public-policy newsletter

CARES Act: Financial Security for Families

April 6, 2020

By Zachary Tashman

On March 27, after weeks of great advocacy from the Human Services sector, Congress passed, and the President signed, the Coronavirus Aid, Relief and Economic Security (CARES) Act (H.R. 748), a more than $2 trillion economic stimulus package to respond to the COVID-19 pandemic. Though this law is the largest federal stimulus in American history, it may still not be enough long-term to support families as they weather the economic storm caused by the Coronavirus. This article analyzes the direct impact the CARES Act will have on families, how provisions addressing financial security will be implemented, and what future legislation the National Assembly believes will be necessary when Congress reconvenes in late April.

Unemployment Insurance

The CARES Act provides $260 billion in additional federal funding to expand Unemployment Insurance (UI) for the millions of families and individuals who have lost, or will soon lose, their paychecks due to the economic fallout from the Coronavirus pandemic. The major Unemployment Insurance components of the CARES Act include:

1. Establishing a Pandemic Unemployment Assistance (PUA) program that provides, through the end of 2020, up to 39 weeks of emergency benefits to unemployed workers who are either not traditionally eligible for regular UI (such as independent contractors and the self-employed) or have exhausted their regular and extended state UI benefits.
2. Increasing all unemployment compensation benefits by $600 per week through July 31, 2020. Typically state UI benefits replace only half of a claimant’s average weekly wage (in January the nationwide average benefit was just $385). For a comparison, Congress increased weekly UI benefits by only $25 during the entire Great Recession.
3. Creating a Pandemic Emergency Unemployment Compensation (PEUC) program that funds an additional 13 weeks of unemployment benefits to individuals who have exhausted their state’s regular UI benefit (typically 26 weeks). This provision includes a non-reduction rule, which requires states participating in this program not to reduce the maximum time limit or benefits amount of their UI.
4. Incentivizing states to expedite their payment of UI benefits by offering full federal reimbursements (including administrative expenses) for the first week to states that suspend their one-week waiting period through the end of 2020.

With the weekly Unemployment Insurance claims spiking from around 200,000 to over six million since the President declared a State of Emergency, this dramatic UI expansion is essential to keep families financially afloat. The challenge for policymakers and administrators has shifted from appropriating sufficient federal funding to states, to making sure that 50 separately administered Unemployment Insurance systems are efficiently getting those federal dollars to families who need them. With Congress on recess, state governments have been taking the lead in executing the UI provisions in the CARES Act. As of March 27, 25 states, either through executive action or emergency legislation, have waived their one-week benefit waiting period requirements. Additionally, many states have begun to implement “work search” and quarantine exemptions. This means that individuals in movement restricted areas due to the Coronavirus or who are personally under quarantine do not need to be actively looking for employment to receive state UI benefits.

National Assembly’s Position: In addition to the resources provided to states’ Unemployment Insurance systems in the Families First Coronavirus Response Act, the National Assembly applauds the work Congress has done to make sure that families that have lost their source of income can receive adequate aid in these turbulent times. One shortcoming of the CARES Act, however, is it does not offer benefits to undocumented workers who are also facing strong economic headwinds. We urge Congress to include additional UI provisions in future legislation to give all workers the same opportunity to receive financial support regardless of their immigrant status. Congress must also address the flawed way states administer their unemployment compensation systems, specifically their authority to implement draconian regulations on access to UI benefits. Since 2011 ten states have curtailed the maximum number of weeks residents are able to receive UI benefits. Though this law does a good job at halting states from enacting further UI benefit restrictions for the duration of this crisis, it does nothing to reverse the damage done already to the integrity of many states’ UI programs. The economic downturn from the Coronavirus will outlast the immediate health crisis; thus, we urge Congress to pass legislation that makes funding contingent on increasing the minimum UI duration and benefit amount states must administer.

