While President Donald Trump’s memorandum on unemployment benefits promised an additional $400 a week to jobless Americans, they likely will get only $300.
It would also take at least a month for those benefits to show up, one expert warned, and the extra funds would be exhausted in a matter of weeks.
The memorandum, along with statements from White House officials, suggested that the benefit would include $300 from federal funds and another $100 from states. But guidance from the Labor Department allows states to avoid paying that extra $100.
“It doesn't look like it's $400,” Michele Evermore, a senior policy analyst at the National Employment Law Project, told Yahoo Money. “It looks like it's $300.”
This comes as over 30 million Americans lost the extra $600 in weekly unemployment benefits at the end of July and have since seen a drop in benefits ranging from 52% to 72%, according to an analysis by Evercore ISI.
‘States are largely going to go with the $300 option’
States have two options for paying out the benefit, according to a letter the Department of Labor sent on Sunday to state unemployment insurance agencies and obtained by Yahoo Money.
One option allows states to count $100 in unemployment benefits they are already paying out to recipients as the extra $100 described in Trump’s memorandum. The second option is for states to find funds to provide an additional $100 on top of the $300, but states are unlikely to opt to do that.
“Given the complexity of that, and given the limitation that states don't have money right now, states are largely going to go with the $300 option,” Evermore said.
State governors — including those from New York, Kentucky, and California — have already expressed concerns about funding the extra $100 a week from their budgets.
“It would cost New York State $4 billion between now and December to pay 25% of the unemployment insurance.” Gov. Andrew Cuomo of New York told reporters on Monday. “If [the president] thinks this is a resolution, this only makes a bad situation worse.”
‘It will take at least a month’
Making matters worse is the timing of these benefits. While White House advisor Larry Kudlow and Treasury Secretary Steven Mnuchin have suggested that jobless Americans may get the extra benefit in the coming weeks, that’s probably not the case, experts said.
Administering the $300 will be another big issue because states have never done something like this before, according to Evermore.
“It will take at least a month,” she said, “and that's being very optimistic about a lot of things.”
Enacting extra unemployment insurance benefits by memorandum would take even longer than by Congressional legislation — which experts said would take weeks to implement — because states can only administer benefits defined under the Social Security Act or by Congress, Evermore said.
“If it was an act of Congress, they could just use their regular system to pay these benefits,“ Evermore said. With the memorandum, “they have to set up a benefit that's parallel to unemployment insurance.”
The process of setting a parallel system to pay the benefits would likely include hiring a vendor and getting a new computer system up and running.
‘That’s money that's not going out in benefits’
The memorandum on unemployment benefits comes with its own price tag. Around 5% of the $44 billion earmarked for the new benefits will be used for administrative costs, according to new guidance by Federal Emergency Management Agency.
Some of the money for administrative work would need to be used for hiring or paying overtime to workers to administer the money because they must be paid by FEMA money to do the additional work. Regular unemployment insurance agency staff can’t be used to pay these benefits, Evermore said.
That expense will leave less remaining for jobless workers. The American Action Forum estimates that the funds will be depleted in five weeks.
“That's money that's not going out in benefits,” Evermore said. “We're gonna spend all the time and money setting something up that is only going to last a few weeks.”