Can the State Use CARES Act Funds for New Unemployment Benefits?

By Brian Skinner, Esq.

During his press conference on Monday, Governor Justice announced he will use funds from the federal CARES Act to provide the state’s portion of the additional unemployment benefits included in the executive memorandum signed by President Trump on Saturday. Last Friday I wrote about governor’s authority to use funds allocated to the state from the Coronavirus Relief Fund, made available in the Coronavirus Aid, Relief, and Economic Security Act or the “CARES Act”, without a specific appropriation by the state legislature. Earlier this year West Virginia received $1.25 billion from the Fund. 

The governor explained that the state will use a portion of the $678 million set aside for WorkForce West Virginia in his CARES Act spending plan to cover the new $400 payments. But can he do that without involvement by the legislature?

The president’s memo extends economic relief to those impacted by the COVID-19 pandemic by providing $400 extra in unemployment benefits to recipients to offset the expiration of the extra $600 included in the CARES Act. To pay for the program, the president said he would use $44 billion in federal funds that are allocated for natural disaster relief such as a hurricane or wildfire. 

The executive action applies retroactively to those receiving unemployment benefits for the week ending August 1, 2020, bridging the gap since expiration of the additional $600 benefits that expired at the end of July. The memo states that the federal government will provide $300 per week in additional aid to unemployed workers if their states also contribute $100. But on Tuesday, senior White House officials said publicly that the executive action only guarantees an extra $300 per week for unemployed Americans — with states not required to add anything to their existing state benefit programs to qualify for the federal benefit. 

Under the cost-share formula laid out in the memo, the federal government would spend about $44 billion and states would contribute almost $15 billion. According to the president’s directive, the aid should run through December 6 or until funding runs out. However, the $44 billion will cover only about five weeks of payments for most of the 30 million unemployed according to economists. 

Anyone receiving unemployment benefits was eligible under the CARES Act to get the $600 weekly boost. The new executive action requires recipients to be receiving at least $100 in unemployment aid in order to qualify for the extra $400 federal boost. This could leave out low earners, particularly those who rely on tips or part-time work as it is estimated that about 6% of regular unemployment recipients earn less than $100 in state benefits. The White House said the $100-a-week minimum to qualify for enhanced benefits is an effort to curb fraud. The FBI has reported an increase in unemployment insurance fraud in recent months, though activity has been linked to identity theft rather than recipients inflating their earnings history to boost benefits.

Under the CARES Act, people without required documentation of their earning history, including freelancers, the self-employed and gig workers, were newly eligible for benefits at a minimum of half the average unemployment benefit in their state. That’s because the CARES Act made assistance for unemployment more widely available through Pandemic Unemployment Assistance. But this new executive action is a separate program to be paid from a state’s traditional unemployment insurance system. So, only those who are eligible for traditional unemployment insurance would be eligible. For example, the Uber drivers and gig workers who were covered by the pandemic unemployment insurance under the CARES Act, who are not eligible, in most cases, for traditional unemployment insurance, won’t be covered.

Department of the Treasury guidance interpreting limitations on the permissible use of CARES Act funds indicates that eligible expenses include unemployment insurance costs related to the COVID-19 public health emergency if those costs will not be reimbursed by the federal government pursuant to the CARES Act or otherwise. According to the president’s executive action, states would be responsible for 25% of the additional $400 benefit. In that case, the state can use CARES Act funds to pay for the state’s portion of the additional benefit. 

But, can the governor direct CARES Act funding to pay unemployment benefits without the legislature’s approval? 

The law gives the governor the power to expend federal funds without a specific appropriation by the legislature when the federal government makes funds available to the state for costs and damages resulting from natural disasters, civil disobedience or other occurrences declared by the governor as a state of emergency. Funds allocated to the state by the CARES Act appear to fall into this exception since the funds were allocated to the states to cover costs that “are necessary expenditures incurred due to the public health emergency with respect to the Coronavirus Disease 2019 (COVID–19).” Accordingly, the governor has the authority to use the money allocated to the state by the CARES Act to pay the state’s 25% portion of the addition $400 benefit. Given the difficulty the state experienced with paying benefits under the CARES Act, it remains to be seen how quickly this can be accomplished.

Brian J. Skinner is the former counsel to the West Virginia House of Delegates Committee on the Judiciary and counsel to the West Virginia Senate Minority Caucus. He has over a decade of experience as an adviser to legislators on legal and political issues related to pending legislation; providing research and legal analysis services to legislative committees; and preparing bills, resolutions, amendments, and other documents for the West Virginia Legislature.

This article contains general legal information and does not contain legal advice. H2C Public Policy Strategists, LLC is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.