Maine Dept. of Labor Urges Congress to Take Action to Avoid the Loss of Unemployment Insurance Benefits to 35,000 Mainers

December 3, 2020

For Immediate Release: Thursday, December 3, 2020

Maine Dept. of Labor Urges Congress to Take Action to Avoid the Loss of Unemployment Insurance Benefits to 35,000 Mainers

AUGUSTA - On Thursday, December 3, Maine Department of Labor Commissioner Laura Fortman sent a letter to the members of Maine's Congressional Delegation, expressing her gratitude and urging them to continue working to keep unemployment taxes for Maine businesses as low as possible and to extend and further support unemployment programs for Maine workers who lost their jobs through no fault of their own. To help accomplish this, Commissioner Fortman outlined several actions Congress could take.

"We estimate that there are roughly 35,000 Mainers who are in danger of losing unemployment benefits when the federal CARES Act unemployment programs expire on December 26," Commissioner Laura Fortman said. The Department has paid out about $1.68 billion in combined federal and state unemployment benefits since March funds that help people pay their bills and put food on the table. We are urging Congress to take action and take steps to help support Maine businesses and laid off workers as they continue to navigate the challenges created by this unprecedented public health and economic crisis.

In the letter, the Commissioner urged Congress to take the following actions:

• Extend the three federal unemployment programs created by the CARES Act, which are currently set to expire on December 26, 2020
• Keep Federal Pandemic Unemployment Compensation (FPUC) at a flat amount rather than a percentage of an individuals wages
• Increase the number of weeks an individual can collect Pandemic Unemployment Assistance (PUA) benefits
• Provide adequate administrative funding for CARES Act programs
• Provide additional support for the state Unemployment Trust Fund, in order to reduce future tax burdens on employers, ensure that benefits are there for workers who need them, and reduce the likelihood of Maine needing to borrow federal funds in order to pay benefits
• Extend federal reimbursements at 100% for state extended benefit payments
• Extend federal reimbursements at 100% for short-term compensation programs
• Continue federal coverage of benefits paid during the one-week waiting period
• Continue or increase support for direct reimbursable employers
• Give the Department the authority to waive PUA and Lost Wage Assistance overpayments. The Department already has the authority to waive overpayments for the other state and federal programs if there is determined to be good cause.

The full content of the letter sent to Senator Susan Collins and Senator Angus King below:

On behalf of the Maine Department of Labor (MDOL), I am writing to express our appreciation for your ongoing commitment to the people of Maine during this global pandemic. The CARES Act and associated legislation has provided critical economic support to the workers and businesses in Maine.

I am deeply concerned that this support is ending. Over the last nine months, Ive seen first-hand the strain on people who suddenly lost their job. None of us could have guessed how long the COVID-19 crisis would last, but we are now coming up against the time when these same people are going to suddenly lose their unemployment benefits. This second round of financial loss will be devastating for Maine people and for Maines economy.

I urge you to prioritize continuation of the CARES Act programs. In addition, my staff and I hope youll consider our recommendations for changes to the programs. Our recommendations are based on our implementation of the programs and the day-to-day delivery of benefits.

In the following pages, Ill explain more about our recommendations regarding: - Extending federal unemployment programs, particularly PUA and FPUC; - Funding for state unemployment trust funds; - Ability to waive benefit overpayments in certain circumstances; - Administrative funding for ongoing operations; and - Additional funding and support to combat unemployment fraud.

I would also like to thank you for your role in the bipartisan team, which proposed a framework for a stimulus package on December 1. We appreciate the $180 million in targeted funds for unemployment. We have not yet seen a detailed proposal but hope that the information and recommendations below are helpful as you finalize a proposal.

