Beg for cash

Governors beg for cash as unemployment claims crush states

By KATHERINE LANDERGAN and KATY MURPHY

Governors are pleading for more financial help from Congress as unemployment claims surge to near-unprecedented levels this month, leaving states incapable of covering the mountainous costs.

The full problem won’t become clear until the Department of Labor releases national unemployment data on Thursday. But eye-popping numbers have already trickled out as state after state has imposed sweeping orders shutting down non-essential businesses.

The anecdotal evidence thus far has been grim: The state of Florida received 21,000 applications for unemployment on Monday and 18,000 on Sunday, far exceeding typical daily averages of between 250 and 1,000. New Jersey saw at least 15,000 applications in one day last week, a record high that caused its filing system to crash. And California has averaged 106,000 unemployment claims daily — nearly 750,000 in a week, or 3.8 percent of the entire state workforce.

Two economic analyses released Tuesday estimated that well over 3 million people filed for unemployment in the last week — by one estimate, five times as many as the worst week of the Great Recession.

If the national tally due out Thursday confirms the dire projections, it would foretell a new period of deep economic turmoil in America. For state governments, already facing enormous costs associated with fighting the spread of the coronavirus and coping with major losses in revenue, the burden will be too great to navigate on their own.

The nearly $2 trillion emergency stimulus package that was being finalized Tuesday night in Congress will give some relief, including cash assistance for millions and a significant boost to unemployment benefits. The infusion could be enough for some states, but others expect they will need far more to avoid racking up debt as they struggle to keep the unemployed from going flat broke.

California Gov. Gavin Newsom underscored the urgency this week, saying it was “absolutely incumbent” on House and Senate leaders to agree on a deal that sends states block grants to bolster their unemployment funds; he was discussing the need directly with President Donald Trump.

“We’re talking about potentially tens of billions of dollars in incurred debt that will come from those funds if left unabated,” he warned. “We’ve really reinforced the importance and urgency of making sure that the states that are on the front line of this have that support.”

Gov. Andrew Cuomo of New York, whose state is at the center of the viral outbreak, was even more blunt: "The state government is not in a position to provide income to everyone who is not working.”

Congress, after rushing through two rescue packages in recent weeks, was closing in Tuesday evening on a third, bipartisan stimulus deal that would meet some of the needs associated with the unemployment boom. Senate Minority Leader Chuck Schumer said Tuesday afternoon that the bill includes “unemployment insurance on steroids,” giving furloughed or laid-off Americans up to four months of extended income.

The earlier, “phase two” stimulus package that was approved March 18 also provided $1 billion in 2020 for emergency grants to states to cover activities related to processing and paying unemployment insurance benefits, under certain conditions.

Still, it remains unclear if the federal aid will be enough to keep state unemployment funds from fighting off insolvency. Without enough direct aid, many states will be forced to take out federal loans to pay out claims.

The trust funds managed by California, Texas, Ohio, Illinois and New York were among nearly two dozen with reserves below the recommended solvency levels as of March 1, according to data compiled by the U.S. Department of Labor.

Jacob Robbins, an assistant economics professor at University of Illinois at Chicago, has been tracking news reports from various states. He estimates the total number of claims in the past week alone could reach 3.8 million for all 50 states. The Economic Policy Institute on Tuesday pegged the number at 3.4 million. The highest weekly total during the 2009 recession, Robbins noted, was about 665,000.

In New York, the state Department of Labor has been crushed by the influx of people filing for unemployment, leading to numerous website crashes, prolonged call wait times, and out-of-work people struggling to get through. On Monday the department reported receiving more than 1.7 million calls and 2.2 million hits to its website over a weeklong period — exponentially more than just weeks prior — and has been increasing server capacity and beefing up phone staff to handle the deluge.

Cuomo has also suspended the state’s seven-day waiting period before people can claim unemployment insurance, and has asked the federal government to provide unemployment assistance to New York’s gig-economy workers, many of whom are ineligible for benefits.

In New Jersey, state officials have already seen a staggering increase in the number of claims filed. But Gov. Phil Murphy said he is hopeful that the federal stimulus bill will provide enough relief for those who are unemployed. The state already has a healthy unemployment insurance fund, which had a $2.4 billion balance as of Sunday.

“With the state's fund and federal money, that should be enough,” Murphy told reporters at a press conference Tuesday.

At the same time, New Jersey has launched an online job portal that helps out-of-work residents find employment in industries that are seeing a spike in demand, like healthcare, shipping and grocery stores. The New Jersey state Legislature also recently passed a bill that would create a $20 million fund to compensate workers who lost wages as a result of the pandemic, but Murphy has yet to sign it.

The unemployment numbers have trickled out in spite of a leaked letter that the U.S. Department of Labor sent last week to state labor departments urging them to keep their latest unemployment figures under wraps ahead of Thursday’s federal announcement. The memo urged states to use only “generalities” when describing claim levels, like “very high” or “large.”

It is not unusual for the Labor Department to bar states from reporting unemployment data before federal announcements, given the market-moving potential. But some state officials say the requirement should be suspended while they work to limit economic damage — and many ignored the embargo.

“Every single hour counts, never mind a day or a week in our response to this,” said Suzi LeVine, the commissioner of Washington state’s employment security department told POLITCO. “And so my [in]ability to share that information, to put it in the governor’s hands and not have to worry about ‘oh, don’t tell anybody this’ — that’s unacceptable right now."

By the week ending March 14 — before California‘s Newsom recommended the closure of bars and nightclubs and, later, a statewide stay-at-home order — the state processed 58,208 unemployment claims, 42 percent more than the average in the weeks before the outbreak reached California, according to a spokesperson for the state’s Employment Development Department.

But the latest number, to be released Thursday in tandem with the federal update, is sure to skyrocket.

“Unprecedented is an understatement,” said Chas Alamo, principal fiscal and policy analyst for the state’s nonpartisan Legislative Analyst’s Office. “We’ve never seen anything like 106,000 claims a day for a week.”

For now, he said, staffers from the department’s other programs have been reassigned to claims-processing duties.

“They’re working weekends and evenings and overtime,” Alamo said. “They’re doing everything they can to immediately address the workload.”