Lawmakers: Use federal funds to address unemployment insurance “sticker shock”

Boston Statehouse

People gathered at an unemployment office (Nexstar, file)

BOSTON (SHNS) – A growing chorus of lawmakers is pushing to direct federal stimulus funding toward the state’s unemployment benefits system to soften the blow of an unexpected surge in required contributions from employers, and House Speaker Ronald Mariano wants an explanation from the Baker administration.

House Minority Leader Brad Jones and Senate Minority Leader Bruce Tarr are circulating a letter on Tuesday to Democratic leadership and Gov. Charlie Baker, urging them to use some of the billions in aid from Washington to replenish the state’s unemployment insurance trust fund.

Dipping into the pool of federal dollars, the lawmakers said, would relieve pressure on employers who were hit with much larger quarterly unemployment tax bills than they expected due to a fifteenfold increase in the solvency fund assessment rate.

“We are urging you to follow the lead of Maryland and other states by dedicating a portion of the federal COVID-19 relief aid Massachusetts is receiving through the American Rescue Plan Act or other available and relevant federal funds to replenish the Unemployment Insurance Trust Fund,” lawmakers wrote in their letter. “Doing so will remove the financial burden from employers who are already struggling to survive, which in turn will help protect jobs and contribute to a strong post-pandemic economic recovery.”

The assessment rate sticker shock surfaced after the Legislature and the Baker administration spent weeks drafting and passing a bill to ease and extend the cost impacts on businesses of unprecedented jobless claims.

In a statement to the News Service, a Mariano spokesperson said the speaker “shares his colleagues’ concerns about the significant increase in solvency fund rates.”

“He was surprised the Administration did not factor the assessment calculation and forecast the magnitude of the increase in the recent amendments proposed,” Mariano’s office said. “The Legislature has acted swiftly to address the UI system and provide relief to businesses. We are reviewing this issue and awaiting information from the Administration, including a cost estimate. We hope to have the necessary information soon.”

Baker signed legislation earlier this month designed to limit the cost increases on employers who fund the joblessness system by freezing the rate schedule, but the bill’s drafters only targeted part of the complex formula that determines those taxes.

Because of the multibillion-dollar deficit forecast for the unemployment fund for the next few years, a section of the contribution system that lawmakers did not touch known as the solvency assessment rate jumped from 0.58 percent in 2020 to 9.23 percent in 2021. That translates to thousands of dollars more in charges on many businesses.

Few, if any, concerns were raised publicly about the solvency assessment during debate on the wide-ranging unemployment and tax relief bill that Baker — who filed an original version of the proposal late last year — signed on April 1.

Jones told the News Service that he only learned of the problem when businesses began receiving quarterly tax bills this month.

“I think if we had gotten (the legislation) done earlier this session, we might have had a better idea that these bills were going to be as large as they were,” Jones said. “Instead of getting it in February and saying this is due in 2.5 months, we’re getting it in April and it’s due in 2.5 weeks.”

As of 11 a.m. Tuesday, 49 lawmakers — nearly a quarter of the Legislature — had signed the letter, including both Democrats and Republicans, according to Jones’s office. Jones and Tarr plan to continue seeking signatories until 5 p.m.

Their request for use of federal funding mirrors what a coalition of major business groups said in their own letter to Baker last week.

In Maryland, Gov. Larry Hogan and legislative leaders agreed to use $1.1 billion of the $3.9 billion the state received from Washington to stabilize their unemployment system and limit taxes on businesses in 2022 and 2023, according to an Associated Press report.

The legislation Baker signed freezes the rate schedule, which limits some of the cost increases businesses were set to face, and authorizes $7 billion in borrowing to help steady the unemployment system, but it did not deploy any federal funding directly to the UI fund.

Business leaders told Baker that the decision forces employers “to foot the bill for government decisions before and during the pandemic,” pointing to mandatory closures and public health restrictions that impacted their operations.

The Baker administration did not respond to News Service inquiries on Tuesday.

Asked if he believed the administration or Legislature missed a warning sign about the solvency assessment increase when it was debating the UI bill, Jones replied that he is “surprised we didn’t hear anything from some of these bigger entities.”

“Everybody can point a finger in a different direction,” Jones said. “We have to deal with the fact that we’re where we’re at now and we have to deal with the situation that exists on the ground.”

“The sticker shock surprised a lot of people, including the Senate,” Senate President Karen Spilka said Tuesday about the solvency fund increase.

Spilka said it was too soon to say whether there might be interest in using federal relief funds to offset the increase, though senators intend to talk to federal government officials about how those funds can be used.

“At this point I think we are still in an information-gathering mode, but I realize the hardship this places on many businesses,” Spilka said.

(Matt Murphy contributed reporting)

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