Cash Payments

A centerpiece of the CARES Act is a one-time “Recovery Rebate” of $1,200 per adult ($2,400 for married couples) and $500 per child to every U.S. resident with an eligible Social Security number. These payments will gradually phase out for individuals with an Adjusted Gross Income (AGI) above $75,000 ($150,000 for joint filers) at a rate of $5 for every $100 above the threshold. For people who filed 2018 or 2019 tax returns, their Recovery Rebate will automatically be sent through the IRS by check in the mail or a direct deposit starting in three weeks. For people who receive Social Security benefits, such as retired workers, disabled workers, and survivors, but did not earn enough income to file taxes for 2018 or 2019, they will have their Recovery Rebate sent to them through their SSA-1099. Eligible individuals who did not file tax returns or receive Social Security benefits (predominantly individuals with low-incomes) currently have no way to obtain their Recovery Rebate. The Internal Revenue Service has also been given additional resources to engage in a public campaign to alert all individuals of their rebate eligibility and how to use the IRS Free File Program by July 15 to receive their payment.

National Assembly’s Position: Direct cash payments have a dubious history of providing economic stimulus compared to other alternatives, such as increasing SNAP or UI benefits. A study of the Economic Stimulus Act of 2008, that provided cash payments similar to the CARES Act, found that only 20 percent of those who received checks spent them, while 32 percent put the money into savings and the rest used the checks to pay off existing debts. However, more money for families during an economic downturn is almost always positive, and the lack of a minimum qualifying income to receive payments was a big win, so the National Assembly is supportive of these Recovery Rebates. However, it is the National Assembly’s position that these direct payments should be universal and provided to all adults, children, and dependents. In future legislation, Congress should remove the burdensome tax return requirement on people who earned too little money to file. Direct cash assistance to these individuals can be administered through programs such as SSI, SNAP and veterans assistance, rather than the IRS. This rebate should also be made available to adults who are claimed as dependents (such as college students or elderly relatives) by caregivers. Additionally, immigrant workers (and their children) who do not have Social Security numbers but are paying taxes through the use of an Individual Taxpayer Identification Number should be eligible for rebate payments as well.

Additional Financial Security and Human Services Related Provisions

Relief for Federal Student Loan Borrowers

The CARES Act defers federal student loan payments, principal, and interest through September 30, without penalty to the borrower. For individuals participating in the Public Service Loan Forgiveness (PSLF) program, this six month pause in student loan payments will count towards their completion of the PSLF program.

Expansion of Head Start and Childcare

The CARES Act provides $750 million to Head Start, including up to $500 million for supplemental and summer programs, and $3.5 billion for childcare development block grants for childcare assistance to healthcare employees, emergency responders, sanitation workers, and other workers deemed essential during the Coronavirus crisis.

Elementary and Secondary School Relief Fund

The CARES Act creates a State Education Stabilization Fund to provide $30.75 billion through the end of September 2021. Most of the money is split between Emergency Relief funds for Higher Education ($14.2 billion) and Elementary and Secondary Schools ($13.5 billion). The remaining $3 billion can be allocated by governors to local districts deemed hardest hit by the Coronavirus and can be used to support the funding of educational programs including afterschool and summer activities.

Expansion of Food and Nutrition Service

The CARES Act provides an additional $15.8 billion to the Supplemental Nutrition Assistance Program (SNAP), most of which is set aside in an emergency fund that states can request access to through September 2021. This falls short of the 15 percent boost to maximum SNAP and increasing the minimum monthly benefit to $30 that leading nutrition nonprofits were advocating Congress to put into this legislation.

Housing Assistance Grants

The CARES Act provides $4 billion for Emergency Solution Grants for those who are homeless or at risk of homelessneess with an additional $3 billion in rental assistance. Additionally the law implements a 120-day moratorium on eviction in properties receiving any federal and a 60-day foreclosure moratorium on federally backed mortgages.

Next Steps

With the exception of changing the paid leave tax credit from reimbursement to advance payment to employers, no changes were made to paid sick, family and medical leave (PSFML) rules passed in the FFCRA, most glaringly that employers with more than 500 employees are not required to provide their workers with any paid time off benefit during this crisis. For the National Assembly, creating a comprehensive and universal PSFML program is one of our top legislative priorities in any “phase 4” bill.

The National Assembly will continue to track the progress of coronavirus legislation closely, as well as advocate for provisions that benefit the human service sector. For more information contact Zachary Tashman.