Mass. employers shouldn’t get stuck with the UI bill
State mandated shutdowns not the fault of businesses
IN THE CONFUSION surrounding the initial weeks and months of the pandemic, when businesses were ordered to close their doors and workers were losing their jobs by the thousands, the state attempted to provide unemployment insurance benefits to claimants as quickly as possible. As the state of Massachusetts desperately rushed to get checks in the hands of the unemployed, it resulted in $2.7 billion in unemployment insurance overpayments. Roughly $375 million will come directly from the state’s unemployment insurance trust fund.
Under the law, if a recipient is overpaid for unemployment, they are required to refund the money to the state or federal government unless waived. Understandably, lawmakers are concerned that people laid off during the pandemic, mostly due to government mandated shutdowns, lack the ability and resources to make the payments. Now Massachusetts lawmakers are pursuing blanket waivers for state-related UI overpayments and seeking permission from US Secretary of Labor Marty Walsh to waive federal overpayments. However – who ends up paying for waived overpayments from the state unemployment fund? The answer: Massachusetts employers.
Employers and job creators fund the state’s unemployment insurance system through UI taxes. According to the national Tax Foundation, Massachusetts is ranked 50th worst in the nation for unemployment insurance taxes with some of the most generous benefits and laxest eligibility requirements in the country. Even before the pandemic, with an unemployment rate below 3 percent, the state was paying out billions of dollars in UI claims. When COVID-19 struck and Massachusetts climbed to a 17 percent unemployment rate in the summer of 2020, the UI Trust Fund depleted rapidly, forcing the state to borrow $2.3 billion from the federal government to continue paying claims. Again, who must shoulder the cost burden of this debt with an additional assessment charge? Massachusetts employers.
Earlier this year, lawmakers agreed to allocate $500 million in federal American Rescue Plan Act aid for the state’s UI Trust Fund to provide relief for employers. After all, the layoffs resulting from the prolonged state-mandated shutdowns and restrictions were not the fault of business owners. Demanding businesses replenish the entire UI trust is grossly unfair and counterproductive to the state’s economic recovery.
Since lawmakers have publicly expressed their support for advocates’ calls for a blanket waiver of unemployment insurance overpayments, we ask that any amount that was slated to be returned to the state UI trust fund be replaced with either federal funds or excess state tax revenue. Massachusetts still has roughly $2.3 billion in unspent American Rescue Plan Act aid that will more than cover the $375 million in waived state overpayments.
It would be patently unfair to force strained business owners to cover the cost of this public policy decision. Lawmakers and activists make the case that residents of the Commonwealth who were unemployed for extended periods of time would face a major hardship trying to repay the state, but they must also understand that businesses, with reduced revenue that will be paying billions of dollars in UI debt over the next decade, are also struggling.Just as residents of Massachusetts cannot afford to refund the state for UI overpayments, small businesses attempting to lead the state’s economic recovery cannot afford to incur any additional UI costs if Massachusetts decides to move forward with a blanket waiver.
Christopher Carlozzi is state director of the National Federation of Independent Business.