Unemployment insurance deficit may have vanished
Senator says $1b in aid unnecessary; Administration says situation evolving
This story has been updated with a Baker administration response.
THE DEFICIT in the state’s unemployment insurance trust fund, expected by some to run into billions of dollars eventually, has apparently vanished, according to a state senator and documents filed with the federal government.
The state issued a report for May indicating the trust fund was running a deficit of nearly $1.8 billion. Strangely, no other monthly reports have been issued by the Baker administration since then. But documents compiled by the US Treasury indicate the fund’s financial situation has dramatically improved, hitting $2.9 billion earlier this month – enough to pay off nearly $2.3 billion in loans from the federal government and still have money left over.
The numbers are sharply at odds with public perception, which holds that the unemployment insurance trust fund is running a huge deficit and in need of a state bailout. Business leaders, whose members are on the hook for most of the cost of the unemployment insurance trust fund, have pressed Beacon Hill for relief. They say the $500 million lawmakers have set aside for the trust fund is not enough. They back a proposal from Gov. Charlie Baker calling for $1 billion to stabilize the unemployment insurance trust fund.
CommonWealth asked the Baker administration about the conflicting numbers on Tuesday. On Wednesday, the situation came to a head on the floor of the Senate during debate on an amendment to increase from $500 million to $1 billion the amount of federal aid the state should use to address the shortfall in the unemployment insurance trust fund.
Sen. Patricia Jehlen of Somerville, the chair of the Legislature’s Labor and Workforce Development Committee and the head of an unemployment insurance trust fund study commission, said the extra money wasn’t needed because the deficit had disappeared.
The Baker administration had no immediate comment, but later Wednesday night an official issued a statement suggesting the situation was evolving. The statement said the Treasury documents do not take into account “credits owed to employers who essentially overpaid their UI rates during the first quarter of this year.”
The statement continued: “While the situation with the UI Trust Fund is constantly evolving, it is not accurate to say that the fund is in a position to be able to pay back federal advances while continuing to pay benefits without additional stabilization funding.”
During the Senate debate on Wednesday, Senate Republican Leader Bruce Tarr of Gloucester pushed for an amendment increasing the unemployment insurance aid from $500 million to $1 billion. He said the additional money was needed because the deficiency in the trust fund could approach $7 billion. Tarr said the downturn in economic activity and the rise in unemployment during the pandemic dramatically affected the unemployment insurance trust fund. He said benefits were paid out, employer contributions declined or disappeared, and a huge deficit built up that will eventually have to be paid off by employers unless the state steps in with additional funds.
Tarr said it was “totally just” that the state supplement the existing $500 million appropriation in the American Rescue Act Plan spending bill to provide more help to employers.
Sen. Michael Rodrigues of Westport, the chair of the Senate’s budget committee, agreed with Tarr that businesses need help coping with unemployment insurance costs but said any decision on funneling additional money to the unemployment insurance trust fund should wait until later when the remainder of the state’s federal aid money is distributed.
The senator said there was almost no money earlier this year in the fund and about $2 billion was owed to the federal government. That was the situation that prompted calls for the state to issue bonds for up to $7 billion to deal with the rising deficit in the fund and allow employers to pay off the state borrowing through smaller assessments over a longer period of time.
Jehlen said she was surprised to learn recently that there is close to $3 billion in the fund now, enough to pay off the loans from the federal government. She said there is no need to allocate an additional $500 million to the unemployment insurance trust fund, and there may be no need for the existing $500 million in the American Rescue Plan Act spending bill.
Tarr’s amendment was defeated 32-5.
In a telephone interview after the vote, Jehlen said she was alarmed lawmakers and the public are considering amendments worth hundreds of millions of dollars without all the facts. She said she has asked the Baker administration for information on the status of the unemployment insurance trust fund and received nothing.“How are we to make decisions without this information?” Jehlen asked. “I don’t want this debate to take place in a vacuum with false information being used.”
Asked why the apparent good news about the unemployment trust fund is not being released publicly, Jehlen said she didn’t want to speculate. “I don’t know what to say,” she said.