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Businesses still want a break on the COVID unemployment surcharge 

Local employers have a legitimate gripe about being required to bear all of costs the state decided to incur

Cutting costs for employers who fund the state's unemployment insurance system wasn't a top priority under Charlie Baker. Will Governor Maura Healey push for change?Steven Senne/Associated Press

This column first appeared in Trendlines, my new business newsletter that covers the forces shaping the economy in Boston and beyond. If you’d like to receive it via e-mail on Mondays and Fridays, sign up here.

After going deep into the red during the pandemic, the employer-funded account that pays state jobless benefits is now flush.

But business owners aren’t celebrating.

Many are still peeved that they are being required to pay back — through a special tax surcharge — the $2.7 billion in bonds sold by the state to retire the unemployment insurance (UI) trust fund’s federal loans. They’re also unhappy that they must cover other UI costs incurred by the old Baker administration and the new Healey team.

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“The state mandated these businesses close their doors and restrict their operations, which resulted in layoffs,” said Chris Carlozzi, Massachusetts director of the National Federation of Independent Business. “It is unfair that employers are left to shoulder the financial burden of the post-pandemic UI crisis.”

The UI trust fund is back in the news thanks to my colleague Shirley Leung, who on Thursday broke the story that Governor Maura Healey’s Executive Office of Labor and Workforce Development is seeking to finally close the books on a bureaucratic mess that ensnared 590,000 unemployment recipients.

Starting in early 2022, Shirley and I wrote a series of stories about how the state — swamped by millions of jobless claims and side-swiped by rapidly changing federal rules — paid $4.3 billion in federal and state jobless benefits to 590,000 people who were later deemed ineligible.

At the time, the Department of Unemployment Assistance was dunning claimants for the money, which many had already spent on necessities while they were out of work.

It took too long, but the DUA eventually rolled out a plan last April for a streamlined “one-click” process to waive these so-called overpayments. About 81 percent of overpayment cases have been resolved through waivers, at an estimated cost of $910 million to the federal government and $221 million to the state UI fund —a hit that employers will have to make up through unemployment taxes.

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Now, according to Shirley, the Healey administration will give 59,000 recipients more time to resolve their cases — the one-click program expired in October — at an added cost of $323 million to the feds and $17 million to the UI fund. At the same time, the state will this week begin the process of intercepting Massachusetts and federal tax refunds to recoup $719 million from 112,000 others.

In response, some business leaders are once again urging Beacon Hill to compensate the UI trust fund for the costs of granting the waivers — using some of the $1.7 billion that the state has from unallocated federal stimulus money and its budget surplus.

Jon Hurst, president of the Retailers Association of Massachusetts, notes that the Legislature last year allocated $100 million to the trust fund to cover waivers, less than the $300 million pressed for by the Baker administration.

“If the state were to cover the originally planned additional $200 million for overpayments, that could arguably reduce the COVID assessment by 10 percent,” he said.

The trust fund balance was $3.91 billion at the end of last year. Absent a spike in unemployment, it’s expected to wrap up this year with $3.6 billion, more than twice the money it had in December 2019, before COVID-19 upended the economy.

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Moreover, the $2.3 billion the state borrowed from the US Treasury to cover jobless claims during the darkest days of 2020 and 2021 has been paid back using proceeds from the aforementioned bond sale. But that leaves employers to cover principal and interest payments through the aforementioned COVID tax surcharge.

I know, you may have had enough of employers’ endless harping on the state’s generous UI benefits and the COVID assessment.

But they have a legitimate gripe about being required to bear the costs of overpayment waivers and the bond sale: Most had no choice but to cut jobs during the COVID shutdown. Lawmakers pushed the waivers but never took action on proposed fixes that could have lowered UI taxes.

At the very least, the Legislature should send the trust fund the $200 million it declined to provide last year.


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