Connecting state and local government leaders
The proposal also does not include funding for state and local governments, but would allow them to use previous funding to offset falling revenues.
The $1 trillion coronavirus relief package proposed Monday by Senate Republicans would keep in place some enhanced unemployment benefits for out-of-work Americans, but would significantly scale back the size of the payments.
The proposal, released late Monday after several rounds of negotiations with the Trump administration, comes too late for millions of Americans whose federal benefits ended over the weekend. It could take weeks for states to restart payments for the millions of Americans who remain out of work—particularly if lawmakers implement a percentage-based payment system that takes workers previous income into account, according to unemployment experts.
The Republican package is seen as a starting point for negotiations with Democrats, who passed their own $3 trillion relief bill in the House in May. Disagreements over the amount of enhanced unemployment payments and aid to state and local governments could both be sticking points.
The Republican package does not give any money to state and local governments, which have seen revenues plummet amid the pandemic, but does give them more flexibility in how they can spend previously allocated assistance. While state and local leaders have agitated for this flexibility, they also have insisted that more money is necessary for them to maintain vital services.
“We have produced a tailored and targeted draft that will cut right to the heart of three distinct crisis facing our country— getting kids back in school, getting workers back to work, and wining the healthcare fight against the virus,” Senate Majority Leader Mitch McConnell said of the series of bills introduced Monday that will be collectively known as the HEALS Act.
Under the plan, federal unemployment benefits would be scaled back from $600 to $200 a week while states set up the framework to transition to a percentage-based system. Out-of-work Americans would receive $200 a week in federal unemployment benefits in addition to the variable rate paid by each state through September. From October through December, the payment structure would then change so the amount paid by the state and federal government combined would replace about 70% of an individual's lost wages.
Republicans have said it is important to trim the extra unemployment payment, raising concerns that if workers receive more in benefits than they did in wages that they will have no incentive to return to work.
“We learned a tough lesson that when you pay people not to work, what do you expect?” said Sen. Chuck Grassley, the chairman of the Senate Finance Committee, which drafted that portion of the legislation.
Close to 32 million Americans were receiving unemployment at the start of July but federal unemployment benefits, which since April have supplemented the variable amounts paid by states, cut off at the end of this month. Even if lawmakers were to approve legislation to restart the program at the same rate tomorrow, it could take several weeks to distribute the first payments, said Andrew Stettner, a senior fellow at The Century Foundation.
“It’s going to be very hard for people to get paid next week at this point,” he said.
The program could take longer to restart depending on how money is allocated. Maintaining a flat dollar amount, no matter the amount paid, will make it easier to allocate unemployment, said Michele Evermore, a policy analyst with the National Employment Law Project. Any sort of percentage-based system, like the one proposed by Senate Republicans, will require states to set up an entirely new system and benefits process that could take much longer, she said.
The Senate plan includes $2 billion to assist states in upgrading their unemployment systems to be better prepared to handle a surge in claims and to adjust the wage replacement levels. But since the pandemic, many state unemployment systems have been overwhelmed, with out-of-work people complaining about not getting benefits they are eligible for. The technology used in many state systems is old and people across the country have expressed frustration about not being able to file online, while also not being able to reach anybody at state unemployment offices.
Democrats were immediately critical of the proposal, saying it was too little too late to address the ongoing effects of the coronavirus pandemic, particularly as resurgences in many states have forced governors to reimplement restrictions on businesses like bars, restaurants and gyms.
“[Republicans] waited and waited and waited until they are up to the cliff and now they come up with an entirely new system where states would have to calculate a different benefit for each individual worker,” said Sen. Minority Leader Chuck Schumer. “The implementation will be a nightmare.”
In addition to unemployment insurance, the Republican proposal would also include a second round of $1,200 payments to adults and $500 per dependent for families within the same income limits as in the last coronavirus package. The legislation would also provide $100 billion to help schools reopen, $100 billion in loans through the Paycheck Protection Program for businesses that have had revenues fall at least 50%, and lawsuit limitations for businesses and hospitals. While allowing state and local governments to spend previously allotted funding to cover revenue shortfalls, the proposal prohibits governments from using the money on pensions or to replenish rainy day funds.
Lawmakers will be under pressure over the next two weeks to hammer out an agreement and adopt an aid package that addresses both sides’ priorities before their scheduled August break.
Looking ahead, it’s possible that state and local aid could turn into a bargaining chip as discussions between the two parties about a final piece of legislation unfold.
“I think in the Senate right now, it is part of a negotiation strategy, that the House was very aggressive on the request for state and local governments,” Matthew Chase, executive director of the National Association of Counties said on a call with reporters on Thursday.
“We’re still optimistic that, at the end of day, there will be some level of bipartisanship around this,” he added.
The U.S. Conference of Mayors said federal aid for cities is essential if the country is going to recover from the pandemic.
“Without direct relief to help fund police officers, firefighters, public health workers and other critical public employees, cities can’t do the work to fight this pandemic,” said Louisville Mayor Greg Fischer, who is president of the organization. “The situation is growing more dire by the day, and there will be significant consequences if real resources are not provided soon.”
Staff correspondent Bill Lucia contributed to this report.
Andrea Noble is a staff correspondent for Route Fifty.