Relief pitched on jobless insurance
Massachusetts businesses would face smaller increases in taxes they pay to fund the state unemployment system over the next two years, under a new bill Gov. Charlie Baker announced on Friday.
With the state facing an unprecedented surge in demand for joblessness aid during the COVID-19 pandemic, the unemployment insurance trust fund is already in the red and relying on billions of dollars borrowed from the federal government to keep jobless aid flowing.
Baker’s legislation, which does no yet have a bill number, would freeze the rates employers must pay at their current schedule, replacing a nearly 60% increase in the average per-employee cost in 2021 with a more modest increase of about 17%.
Business leaders have fretted about the impending hikes for months, warning that they would struggle to hire more workers — particularly if the economy remains on shaky ground in early 2021 — if they had to pay significantly more toward the unemployment fund.
The governor’s bill would also enable the state to issue bonds to pay back federal loans that have helped keep the unemployment insurance trust fund solvent, a step that Baker said will reduce the cost Massachusetts pays in the long run and guarantee benefits without hamstringing businesses.
“The fact that it’s so much less expensive means people get their benefits that they’re entitled to and employers, in the midst of a terrible, terrible time for so many of them, continue to pay what they pay now and don’t get a big quarterly increase that could be hundreds of dollars per employee,” Baker said.
Like many states across the country, Massachusetts has been hit with a deluge of unemployment claims since the pandemic hit and prompted widespread business closures in March.
Over the first 10 months of 2020, the state’s unemployment insurance trust fund paid out more than $5.3 billion in benefits, nearly five times as much as during the same span in 2019, according to a report summarizing the trust fund.
The Executive Office of Labor and Workforce Development estimated the trust fund will end the year with a deficit of nearly $2.4 billion, which could swell to almost $4.8 billion by the end of 2021.
In its most recent quarterly report issued in October, the administration projected the shortfall will trigger a change in the contribution rate from schedule E to schedule G for employers, pushing the average cost per employee from $544 this year to $866 next year.
Under Baker’s bill, the employer tax rate would remain at schedule E in 2021 and 2022 rather than jump up to schedule G, as would be required under current law. That change would limit the per-employee costs to $635 in 2021 and $665 in 2022.