Congress has passed and the President has signed a new COVID-19 economic relief bill, the Coronavirus Aid, Relief and Security (CARES) Act. Here are some of its major provisions and what they mean for Kentucky. This blog will be updated as more information becomes available.
Expanded and increased unemployment benefits
One of the most significant components of CARES increases unemployment benefits by $600 a week for the next four months, fully paid for by the federal government. Kentucky’s average unemployment benefit is only a modest $380 a week currently. This improvement will help newly-jobless workers pay bills and make ends meet in the near term (though the $600 will need to be extended for a longer period given the extent of the crisis). The bill also lengthens the time an unemployed worker can receive regular benefits (not including the $600 a week) by an additional 13 weeks — beyond the state’s maximum of 26 weeks — with the federal government paying for all of that extension.
The bill expands eligibility for unemployment insurance by providing what it calls Pandemic Unemployment Assistance (PUA) to workers not normally eligible for unemployment benefits because they are self-employed, furloughed, don’t have a sufficient work history or are seeking part-time employment. That includes independent contractors and “gig” economy workers. Also eligible are those who have quit because of COVID-19 including due to care responsibilities for a sick member of their household and because of closed schools and childcare centers.
PUA will provide no less than ½ the average state benefit (or approximately $190 a week in Kentucky) through December 2020. PUA recipients are also eligible for the temporary additional $600 a week benefit through July 31. All that is paid for by the federal government.
The extra $600 a week alone will bring an estimated $623 million into Kentucky for jobless workers over the four month period, according to one analysis. Importantly, that supplement will not count as income for purposes of determining eligibility for Medicaid and the Children’s Health Insurance Program, helping ensure more unemployed people can receive those benefits.
CARES incentivizes states to provide the option of short-time compensation or work sharing, as exists in 27 states. In work sharing, businesses reduce workers’ hours and employees receive partial unemployment benefits. Under CARES, the federal government will pay half of the cost of these benefits, as well as provide grants for implementation and promotion of the program. Kentucky does not currently offer work sharing. CARES also will reimburse states (like Kentucky) that waive the normal one week waiting period for benefits.
To take full advantage of these unemployment benefit changes, the General Assembly passed SB 150 which allows work sharing as well as the option of counting an unemployed worker’s last 3-6 months of work history in considering whether they are eligible for benefits (including for the additional $600 a week), among other improvements.
One-time rebate checks
CARES provides one-time checks (“recovery rebates”) of $1,200 for individuals making up to $75,000, $2,400 for a married couple making up to $150,000 and $500 per child. Payments are phased out above those income levels to a maximum of $99,000 for individuals and $198,000 for married couples. See a calculator here.
The bill makes low-income people eligible for the rebates (some of whom were excluded or awarded smaller amounts in earlier versions of the bill). In total, Kentuckians will receive $4 billion in rebates.
However, the rebates leave out certain people. The bill only provides rebates for dependents under the age of 17, leaving out elderly dependents, adults with disabilities who live with family members and college students. Additionally, the bill requires income tax filing to receive the rebate, which will create an administrative challenge for people who do not file (Treasury has clarified that Social Security recipients can automatically receive payments without filing). An estimated 30 million Americans do not file, including people in deep poverty, veterans and people with disabilities. There should be public resources provided for free tax filing options like the Volunteer Income Tax Assistance (VITA) program to ensure people file and to limit the profiteering of high-fee tax preparation companies.
The bill also leaves out many immigrant families, including those with children who are U. S. citizens. An estimated 20,650 adult immigrant Kentuckians (with 32,871 children) file taxes with an Individual Taxpayer Identification Number rather than a Social Security Number and are ineligible for the rebate.
While this one-time check will be helpful to those who do receive it, there are no provisions in the legislation for additional payments down the road should poor economic conditions continue, which is likely.
Also, the bill did not include an increase in Supplemental Nutrition Assistance Program (SNAP) benefits, as was included in the Recovery Act during the Great Recession and proposed for CARES. SNAP is particularly effective at reaching low-income families who have even less food security now due to lost jobs and incomes and whose children have reduced access to food because schools are currently closed. The next relief package must include an expansion.
Assistance for state and local governments
The bill creates a Coronavirus Relief Fund for state and local governments that will distribute an estimated $1.732 billion to Kentucky. Of that amount, an estimated $1.599 billion will go to the state and $134 million to Louisville/Jefferson County (the only eligible Kentucky local government under the law).
Kentucky will also receive an estimated $409.7 million through the act’s Education Stabilization Fund. That includes:
- $203 million for K-12 schools. Those monies are distributed based on a state’s share of Title I funding, a federal program for high poverty schools.
- $164.6 million for colleges and universities. Approximately 90% of these funds are distributed to directly public and private higher education institutions based primarily on their share of Pell Grant recipients; 7.5% is going to Historically Black Colleges and Universities and other institutions primarily serving students of color; and 2.5% will be distributed by the Secretary of Education to institutions determined to be especially harmed by COVID-19 and the economic downturn. Initial allocations for emergency cash grants to students are here.
- $42.1 million in emergency relief that the governor can distribute to schools and higher education institutions. Each state’s allotment was determined by a formula that sent 60% to states based on their share of the school-age population (ages 5-24) and 40% based on states’ share of Title I students.
In addition, Kentucky is estimated to receive through CARES:
- A minimum of $8.29 million in Centers for Disease Control and Prevention grants;
- $10 million for personal protective and medical equipment for law enforcement;
- $132.7 million for public transit;
- A minimum of $25.9 million for homelessness programs;
- $17.9 million for the Low-Income Home Energy Assistance Program (LIHEAP) to help families pay heating and cooling bills.
- $6 million for assistance with making elections safer.
- $65 million in child care funding.
The Families First Coronavirus Act that recently passed also included an increased federal match for Medicaid costs that will result in approximately $480 million in state savings on an annual basis in Kentucky, though this assistance stops at the end of the quarter when the public health emergency is declared over.
While these dollars are a significant, positive next step in providing aid to state governments, much more will be needed to avoid harmful budget cuts and layoffs. State revenues are expected to plummet as the economy shuts down, even while state costs will rise to combat COVID-19 and as more people become eligible for Medicaid due to lost jobs and income. Also, Kentucky’s rainy day fund is too depleted to go far in filling the gap, possessing only the equivalent of four days of state operating expenses.
The legislature recently passed a new state budget that downgraded Kentucky’s revenue forecast by 1% the first year and 1.5% the second year of the new biennial budget. Kentucky’s revised forecast is based on an assumption of 5.8% unemployment next year. Yet in the short term the economy will be much worse. Goldman Sachs recently predicted that U. S. gross domestic product will shrink 34% in the second quarter of the year, which translates to an estimated 251,846 jobs lost in Kentucky by the summer and a state unemployment rate of 16.3%.
Provisions for businesses, hospitals
Other significant elements of CARES include (dollars amount here are nationwide):
- $349 billion in loans to small businesses (less than 500 employees) that can be forgivable for businesses that agree not to lay off their employees. There is also $17 billion for debt relief for existing Small Business Administration borrowers, and $10 billion for grants.
- $500 billion for loans and aid to businesses, states and cities (with $46 billion set aside for airlines, air cargo carriers and national security-related businesses). Companies receiving this aid are only required to maintain existing employment levels “to the extent practicable” through September.
- $100 billion for grants to hospitals and other healthcare organizations for unreimbursed costs related to COVID-19, and other monies for protective equipment and testing supplies.