Unemployment Insurance Fund Deficit Concerns Local Businesses

The unemployment insurance system in Massachusetts is one of those things that most people don’t think much about until they need it. Then came the pandemic, and many people who had never collected unemployment before did so in large numbers in the face of lockdowns, shutdowns, and other business dislocations.

Much of the funding came thanks to Washington, but the rest came from the Unemployment Trust Fund – the ‘bank’ into which Massachusetts employers pay, year after year, to ensure that workers will have a source of money if needed.

Needless to say, the pandemic greatly reduced the money available in the system (fewer people working and more people collecting), but how much is now unclear thanks to the government. To be exact, the Baker administration has avoided providing an update on the fund since early summer, leaving employers concerned about how much they will eventually have to pay to rebuild the fund. And, meanwhile, the state has been awash in aid from Washington, frustrating those who had hoped employers wouldn’t bear the whole burden of this pandemic period spending.

Jack Lank, president of the United Regional Chamber of Commerce in  Plainville, which represents businesses in Franklin, said the whole situation is extremely frustrating. “This hurts big companies and small companies equally,” he said. It’s both a matter of the uncertainty and the fact that these employers may end up seeing substantial hikes in UI rates – another tax headwind for business still trying to recover from the impacts of the Pandemic.

Members of a panel studying the unemployment system indicated, last week, that they want to gain a clearer understanding of the fund's financial outlook before they iron out a report about improving its long-term stability.

The group's work has been marked recently by co-chair Sen. Patricia Jehlen questioning if the state still needs to borrow any money to buoy the UI fund now that employment rates have rebounded.

"In terms of the chamber's vote, that would be a really important piece of information to have, and I don't know that I'd feel comfortable voting without a little bit more information than we have on that," said Carolyn Ryan, a member of the commission and vice president for policy and research at the Greater Boston Chamber of Commerce.

Facing inquiries from the panel about the trust fund's current balance and the administration's plans for bonding, Labor and Workforce Development Secretary Rosalin Acosta said Monday she hopes "to have a more concrete timeline in the near future."

Asked if she would have an estimate about the trust fund's balance by January, Acosta replied, "I'm hoping so, chair. As soon as I hear from the team, I will confirm."

Baker in April signed a law authorizing up to $7 billion in bonding to stabilize the unemployment insurance fund after a surge of claims during the pandemic depleted the account, which Massachusetts businesses fund via taxes, and forced the state to borrow money from the federal government.

Officials still have not triggered any of that bonding yet, and Jehlen raised eyebrows this month when she suggested during Senate debate that it may no longer be necessary with federal reports indicating the account has about $2.9 billion on hand.

The Baker administration typically publishes a summary of the unemployment fund's status every month, but has not posted an update since June, when it reported that the account had a balance $1.77 billion in the red.

Richard Marlin, the legislative director for the Massachusetts Building Trades Council, said during last week's meeting that his group also wants to know the administration's plan for that borrowing.

"Quite frankly, I think $7 billion, if they bonded it, they could make us whole," Marlin said. "Getting a sense of where they want to have the trust fund balance start and if whatever we're going to do is going to add to that might be somewhat helpful."

The House and Senate both agreed to steer $500 million in federal relief and surplus tax dollars into the unemployment system to reduce the burden on businesses, half as much as Baker sought, but that proposal remains stalled in conference committee talks about the broader spending bill.

Administration officials have contended that the bulk of the existing unemployment fund's balance is money owed to the federal government, warning that the state cannot pay back those advances and keep benefits flowing without additional borrowing.

The commission studying the unemployment trust fund, created in the same springtime law that authorized the $7 billion in bonding, will not meet its Dec. 15 deadline to file a report and recommendations for keeping the unemployment system solvent.

Instead, members at last week’s meeting unanimously approved a new plan. Jehlen and fellow co-chair Rep. Josh Cutler will file a status update on Dec. 15 summarizing the commission's meetings so far, then craft a "skeleton report" including their personal recommendations. Panelists will get two weeks to review the draft before deliberating and voting at their next meeting, whose date is uncertain.

Justifying the delay, Jehlen pointed to Republican Rep. David Vieira's quote in a Boston Globe story about a commission studying the state seal.

"I just read in the paper today that Rep. Vieira said he has never been on a commission that met its deadline, so I don't feel that we are out of line," Jehlen said.

The commission's scope includes potential changes to the experience rating system, taxable wage base and use of federal credits, but members -- who range across the spectrum from organized labor representatives to business group leaders -- so far appear distant from consensus.

After agreeing that the trust fund should maintain a sufficient reserve, members on Monday spent much of the meeting unsuccessfully deliberating if the panel should declare that improving "equity for small businesses" is one of its guiding principles.

Jehlen and Cutler proposed that language, but it failed to earn sufficient support with seven of the 21 members voting in opposition and three abstaining.

Several panelists who voted against the motion said they felt the language was too "subjective" and that decisions about how to prioritize small business equity should fall to lawmakers weighing specific legislation, not the commission studying the system.

Coming up on Friday, the Senate Post Audit Committee has also scheduled a hearing to examine how the state's unemployment insurance system, including the Pandemic Unemployment Assistance program, fared during the COVID-19 emergency.

The panel, chaired by Sen. Moore of Millbury, will reportedly explore the UI system. Speakers will include Acosta, First Assistant Inspector General Natalie Monroe, and representatives from Greater Boston Legal Services, the AFL-CIO of Massachusetts, the National Federation of Independent Business of Massachusetts, and the Retailers Association of Massachusetts. (Friday, 1 p.m., More information