Federal CARES Act money sent to Tennessee will be used to keep the state’s $1 billion unemployment insurance trust fund from hitting rock bottom, officials said Tuesday, May 12.

Gov. Bill Lee and Finance and Administration Commissioner Butch Eley both said a chunk of the state’s $2.6 billion allotment will go toward keeping the trust fund from falling below the billion dollar mark, which would necessitate a tax increase, and then to keep it from being drained amid the COVID-19 crisis.

Some 470,000 Tennesseans have filed unemployment claims since the pandemic hit the state in March, and the state still has about 5,000 people signing up each day, according to Eley.

“We definitely have that as a centerpiece” for using the money “to keep the fund safe and sound,” Eley said during an online meeting of the governor’s working group on federal funding accountability.

The Lee Administration is working with the Department of Labor and Workforce Development to avoid dipping below $1 billion because, in that case, the state would be forced to ask businesses to increase contributions to the fund, Eley said.

The state is already trying to reimburse unemployment expenses, a little more than $266 million so far, according to Eley. The fund was at $1.2 billion when the pandemic started.

Memphis area unemployment claims continue to flow in

If Tennessee continues on its pace for unemployment, though, the state would “extinguish” the reserve fund by the end of the year unless it replenishes with coronavirus relief funds, Eley said.

“We’d like to be able to fill it up proportionally to be where we were,” Eley said.

Lee acknowledged the state has “no idea” what the unemployment rate will be for the next few months. He hopes the state’s business reopening will stop the rate of decline and help Tennessee avert a $1 billion expense.

“On the current trajectory, it certainly is possible to spend a billion dollars or more, which we think we ought to if we can use federal funds, to backfill that cost. … But it could be that much,” Lee said.

The governor said he wants to use the money to bolster the unemployed as well as businesses that were forced to close when the pandemic started. Payments to cities and counties are expected too.

State leaders are hoping for more flexibility from the federal government. But unless Congress changes the rules for CARES Act funding, the state won’t be able to use the money to replace lost tax revenue, officials said.

Tennessee’s revenue plummeted in April, leaving a $693.8 million deficit in the state budget for fiscal 2019-20, which ends June 30. Overall state revenues for April dipped to $1.3 billion, marking a nearly 40% negative growth rate from last year.

Sales tax revenue for April was off 6% from 2019, but much of the revenue loss stems from extensions given for business tax filings, according to Eley.

All told, the state is set to receive more than $5 billion from the federal government, including increased unemployment payments of $600 a week on top of state payments.

Shelby County and Memphis are to receive $164.7 million and Metro Nashville is netting $121.9 million from coronavirus relief fund. Another $2.7 million is to go toward law enforcement in Memphis.

Nationally, $175 billion was budgeted for health care providers. Tennessee hospitals and providers are to receive $919.5 million through Health and Human Services funds.

Hospitals with “high impact,” Sumner County Regional Medical Center and Vanderbilt University Medical Center, are to receive $35.4 million, and 289 rural healthcare providers are to get $240 million.

The state already had $740 million in its fund for Temporary Assistance for Needy Families, which provides cash for low-income families. State lawmakers were criticized in late 2019 for allowing the amount in the fund to balloon instead of increasing payments to recipients or using it for other expenses such as child care.

The state receives $190 million annually for the TANF fund, and Eley said enrollment is not “eating” into the yearly amount the state receives, leaving the total in the fund intact.

State Sen. Raumesh Akbari, a Memphis Democrat, asked whether the state is seeing a spike in TANF and SNAP (Supplemental Nutritional Assistance Program) requests.

Akbari said she would also like for the state to look at “disparities” highlighted by the crisis in health care and access to broadband after students missed the past two months of the academic year.

Eley responded that having sizable funds is enabling the state to make direct payments of $500 to $1,000 to families and is extending that beyond June.

In addition, funds are being made available to people who were essential employees to pay for child care at approved centers during the pandemic, according to Eley.

Lee said he wants an analysis on enrollment and its impact on reserves used by the Department of Human Services.