The Baker administration said on Friday that it planned to raise as much as $2.6 billion through a bond sale, with the money going to beef up the state’s unemployment insurance trust fund and pay back federal loans used to finance jobless benefits during the pandemic.
The amount of the bond offering, which has been in the works since last year, fell in the middle of the $2 billion to $3 billion range discussed last month by Rosalin Acosta, secretary of the Executive Office of Labor and Workplace Development. Employers, who must pay down the bonds through a special COVID-19 tax, said they were relieved to finally know how much money they will be on the hook for.
In a just-released quarterly report, the state said the trust fund balance stood at a healthy $2.64 billion as of March 31. The balance was $1.73 billion at the end of 2019, before the pandemic.
But Massachusetts owes $1.77 billion to the federal government, money it borrowed during the crush of layoffs in 2020 and early 2021 to keep jobless benefits flowing to unemployed workers. That amount is net of $500 million the state repaid last month using pandemic relief funds allocated by Congress in 2021.
The trust fund balance also includes $372 million in credits to employers that can be used against future contributions. Factoring in the credit and the outstanding federal debt, the account total falls to under $500 million.
The Legislature approved the use of bonds for the trust fund last year. The administration plans to sell the so-called special obligation COVID recovery bonds by the end of September.
The state estimates that the trust fund balance will be $3.32 billion at the end of this year and $2.81 billion at the end of 2023. It projected that employer contributions to the trust fund will revert to schedule A, the lowest rate, in 2023.
The bond deal “sets the fund at a pretty healthy level,” said Christopher Carlozzi, Massachusetts state director of the National Federation of Independent Business. “But we must remember that employers are still responsible for paying all this back over a 10-year span.”
Business leaders are also keeping a close eye on the potential impact to the trust fund from the administration’s plan to provide up to $1.6 billion in financial relief to people who received jobless benefits during the pandemic but were later told they may have to pay back the money. The state’s plan, announced on Thursday, could waive as much as $281 million in overpaid claims tied to the trust fund.
Business leaders have urged the administration to use some of its remaining federal pandemic funds or state budget surplus to offset any new cost the waivers might generate for the unemployment system.
“It can’t be employers who shoulder that as well,” Carlozzi said.