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Enhanced unemployment would drop to $200 per week through September under new Senate proposal

U.S. Senate Majority Leader Mitch McConnell speaks during a press conference on Capitol Hill in Washington, D.C., the United States, on July 21, 2020.
Ting Shen | Xinhua | Getty

Senate Majority Leader Mitch McConnell revealed on Monday the Senate's Health, Economic Assistance, Liability Protection and Schools, or HEALS, Act, a $1 trillion package proposal for the next round of coronavirus relief.

The proposal outlines a second round of $1,200 economic impact payments; legislation to shield entities such as businesses, doctors and schools from certain lawsuits; and funding to Paycheck Protection Program loans, schools, coronavirus testing and vaccine development efforts.

One major section of the HEALS Act proposes a drop in enhanced unemployment benefits from the current $600 per week to a new $200 weekly boost, on top of state-administered aid, until the end of September.

According to a CNBC analysis of Labor Department data, this would cut the average worker's unemployment benefit by 43% to about $521 in total benefits per week, accounting for both state and federal aid.

That amount could range widely depending on the state; with the $200 weekly boost, new benefits under the proposal could reach an average high of $697 per week in Washington or as low as $244 per week in Oklahoma.

By October, the federal boost will be replaced with a payment that, when combined with regular state benefits, will recover 70% of the worker's previous wages. The replacement rate will be calculated either by a formula specified in the bill or by a state proposing an alternative method and receiving approval from the Secretary of Labor, meaning the method of calculation could vary by state. Boosts will be capped at $500 per week.

The 70% replacement calculation has raised concerns among Democratic leaders and policy experts who believe state unemployment systems will be unable to handle making such targeted payments to such a large volume of recipients. Roughly 32 million Americans are currently receiving jobless benefits — about five times the level of the Great Recession.

"Measuring 70% [wage replacement] will present quite serious administrative challenges for states, since in many cases they don't have a good measure of a person's average earnings based on the previous year," Wayne Vroman, a labor economist with the Urban Institute, tells CNBC Make It.

"We're not the IRS. We don't have your taxes. We don't know what you made last year," said Mark Butler, Georgia's publicly elected labor commissioner, on a recent conference call with state unemployment insurance officials, as reported by Bloomberg Law. "Our stuff is based on you getting laid off by a particular employer and them reporting to us about what the wages are."

Currently, applicants must report their average wages from the previous four quarters, then have it verified by previous employers, to calculate their benefit. This information isn't always readily available, especially for people previously ineligible to receive benefits (like the self-employed, gig workers or people who earned too little to qualify) who may not have an officially documented earning history but now qualify for federal assistance under the CARES Act passed in March.

"I would guess states will have to go through hoops to get information on that," Vroman says.

Many Americans will remember the crush of applying for unemployment in recent months and delays caused by inundated, outdated state unemployment systems. The previous $600 weekly boost approved in March was determined as the 100% replacement wage for the average worker. It was applied broadly to help expedite the claim approval and administration process as the pandemic caused sweeping job loss starting in March.

If states are unable to program systems to provide this 70% replacement wage to workers by October 5, they can apply for a waiver from the Department of Labor to continue paying a "fixed dollar amount" for up to two months.

To aid state unemployment offices now, the HEALS Act will provide $2 billion to states to upgrade their unemployment insurance systems to be better able to handle a surge in claims, adjust wage replacement levels and automate a number of processes currently done manually.

The bill also requires state offices to notify unemployment recipients and employers about state law regarding return to work requirements, an individual's rights to refuse unsuitable work and how an individual can contest the denial of a claim as a result of these requirements.

The Senate HEALS proposal now moves to the House, which passed its own $3 trillion HEROES Act in May that extended the $600 boosted unemployment through the end of the year and phased down enhancements as unemployment rates fall. Democratic leaders in both houses of Congress responded to the Senate proposal Monday saying it doesn't do enough to include hazard pay for essential workers, does not adequately address the eviction crisis and does not provide additional funding for food stamps, among other issues.

House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer will resume negotiations today and have not given a firm deadline of when they will agree to and pass legislation.

"Unfortunately, we're pretty far apart right now, although I'm optimistic we could have a good solution at the end," Schumer said on "CBS This Morning" on Tuesday. He said he's hopeful both sides could reach a deal before the end of the week.

Republican Senator Pat Toomey, meanwhile, told CNBC Tuesday, "I imagine it's probably another week or two" before Congress reaches an agreement.

With Congress still negotiating the next round of pandemic relief, unemployed Americans are receiving what's likely to be their final $600 boosted payment this week as the CARES legislation expires July 31.

Additional enhancements to unemployment under the CARES Act, including extending benefits to previously ineligible workers and providing an additional 13 weeks on top of regular state aid, expire December 31, 2020. 

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