State sorting through jumble of unemployment insurance claims, advances

Boston Statehouse

BOSTON, Mass. (State House News Service)– With federal loans buoying the account and claims retreating closer to a pre-pandemic level, the the state fund that pays unemployment benefits in Massachusetts appears to hold one-of-a-kind status at this point in the country’s economic recovery, officials said Friday.

Staff on a commission tasked with studying the topic said that among states that borrowed money from the federal government to keep benefits flowing when unemployment surged last year, the Bay State is the only one with a balance that exceeds the amount of debt it owes to Washington.

The current balance of the UI trust fund, estimated at $2.9 billion in data published by the U.S. Treasury, has emerged as a point of discussion in the debate about injecting surplus state dollars into the account.

About $2.3 billion of that money is from federal advances that will need to be repaid. A report the Tax Foundation published in September, which legislative staff cited during a Friday presentation, found that 10 states – mostly blue states – still owe money to the federal government for unemployment advances. Massachusetts is the only one from that list whose UI fund balance is larger than the debt owed.

“That is a sign that we are in recovery and that we’re doing well,” said Sen. Patricia Jehlen, who co-chairs the Unemployment Insurance Trust Fund Study Commission, at its Friday meeting.

Jehlen, a Somerville Democrat, raised eyebrows in the Baker administration on Wednesday, when she said during a Senate debate that the current balance means the state “may not need” to deploy $7 billion in bonding authorization that the Legislature and Gov. Charlie Baker authorized to help preserve the fund’s fiscal health.

In the administration’s view, suggesting Massachusetts could pay back all of its federal advances and keep benefits flowing without an injection of additional funding is inaccurate.

At Friday’s meeting, Labor and Workforce Development Secretary Rosalin Acosta stressed that the fund’s current balance is largely built from borrowed money that still needs to be repaid. The state also owes a still-undisclosed amount in credits to employers who overpaid their unemployment taxes during the first quarter.

“Right now, the Treasury report is showing we have about $2.9 billion in balances. That is a fluid number. That number can change daily,” Acosta said. “But remember that includes the borrowing, so it’s important for us as we continue as a commission to think about: what do we want our solvency to be, what is it that we’re aiming for here? That’s where the bonding piece will make a difference.”

The House and Senate have each approved transferring $500 million — half as much as Baker and other Republicans have sought — into the unemployment insurance trust fund to help its fiscal health amid recovery from the pandemic. That deposit has been framed as a way to aid employers facing higher long-term assessments. Many businesses were forced to close their doors for long stretches due to government mandates or their own safety concerns, leading to widespread layoffs and a surge in unemployment. Massachusetts has paid about $24 billion in joblessness benefits since March 2020.

In recent months, claims for unemployment benefits have declined, according to data Jehlen’s staff presented Friday. The most recent September data counted slightly more than 55,000 people claiming unemployment benefits per week, slightly more than in fall 2019 and about as much as that winter, according to data commission staff presented on Friday. That’s a sizable drop from the spike COVID-19 brought. In the early months of the crisis, Massachusetts received a peak of more than 547,000 claimants seeking joblessness aid every week, according to the presentation.

Many other states continue to draw from federal advances, but Massachusetts last recorded a withdrawal in April, Jehlen’s staff told the commission. This year, the Bay State has accrued $5.5 million in interest on its federal unemployment fund loan and it will need to pay back the entirety of the principal by November 2022. “I know the secretary wants to be careful, but the more we can pay off our advances from the federal government, the less we’ll be spending,” Jehlen said, adding that Massachusetts “should not” put money toward interest payments if it can pay down the total balance. “I think it’s really important to straighten this out and not issue more bonds than and to pay off (the loan) without bonds to the extent we can.”

The law creating the commission imposed a deadline of Dec. 15, but with members still waiting to examine datasets they requested and an obvious consensus out of reach, the panel is poised to seek an extension. Commissioners come from a range of backgrounds, representing both business and organized labor interests, and so far they have pushed competing recommendations. “I’ll be very candid: I don’t think there’s any way we’re going to meet that deadline,” co-chair Rep. Josh Cutler said Friday, describing the challenges of finding agreement in the next month and several outstanding requests for additional information.

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