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More than half of states OK to send out an extra $300/week in unemployment — sadly, experts say, there's a catch

More than half of states received approval to send out $300 per week in enhanced unemployment benefits. Here's why experts caution against factoring the cash into your budget.

Twenty/20

Unemployed residents of certain states may be one step closer to receiving an extra $300 in weekly unemployment benefits

As of Aug. 24, more than half of states have received approval to send out $300 per week in enhanced unemployment benefits, according to the Federal Emergency Management Agency (FEMA), which is overseeing the assistance. Eligible residents will receive that money in addition to standard state jobless aid.

The $300 weekly supplement is a result of an executive order President Donald Trump signed on August 8 to temporarily extend the enhanced unemployment benefits that expired at the end of July. Under the CARES Act, eligible out-of-work Americans had been receiving an extra $600 per week. When those benefits expired, the average weekly unemployment compensation Americans received fell from $812 to $257, according a report released Monday from the National Bureau of Economic Research.

Unfortunately, experts say, there's a catch, so don't factor the jobless aid benefits into your budget just yet.  

Implementation will be a 'challenge for all states'

"Implementing the president's executive order calling for additional payments will be a challenge for all of the states," says Mark Hamrick, senior economic analyst at Bankrate.

States with FEMA approval will have to set up entirely new unemployment programs, according to Joshua Gotbaum, a guest scholar at the Brookings Institution. Disbursing payments will require states to sort through an influx of applications to determine eligibility requirement and retrain employees to do so.

"For many states, that will take much longer than people realize," says Gotbaum, who has worked in five administrations under presidents of both parties.  

"The reality is that no state was set up to handle the initial 1,500% [increase] in demand for new claims and the high level of need for new and continuing claims in the nearly half-year since the pandemic set foot and began to spread in the United States," Hamrick says. 

States across the U.S. have been plagued by issues in processing standard unemployment claims. "Reports have been all too common across the nation of individuals who haven't been able to collect their benefits, even when they qualify or have been approved," Hamrick adds. 

Benefits vary by state

Though this enhanced unemployment benefit was initiated by President Trump in the form of an executive order, states can decide whether or not they want to participate. So whether out-of-work Americans receive that $300 in extra weekly aid will vary depending on residency. 

State by state, costs associated with the enduring pandemic vary widely. And because of the way the president's executive order is designed, some states don't have the funding to participate in the program. 

The president's enhanced benefit is being funded from a $44 billion pot of previously approved disaster aid money. About 25% of the money in the fund had been spent as of June 30, and states may have already allocated a large share of the remainder to future costs, according to the Committee for a Responsible Federal Budget.

Originally, the president's order set the weekly benefit amount at $400 a week and called for states to chip in 25%, or $100 a week. To fund their share, states could count the first $100 they already pay in jobless benefits to meet that requirement. But many states are already borrowing from the federal government to pay standard unemployment aid.

The Trump administration announced last week that states could count the benefits they're already paying as fulfillment of that  — meaning they don't have to kick in any additional money.

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The states that have been approved will receive funding within one business day, and the payments are retroactive to the week of August 1.

Arizona started distributing the $300 weekly payments to workers earlier this month. So far, 250,000 residents have received a total $75 million, according to Arizona's Department of Economic Security.

It's unclear whether or not the remaining states will offer residents aid, but FEMA says it will continue to update its website as additional states apply and are approved, a spokeswoman told CNBC.com.

The extra benefit may only last a few weeks

Even if states are able to distribute the benefit, recipients may only get three weeks' worth of payments. States applying for the federal grants will receive an "initial obligation of three weeks of needed funding," FEMA said in its statement.

The agency will then make allotments to states on a week-by-week basis "in order to ensure that funding remains available for the states who apply for the grant assistance," according to the government agency.

That isn't helping to reassure the millions of Americans who are unemployed, says Hamrick. "For Americans struggling to pay their bills, including those who don't have enough money to buy the food they need, time is of the essence."

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