After months of delay, the Baker administration chose New Year’s Eve to deliver the news: The state fund that pays jobless benefits has a deficit of about $115 million.
Trying to bury bad news just before the weekend or a holiday is standard PR practice for companies and politicians alike. But you know what? Governor Charlie Baker’s team chose a sleepy Friday and last day of the year to release news that is . . . not too bad.
It’s no surprise the Massachusetts unemployment insurance trust fund is in the red after the state paid out a total of $22 billion in jobless benefits in 2020 and $11.8 billion in 2021. In 2019, payments ran about $1.6 billion.
Guesstimates for the size of the deficit reached to the multiple billions of dollars, especially after Baker won authorization from the Legislature to sell up to $7 billion in bonds to investors to replenish the UI fund.
“It could have been a heck of a lot worse,” said Jon Hurst, president of the Retailers Association of Massachusetts.
Private employers, who finance the UI program through unemployment taxes, will ultimately be responsible for closing the deficit. They’ve given Baker a fair amount of heat for keeping them in the dark about the fund’s solvency.
But on Friday the administration released a 31-page assessment by consultants KPMG that starts to clarify how much employers will be on the hook for.
The fund’s balance was $2.9 billion as of Nov. 30, according to KMPG, but that excludes three significant obligations:
- $2.3 billion borrowed from the federal government to cover jobless benefits. The loan is due in November 2022.
- $415 million in employer credits, which stem from a mid-year reduction in UI rates. Those credits will be used against 2022 employer contributions to the unemployment fund.
- About $300 million owed to the feds to reconcile state and federal accounts now that emergency jobless benefit programs have ended.
Now, Baker has signed a bill allocating $500 million of federal pandemic relief money and state budget surpluses to the UI fund. That would bring the balance to $385 million.
And the administration has signaled that it would like to restore the trust fund to pre-pandemic levels. It hasn’t given a specific amount, but the fund ended February 2020, just before COVID-19 shutdowns began, with $1.6 billion.
That would suggest a bond sale of about $1.2 billion. In November, before KPMG finished its work, Baker indicated that the state might have to borrow $2 billion.
So that gives us a range for how much the state will seek to borrow from investors.
Employers still don’t know what their total UI tax tab will be for the new year. Bills will begin arriving in a few weeks, but they won’t be complete until an dollar amount and interest rate is set for the bond sale.
Hopefully, the Baker people will have some more not too bad news in the near future.