Extension of Federal Programs

Since March 15th, BUC has paid out over $1.2 billion in enhanced unemployment benefits that were made possible through provisions in the CARES Act. This includes the Pandemic Unemployment Assistance (PUA) program, which provided crucial benefits to a larger group of individuals than would normally be qualified. Roughly 96,700 initial claims have been filed for PUA since the Department started collecting applications on May 1st. Almost half of those relying on PUA benefits are businessowners or people who are self-employed. Through Thanksgiving, the Department has paid out nearly $150 million in PUA benefits. This program will end on December 26.

The Federal Pandemic Unemployment Compensation (FPUC) provided a supplemental payment of $600 per week through July 25. The Department paid out nearly $920 million in FPUC benefits to Mainers. This provided essential support for basic needs such as rent and mortgage payments, groceries, childcare, and other necessities. Given the fact that winter is now upon us, this support will be even more critical to assist Mainers in covering heating costs.

The Pandemic Emergency Unemployment Compensation (PEUC) program provided an additional 13 weeks of benefits, which has been crucial as Mainers exhaust the balance of their unemployment benefits. The Bureau has paid out roughly $50 million in PEUC benefits through Thanksgiving.

The Department recommends the extension of all three of these federal programs before they lapse. If Congress extends these programs, we would further make the following recommendations:

• Increase the number of weeks that an individual may collect PUA benefits. Under current law, an individual may collect up to 39 weeks of PUA benefits. If someone began receiving these benefits when the pandemic began in March, their 39 weeks ends on December 12. Some individuals may have been eligible sooner based on their specific situation. They will exhaust their PUA benefits even sooner. The Department recommends not having a cap on the number of weeks PUA can be collected as long as there is a civil emergency in place. During the Great Recession, Maine qualified for up to 93 weeks of benefits through several rounds of additional benefits. The enactment of multiple rounds of benefits resulted in time spent reprogramming our system and in uncertainty amongst people filing for benefits.
• Reauthorize the FPUC program and continuing to use a flat amount for a payment. There has been much talk of enacting a formula to replace a certain percentage of a claimants previous wages. States do not have the detailed weekly wage information to do this calculation; wages are reported in a lump sum each quarter for each individual. The Department would need detailed information on the weekly wages earned by each claimant in order to make this type of determination. It would also be incredibly difficult to collect this information on self-employed claimants collecting under the PUA program. The system programming would take several months to complete, which is counterproductive as we work to disburse payments as quickly as possible. We could quickly disburse a flat amount within a week.

Additional Trust Fund Support

Before the pandemic, Maine had one of the most solvent trust funds in the nation with a balance of roughly $500 million. The trust fund hit its lowest point in the pandemic in May when it dipped to a low of nearly $325 million. Amid record nationwide unemployment caused by the COVID-19 pandemic, Governor Mills dedicated $294 million in CARES Act Coronavirus Relief Funds (CRF) to Maines unemployment insurance trust fund. The investment will significantly reduce an employer tax increase for 2021 while ensuring benefits are available for laid off workers.

Without the infusion, the Maine Department of Labor estimates that employer unemployment taxes would have more than doubled in 2021. This would have been overly burdensome for the 45,000 employers that pay into Maines trust fund. Even with these CRF funds, there will be a modest increase in unemployment taxes for employers. Despite this infusion, if benefit disbursements continue at their current rate, the Department could very well need to borrow funds to continue paying benefits in the third quarter of 2021. This would require a special tax on employers in order to repay the loan. In addition, tax rates in 2022 are expected to jump to Schedule H, which is the highest tax rate.

There has been talk of loan forgiveness for states that have to borrow to pay benefits. This was also the case during the Great Recession. However, Maine was one of a few states that did not have to borrow at that time. This means that Maine employers bore the full burden of benefits there was no relief for them. Please consider not only helping states that must borrow, but also states who remain solvent. Bolstering states trust funds will help prevent future borrowing and will limit the impact on employer taxes. In order to remain at Schedule B in 2022 and to prevent a further increase in taxes for employers an additional $500 million would be needed in targeted money for the Maines unemployment trust fund.

