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New Jersey Governor Phil Murphy (D) said that the state may have to cut half of its 400,000 public employees if the federal government doesn’t help make up a $10.1 billion revenue shortage through June 2021, Bloomberg News reported. “I don’t think there’s any amount of cuts or any amount of taxes that begins to fill the hole,” said Murphy, a retired Goldman Sachs Group Inc. senior director and Democrat who came to office in January 2018. Without federal help, he said, state and local governments will have to dismiss firefighters, police, emergency-medical personnel and others. “The alternative to not getting that funding is a whole lot of layoffs — we think as much as 200,000 or more,” he said. Last week his administration listed more than $5 billion in cuts and deferrals to address the expected $10.1 billion revenue shortage — the fallout from a shutdown he ordered on March 21 to slow the spread of the new coronavirus. Murphy is seeking to issue billions of dollars in short- and long-term debt, including via the U.S. Federal Reserve’s Municipal Liquidity Facility.

Amtrak is preparing to slash its workforce by as much as 20 percent in its upcoming fiscal year as the U.S.’s lone nationwide passenger railroad braces for a slow recovery to ridership that’s been gutted by the coronavirus pandemic, Bloomberg News. Amtrak projects ridership will return to just half of 2019 levels in its upcoming fiscal year beginning in October, Amtrak Chief Executive Officer William Flynn said in a memo to employees. The railroad has already reduced service and taken other cost-cutting measures amid a 95 percent decline in ridership and revenue but further reductions are needed to align with a sustained period of depressed demand, he said. “Congress expects us to operate like any other business — and while they have supported us with emergency funding for FY 2020, they are not going to support us endlessly to run mostly empty trains,” Flynn said. The workforce reductions will account for $350 million of a plan to slash operating costs by $500 million next year, Flynn said in a separate letter to top U.S. lawmakers on Monday. In that letter, Flynn said that the railroad would need nearly $1.5 billion in additional funding from congressional appropriators in addition to the internal cuts being planned and $1 billion in emergency aid provided by the $2.2 trillion virus stimulus bill.

As unemployment rises and the first wave of federal economic relief nears expiration, lawmakers are increasingly looking to expand an existing wage subsidy to keep workers on payrolls and help businesses stay afloat, the Wall Street Journal reported. The $3 trillion package passed by the House this month features an expanded wage subsidy, known as the employee retention tax credit. That proposal, which would add about $194 billion to a $55 billion tax credit created in March, is gaining bipartisan support even as lawmakers clash over other legislation to aid the economy during the pandemic. For Democrats, the subsidy offers an alternative to the payroll-tax cut President Trump is seeking, which they oppose because it does little for the unemployed. Republican supporters prefer the subsidy to spending programs favored by Democrats and see it as a way to link aid to work. The House plan would give employers enough money to cover up to 80 percent of their wages and benefits, up to $45,000 per worker, plus a credit for fixed expenses like rent. Eligible companies would simply keep taxes withheld from employees’ paychecks. If that isn’t enough to equal the credit, they could get additional money from the Internal Revenue Service. Smaller businesses would get the subsidy for all workers, while larger ones would get it only for furloughed workers still receiving wages or benefits. The break would be scaled to each employer’s revenue loss during the coronavirus pandemic. Read more. (Subscription required.)
https://www.wsj.com/articles/tax-credit-for-keeping-workers-on-payrolls…

In related news, the first shoots of an economic recovery from shutdowns caused by the coronavirus pandemic are starting to emerge, but the U.S. is likely to face a sustained period of record-high unemployment, the Wall Street Journal reported. Policy makers confronting that possibility are preparing plans to offer additional stimulus to the economy in the coming weeks and months. White House economic adviser Kevin Hassett said on Sunday that he already sees signs a rebound is occurring, pointing to businesses reopening and credit-card data showing consumers are starting to increase spending. Still, he said that May’s unemployment rate, which measures joblessness in the middle of the month, could “end up with a number north of 20%.” April’s rate, 14.7 percent, was the highest on record back to 1948. The Trump administration is in talks with Congress on a fourth pandemic-relief bill, Hassett said. He demurred when asked if President Trump supports extending a $600 weekly boost to unemployment benefits past July. House Democrats have proposed extending those enhanced benefits into early next year. Read more. (Subscription required.)
https://www.wsj.com/articles/unemployment-could-top-20-but-economy-reco…

