AIM Blog – Associated Industries of Massachusetts has worked tirelessly with elected officials on both the state and federal levels to moderate a potentially disastrous 60 percent increase in unemployment insurance rates next year and to keep the Unemployment Insurance Trust Fund on sound financial footing.
Last Friday, Governor Charlie Baker took a major step toward addressing that issue by filing timely legislation (HD.5476) to ensure a two-year schedule freeze and provide the ability to bond the remaining Trust Fund deficit and allow it to be rebuilt overtime.
Meanwhile, AIM continues to support efforts by the Massachusetts Congressional delegation to persuade Congress to provide additional resources for the state’s unemployment insurance trust fund. The $900 billion economic stimulus bill signed by President Trump does not provide money for state UI systems, though it does revive the Paycheck Protection Program with $284 billion to cover a second round of PPP grants to especially hard-hit businesses.
Massachusetts businesses now need elected officials to stabilize the state’s unemployment insurance system by freezing the statutory rate and allowing Massachusetts to authorize bonding.
Last Thursday, a day before Governor Baker filed his rate freeze bill, AIM provided a statement to the entire Massachusetts legislature calling for a freeze on employer UI tax-rate schedules to shield Massachusetts employers from the upcoming rate spike, which is tied by statute to the overall condition of state UI Trust Fund.
Given the unforeseen economic shutdowns brought on by the COVID-19 pandemic beginning in March, the Massachusetts Department of Unemployment Assistance’s (DUA) November 2020 UI Trust Fund Report projects that the Fund, primarily financed by direct and reimbursing employer contributions, will be in the red by $5 billion at the end of 2022 and remain insolvent by about $3 billion as far out as 2024.
These initial numbers left unchecked would trigger an increase from the current 2020 employer tax rate of Schedule E, or $539 per employee, to Schedule G, about $866 per employee, reflecting an almost 60 percent increase.
Governor Baker’s bill would freeze the employer tax rate at Schedule E for the next two years, slowing annual employer contribution growth to $635 in 2021 and $665 in 2022.
“Massachusetts businesses and employers are already vulnerable,” said John Regan, President and Chief Executive Officer of AIM.
“Such a steep rate increase during the worst economic recession of the decade would place an undue burden on employers striving to regain strong levels of employment and operations in Massachusetts. The Trust Fund was depleted due to an unprecedented public-health emergency that forced countless businesses to close and individuals to lose their jobs.
“We’re grateful to the Legislature for the steps they enacted earlier this year to ensure all claims are paid out while shielding employers from negative experience ratings and we remain committed to working with the Baker Administration to pass new legislation and further safeguard our members’ ability to conduct business in the commonwealth.”
AIM’s outreach to the Legislature included a packet showing the association’s federal advocacy conducted throughout the year for direct relief to state unemployment insurance trust funds, as well as results from an Employer Survey conducted this fall indicating that 91 percent of respondents considered increased UI costs as a top concern entering 2021.
The survey found that up to 27 percent of companies are concerned that increased costs could translate into additional layoffs for their businesses.
Governor Baker’s legislation would allow the authorization of special obligation bonds to repay the federal cash advances that Massachusetts has received throughout 2020 to fund the increased demand on the state UI system.
According to the administration, using capital markets will allow the commonwealth to bypass federal UI tax increases faced by employers, regardless of their experience ratings, if the federal advances are not repaid by November 2022.
However, because interest on federal advances will be charged beginning January 2021 and the borrowed funds may not be repaid through the state UI Trust Fund by federal law, the legislation also calls for a separate surcharge on contributory employers to assist in interest payments initially due next Fall. This surcharge will be waived if interest is waived through any future federal negotiations.
AIM thanks Governor Baker for filing this legislation and we appreciate the speedy action that the House and Senate have taken throughout this pandemic with legislation to stabilize the unemployment insurance system for employers and employees.
We urge the House and Senate to take urgent action on this proposed legislation to freeze rates and fund the system through bonding, which will ensure that all claims are paid to individuals, that the trust fund is stabilized with a low-interest loan and the commonwealth is able to avoid statutorily triggered unemployment insurance tax rate hike in first months of 2021.
Members of the Massachusetts House of Representatives and Senate looking for additional information, or a copy of AIM’s letter to the House and Senate, please contact Brooke M. Thomson, EVP for Government Affairs
To learn more about AIM’s Unemployment Insurance committee and how to engage elected officials regarding this issue as it moves towards a public hearing and next steps for legislative actions please contact [email protected] or sign up for updates directly by updating your preferences online.
Click here to learn more about AIM’s work on unemployment insurance issues at the state and federal level.