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State Unemployment Officials Unite Against Wage-Replacement Plan

July 27, 2020, 6:16 PM

The rift between congressional Republicans and Democrats over how best to reboot expanded unemployment insurance in the next virus-relief bill has fostered a collective anxiety and concern among the state administrators who will be tasked with implementing future legislation.

As Capitol Hill lawmakers pursued a divisive brinkmanship in recent weeks over the $600 weekly jobless-aid boost that expires July 31, state unemployment insurance officials from red and blue states alike have shared their frustrations during weekly conference calls. Their session late last week was full of angst and jitters—they know more than 20 million jobless Americans will be counting on them to process their benefits quickly, but they have no idea what kind of final strategy Congress will ask them to roll out.

“The angst that we had on the call was not so much the ending of the program; the angst is: ‘What are they going to throw at us next?’” said Mark Butler (R), Georgia’s publicly elected labor commissioner, who participated in the call Thursday. “It almost got to the point of gallows humor.”

State workforce agency leaders during that call and in other recent conversations voiced uniform opposition to Senate Republicans’ proposal to replace the $600 supplement with a varying total based on roughly 70% of workers’ past wages, Butler and officials from two other states told Bloomberg Law.

The administration’s leading virus-relief negotiators, White House Chief of Staff Mark Meadows and Treasury Secretary Steven Mnuchin, have backed the 70% wage replacement, a central element of the GOP stimulus proposal Senate Majority Leader Mitch McConnell (R-Ky.) plans to introduce later Monday.

The Republican bill would extend the supplement at $200-per-week across the board for two months, Bloomberg News reported Monday.

‘Dumbest Idea Ever’


The 70% wage-replacement plan Republicans envision would put states on a tight deadline to reprogram their systems in time for the launch of the individualized formula. States would be required to collect earnings documentation that often isn’t readily available, particularly for gig-economy workers and other independent contractors who’ve been drawing benefits from a new virus-relief program launched in March.

“That’s the dumbest idea ever,” Butler said when asked about the feasibility of a short-term extension of a flat supplement followed by conversion to a wage-replacement model. “We’re not the IRS. We don’t have your taxes. We don’t know what you made last year. Our stuff is based on you getting laid off by a particular employer and them reporting to us about what the wages are.”

Some state representatives who took part in Thursday’s call said they might not be able to implement wage-replacement revisions until next year, Butler added.

There was consensus among state leaders on the call, which was organized by the trade group representing all 50 state workforce agencies, that a change to the $600 supplement that maintains a fixed amount would be preferable to an individualized scheme, Butler said.

A wage-replacement calculation would put increased pressure on state workforce agency staff at a time when workers in these offices have been working overtime for an extended period.

“States are very concerned about a gap in this benefit as it will cause confusion on the part of the claimants, drive calls to our programs at a time when there is already high demand, and, of course, is a timing challenge as many citizens may be reliant on that additional benefit to pay rent,” the head of a state unemployment office told Bloomberg Law in an email, requesting anonymity to discuss the matter candidly.

Four other state workforce-agency representatives interviewed for this article said a flat supplement would be their choice. Their nonpartisan trade group, the National Association of State Workforce Agencies, provided the same advice in a memo to Congress, and the U.S. Labor Department as of mid-May even said it was opposed to a wage-replacement system.

The trade group estimates it would take states four to 12 weeks or more to reprogram their systems to calculate expanded benefits according to each claimant’s prior wage records.

State representatives said a transition period before a switch to a varying supplement would be more workable for them, but still preferred to avoid a wage-replacement mandate.

The state-level consensus gives some ammunition to House Speaker Nancy Pelosi (D-Calif.) and Democratic negotiators in their push to extend the $600 enhanced payments through 2021. They believe the supplement has helped prevent the recession from worsening into a depression.

Republicans contend the expanded benefits were too generous and paid many people more than they earned in their prior jobs. They prefer a lower level of compensation paired with other incentives to encourage people to return to the workforce.

CARES Act Repeat?

The significant preparation time required for individualizing expanded benefits is one reason why Suzi LeVine, Washington state’s employment security commissioner, advised lawmakers to extend the current $600 boost “with only minimal or clarifying changes.”

“Most states needed several weeks to program the CARES Act benefits before they could be paid, even though citizens believed the money would begin flowing immediately,” LeVine told her state’s congressional delegation in a message provided by her office.

Butler said he fears a repeat of what happened during rollout of the $2.2 trillion CARES Act Congress passed in late March, when state unemployment offices struggled to meet public expectations that they could revamp their systems overnight.

“During that entire time the citizens that are supposed to benefit from that—they’re getting outraged,” Butler said. “And we’ve also got congressmen yelling and screaming at the same agencies—‘Why aren’t you paying my constituents?'—when they’re asking us to do what none of us are set up to do.”

To contact the reporter on this story: Ben Penn in Washington at bpenn@bloomberglaw.com

To contact the editors responsible for this story: John Lauinger at jlauinger@bloomberglaw.com; Karl Hardy at khardy@bloomberglaw.com

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