President Trump and top Republican lawmakers are mounting fresh opposition to extending enhanced unemployment benefits to the millions of Americans who are still out of work, even as the administration prepared to release new jobless figures today that illustrate the ongoing devastation wrought by the novel coronavirus, the Washington Post reported. The reluctance by the White House and top GOP leaders drew sharp rebukes from congressional Democrats, who argue that the coronavirus outbreak threatens to further ravage the U.S. workforce unless the government authorizes additional aid. Their clash could intensify in the next six weeks, as policymakers stare down a July deadline while the country’s labor market is expected to only worsen. More than 36 million Americans already have sought unemployment benefits over eight weeks, the Labor Department reported in its most recent update, with many more expected to join their ranks in the agency’s imminent report. At issue is the enhanced unemployment aid that Congress approved in late March, which includes an extra $600 in weekly payments to out-of-work Americans. On Tuesday, President Trump articulated his reluctance to extend those benefits during a closed-door lunch with Senate Republicans, many of whom share his concern that the expanded federal payments deter people from returning to work. The enhanced benefits expire in July. Top congressional Republicans signaled support for paring back these benefits during a meeting on Tuesday attended by Vice President Pence, Treasury Secretary Steven Mnuchin, Senate Majority Leader Mitch McConnell (R-Ky.) and House Minority Leader Kevin McCarthy (R-Calif.). Party leaders also agreed to delay another round of coronavirus aid for three to four weeks.

Republicans universally rejected a $3 trillion stimulus measure drafted by House Democrats to bolster the U.S. economy, but the draft plan has the seeds for an eventual, smaller compromise, Bloomberg News reported. With House Speaker Nancy Pelosi (D-Calif.) pushing the House toward a Friday vote on the Democratic package, a Senate Republican aide said that Majority Leader Mitch McConnell (R-Ky.) doesn’t plan to move on any GOP alternative until June at the earliest. The framework for a compromise — probably still weeks away — likely will be built on state and local government aid, expanded tax breaks and legal protections for businesses and assistance for unemployed workers. There are several pressure points looming that will increase the stakes, including expiring pandemic unemployment insurance and Paycheck Protection Program provisions at the end of July, and the Sept. 30 ending of grant funding for airlines, as well as the fiscal year. Republicans are counting on the lifting of lockdowns in many states along with the previous stimulus money still flowing out to juice the economy enough that another big spending package won’t be necessary. That aligns them with President Donald Trump, who has said he’s in “no rush” for another stimulus package. Treasury Secretary Steven Mnuchin, who was a linchpin in the negotiations that produced the previous stimulus bills, dismissed the Democratic bill and said that both sides should spend the next 30 days assessing how well those earlier efforts are working. Federal Reserve Chairman Jerome Powell yesterday urged Congress to keep spending in order to avoid long-term damage. “Additional fiscal support could be costly, but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery,” he said. Read more.

The “Health and Economic Recovery Omnibus Emergency Solutions Act” (HEROES Act), introduced on May 12 by Rep. Nita Lowey (D-N.Y.), is the latest legislative spending package aimed at stabilizing the economy amidst the COVID-19 pandemic. In addition to providing funding for states, localities and territories to pay essential workers, conduct additional testing and provide an additional round of direct payments to households, the legislation has included a few bankruptcy provisions. According to the bill summary:

• Sec. 20104 protects Economic Impact Payments from any form of transfer, assignment, execution, levy, attachment, garnishment, legal process, bankruptcy or insolvency law, and any other means of capture prohibited for payments made under Chapter 7, Subchapter 2, of the Social Security Act.

• Section 90001 (c) makes a technical clarification to ensure that hospitals in bankruptcy still qualify for PPP loans due to the essential nature of their operations.

• Sec. 110203 extends and expands the eviction moratorium and foreclosure moratorium in the CARES Act to include all renters and homeowners, improves the forbearance provided under the CARES Act, and specifies the loan modifications and loss mitigation that should be available to homeowners following a moratorium to prevent any homeowner from facing a lump-sum payment that they cannot afford. Additionally, this section protects federal relief payments from being taken in bankruptcy proceedings, ensuring that homeowners in bankruptcy proceedings can participate in the mortgage forbearance program created by the CARES Act and other COVID-19 mortgage assistance; increases the amount of home equity protected in the bankruptcy process to $100,000; makes it easier for homeowners to exit bankruptcy so they can resume normal economic activity and continue paying off their mortgages; and opens up chapter 13 to more homeowners and small businesses by raising the limits for debt to qualify for a bankruptcy through chapter 13.

Click here for the bill text.

Click here for the bill summary.

One of the most progressive lawmakers in the House and one of the most conservative in the Senate, staring down a pandemic-driven unemployment rate at its highest level since the Great Depression, have come to the same conclusion: It’s time for the federal government to cover workers’ salaries, the New York Times reported. As Congress prepares to wage a new battle over how to best aid workers and businesses devastated by the coronavirus crisis, Representative Pramila Jayapal (D-Wash.) and Sen. Josh Hawley (R.-Mo.) are both making the case to their party’s leaders that guaranteed income programs should be part of the federal relief effort. Jayapal’s bill would cover workers’ salaries up to $90,000 for up to six months — allowing businesses to rehire furloughed and laid-off employees — and distribute grants to businesses to cover operating costs. It would cost $654 billion over six months and benefit more than 36 million workers, according to an analysis by Moody’s prepared for her office. Hawley has introduced a similar proposal mirroring the British government’s plan that would cover 80 percent of employers’ payroll costs up to the median wage, about $49,000 a year. A companion bill that Hawley introduced goes further, providing families and single parents making less than $100,000 with a monthly check for the duration of the crisis.