In addition to targeted funding, the Department would also recommend:

• Permanently extending federal reimbursements at 100% for the federal/state extended benefit payments. Extended benefit programs only go into effect in times of high unemployment. The most recent times that extended benefits have been active are during the Great Recession and during the pandemic. Each time, Congress voted to fund this program at 100% in recognition of the difficult economic times.
• Extend federal reimbursements at 100% for short-term compensation programs (WorkShare as it is called in Maine).
• Continue federal funding for benefits paid during the one-week waiting period, as long as it continues to be waived. Continue or increase support for direct reimbursable employers. Under the CARES Act, the federal government covered 50% of unemployment charges for direct reimbursable employers. Currently the most impacted direct reimbursable employers represent non-profits, towns, and schools that could not have budgeted to account for the crisis caused by COVID-19. The Department suggests extending the reimbursement coverage and increasing the amount the federal government is covering to 100%.

Authority to Waive Certain Overpayments

Overpayments occur when unemployment benefits are paid to an individual erroneously. The Department normally has the leeway to determine if there are extenuating circumstances or good cause as to why the individual provided misinformation or that the department made an error. In these situations, the Department has the authority to waive overpayments of regular state Unemployment Insurance benefits, FPUC payments, PEUC and other regular state benefit payments. When determining good cause, the Department considers the degree of fault for the claimants overpayment as well as their ability to pay back the debt. However, under no circumstances does the Department waive overpayments for fraud.

When the CARES Act was passed, it did not include the authority for departments to waive PUA overpayments. That means the Department must pursue the collection of these funds from all individuals, regardless of fault. This can cause greater hardship, especially for claimants who made an honest mistake.

The same is true for the Lost Wages Assistance (LWA) program, which was created through Executive Memorandum. LWA is a FEMA grant program that provided a time-limited $300 payment to certain eligible unemployment recipients. Much like the PUA program, the Department does not have the authority to waive any LWA overpayments, regardless of fault. The Department would encourage Congress to mirror the existing authority and protections granted in these unemployment programs for both the PUA and LWA programs.

Provide Adequate Administrative Funding for CARES Act Programs

The unemployment system runs as a federal-state partnership, with the federal government paying states to administer unemployment insurance programs. In recent years, the amount of federal funding has decreased due to the counter-cyclical nature of unemployment. Normally there is a period leading up to a recession where indicators point toward an economic downturn and departments across the country have time to ramp up services. This economic crisis is a public health crisis and came with no warning or time to prepare.

Departments of Labor have been nimble and have adapted to address the needs of laid off workers since the beginning of the pandemic. However, Departments do not have an adequate amount of administrative funding to adequately operate federal programs and make the necessary changes to the system to pay out benefits. It is crucial that states be funded for costs related to any extension of these programs. Without administrative funding, it will be difficult to maintain operations at a level needed to assist the people of Maine.

Provide Ongoing Funding & Support to States to Fight Unemployment Fraud

State unemployment insurance programs have been targeted with unprecedented fraud attacks during the COVID-19 pandemic. Well-organized and sophisticated criminal fraud rings have deluged states with massive identity theft claims in an effort to access benefits intended to help individuals and their families adversely impacted by the pandemic. The funding already provided to assist states in adding fraud investigation staff and strengthening unemployment system functionality in preventing and detecting fraudulent claims has been much appreciated. However, the battle against these criminals is ongoing and the methods used to file fraudulent claims successfully are constantly changing. To remain effective, states need to continually evolve their fraud filters and scans. States also need to add new and stronger technological tools to combat fraud or verify identity of those filing claims to prevent fraudulent benefits from being paid. There is an ongoing need for additional fraud investigation staff, and for collection staff focused on recovering fraudulent benefits already paid. It is critical that states receive additional funding and resources to support these efforts to combat fraud and protect the integrity of state unemployment trust funds.

My staff and I welcome any questions you have on these important matters. I truly thank you for your considerations of the Departments time-sensitive requests. Please feel free to contact me if you have any questions.

Sincerely,

Laura A. Fortman Commissioner Maine Department of Labor