States Wary of Trump’s Move For Them to Kick In on Federal Aid

(Bloomberg) -- A day after President Donald Trump took executive action to offer $400 per week in supplemental unemployment benefits, including 25% he said should be kicked in from state coffers, governors are pushing back.

The leaders of states including New York and Michigan said Trump’s plan ignores the cash-strapped reality of most states, which have deep budget holes as a result of the coronavirus pandemic.

New York Governor Andrew Cuomo said the president’s order was based on “shaky ground legally” and it was “impossible” for states to pay.

“The concept of saying to states ‘you pay 25% of unemployment insurance’ is just laughable,” Cuomo, a Democrat, said on a call with reporters on Sunday. “The whole issue here was getting states funding.”

Michigan Governor Gretchen Whitmer, also a Democrat, said Trump is ordering states “that are facing severe holes” in their budgets to pay 25% of the funding while the federal government cuts funding for unemployed workers.

“His refusal to provide full federal funding to states across the country to help us combat this virus will hurt the brave men and women on the front lines,” Whitmer said in a statement.

Unlike the federal government, which can run massive budget deficits, many states must balance their budgets each year -- and if there’s a revenue shortfall, they must cut services, raise taxes or use other tactics.

Democrats and Republicans are trillions of dollars apart on overall spending and on key issues. Trump’s executive actions to bypass the Congressional impasse may face legal challenges, although House Speaker Nancy Pelosi and Senate Democratic Leader Chuck Schumer stopped short of saying that Democrats would attempt to stop them in court.

White House economic adviser Larry Kudlow defended Trump’s order Sunday on CNN’s “State of the Union,” saying estimates from the Treasury Department show states will be able to provide the extra dollars, because they haven’t spent all the money that was allocated to them under the CARES Act passed in March.

Asked how many states will be able to pay, Kudlow answered, “We will probably find that out today and tomorrow as we make our canvass.”

The Center on Budget and Policy Priorities said in a statement that Trump’s executive actions will “force states to choose” between letting the federal supplemental jobless benefits end entirely, or slashing other parts of their budgets.

Ohio Governor Mike DeWine, a Republican, said on CNN that he doesn’t know yet if his state can afford to pay.

“We have set some money aside, a significant amount of money, for testing. Testing is going to be very, very important.” DeWine said, adding he’s “reviewing this issue.” Meanwhile, he urged Congress to “get back in and negotiate.”

That sentiment was echoed by Illinois Governor J. B. Pritzker, a Democrat. “The president needs to do what’s right and work with Congress to pass a comprehensive aid package that supports working families instead of legally questionable theatrics,” Pritzker said in a statement.

The Trump administration is directing states to use part of the $150 billion Coronavirus Relief Fund, while the federal government will tap $44 billion of the existing Disaster Relief Fund. To participate, states would have to establish a new measure, the “lost wages assistance program.”

Economists estimate the money discussed by Trump could be enough for one to two months of payouts.

Treasury Secretary Steven Mnuchin said Sunday on Fox News that the 25% match would be “coming from money we already gave the states. So this is effectively 100% paid for by the federal government.”

©2020 Bloomberg L.P.