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Storm clouds over Mass. job market are still looking ominous

Borrowing millions, state feels pressure as unemployment claims remain high

More than 527,000 people in Massachusetts collected state checks for unemployment assistance last week.Feng Yu - Fotolia

It’s hard to find a silver lining when assessing the storm clouds looming over an already-battered Massachusetts job market.

More than 527,000 people collected state jobless checks last week, the Baker administration said Thursday, nearly 10 times the number a year earlier. Add in 400,000-plus residents covered by the feds under a new program for gig workers and others, and there are probably more than 900,000 people receiving jobless benefits, or 14 percent of the state’s labor force before the coronavirus pandemic shut down the economy.

Now comes news that the Baker administration has borrowed $455 million from the federal government to pay state unemployment claims, after the account used for the payouts was all but drained.


The loans will almost certainly be the first of a massive pile of IOUs. The most recent state report on the Unemployment Insurance Trust Fund estimated the gap between employer contributions and benefit payments at $3.2 billion in the fiscal year ended June 30.

Employers, who fund most of the benefits paid by the state, are rightly concerned that they will have to plug the hole. In its trust fund report for June, the state said employer contributions were slated to increase from $1.6 billion in the fiscal year just ended to $2.2 billion in fiscal 2021 due to automatic increases tied to the account’s financial condition. Additional tax hikes may also be needed to close the $6.2 billion deficit estimated for the year that just finished and future shortfalls.

“Putting an extra $6.2 billion burden on Massachusetts employers as they struggle to survive the recession is like throwing an anchor to a drowning person,” said Greg Sullivan, director of research at the Pioneer Institute in Boston, referring to the estimated deficit for unemployment fund deficit for the current year.


But there are other options the state can pursue.

The administration could forgo the automatic hikes, as it has done before, and sell bonds to pay the feds back, said John Regan, chief executive of Associated Industries of Massachusetts, one of the state’s largest business groups. Or it could lobby Congress for some sort of bailout, such as debt forgiveness.

And Massachusetts would have allies in any push for federal help. California ($5.4 billion), New York ($4.2 billion), and Texas ($1.8 billion) are among the 12 states and the Virgin Islands that have taken loans or have signaled they will. The loans are interest-free until the end of the year, then borrowers will pay 2.41 percent.

“Everyone knows that this tide of red ink is coming at us,” Regan said.

No one, he said, is sure how it will all play out.

That’s especially true because the state must also confront a sharp drop in tax revenue ― $6 billion below its January forecast, according to an estimate by the Massachusetts Taxpayers Foundation ― as the pandemic takes a bite out of employer payrolls, retail sales, and corporate profits.

Jon Hurst, president of the Retailers Association of Massachusetts, said the state should take this opportunity to overhaul what he called its “simply bad” unemployment insurance system.

“We have the easiest qualification standards” for applicants and “the most generous benefits,” he said. “We can’t be both... It’s going to come back to haunt us.”

For its part, the state isn’t saying much.


“The Administration is committed to making sure workers impacted by the COVID-19 pandemic continue to receive the benefits they deserve and will continue to take any steps necessary to ensure the solvency of the [unemployment insurance] trust fund,” the Executive Office of Labor and Workforce Development said in a statement.

In other words, the unemployment checks will not stop. The state will continue to borrow from Uncle Sam. And everyone will worry about the bill later.

Does that add up to a silver lining?

Larry Edelman can be reached at larry.edelman@globe.com. Follow him on Twitter @GlobeNewsEd.