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An Update on the Lost Wages Program

By: Robert Knight, Director of Government Relations and Workforce Policy

In August, new applications for unemployment insurance (UI) benefits were around one million per week. The initial claims level is only the tip of the iceberg, as almost 30 million workers are collecting UI payments under one of the several state and federal programs now in place.

The average payment in the U.S. is about $400 per week. A federal add-on of $600 enhanced payments until the additional benefits provided through the CARES Act expired at the end of July.

With the Senate deadlocked over the amount to spend on another stimulus bill – Republicans called for about $1 trillion in new spending and Democrats wanted $3 trillion – the White House developed a strategy to go around Congress in resolving the UI portion of the impasse. President Trump issued an Executive Order to use $44 billion in pandemic funds available through the Federal Emergency Management Agency (FEMA) to continue the enhanced program, but at $400 per week with participating states kicking in $100 of that amount.

The National Governors Association (NGA) suggested that the new program would be too complicated and might run out of money quickly. Instead, Congress should reauthorize the existing program through the end of the year in its view. So far, the Senate has not budged. With no compromise in sight and growing alarm that the lost benefit could lead to evictions and other social and economic problems, the President’s team moved FEMA, with assistance from the Labor Department, to roll out the Lost Wages Assistance (LWA) Program.

As you might imagine, starting a new program from scratch that would send weekly payments to 30 million recipients and would calculate benefits back to August 1 is no easy task. Because the funding is coming from the Department of Homeland Security’s Disaster Relief Fund (DRF), the UI payment system cannot be used unless the state pays these costs from non-UI funds. In addition, eligible individuals will need to submit a separate application for the new program.

Because many governors indicated that they did not have the $100 state share of the benefit, the rules were modified to allow a federal benefit of $300 with no state add-on. The complexities and opportunities of the new program are provided in some detail in Unemployment Insurance Letter No. 27-20 and Letter No. 27-20, Change 1.

FEMA posted a question and answer document stating that benefits would begin to flow to recipients in about three weeks after approval of the state application. However, individuals involved in the problems the UI system has faced over the past several months have their doubts. The money is likely to run out in mid-December if most states participate. There is concern that legal challenges to using the FEMA money in this manner will be determined illegal by the courts. If this is the case, who is left holding the bag for benefits already paid?

Currently, many states have not decided whether they will participate in the LWA Program, but the pressure will build on governors as the stalemate in Congress drags on past Labor Day. According to the FEMA website, 30 states have been approved for the program.

We suspect that all the states, whether in or out, are hoping that Congress will soon pass a new enhanced benefit between $400 and $600, which will get them off the hook of taking a chance on the LWA.