A SENIOR ANALYST at the Massachusetts Budget and Policy Center who is following the debate over the solvency of the state’s unemployment insurance trust fund urged the Baker administration on Thursday to clear up confusion about the fund’s financial status.
Phineas Baxandall, senior policy analyst and advocacy director at the left-leaning center, said the information he has reviewed confirms what Sen. Patricia Jehlen of Somerville told her colleagues Wednesday during a Senate debate on legislation parceling out some $3.8 billion in federal American Rescue Plan Act aid.
The Senate bill as drafted pumped $500 million into the unemployment insurance trust fund to cut the size of the fund’s deficit and reduce assessments on businesses, who are ultimately responsible for the fund’s losses. Several senators pushed an amendment to raise the contribution to $1 billion, arguing the fund was in dire financial shape and businesses needed more relief.
Jehlen, however, said US Treasury data indicate the fund is doing well, reporting a surplus of $2.9 billion earlier this month — enough to pay off nearly $2.3 billion in loans from the federal government and still have money left over.
The amendment was defeated, but confusion remained about the fund’s financial status.
A Baker administration official issued a statement Wednesday night saying the situation with the trust fund is evolving, but failed to say what the financial status of the fund is.
“The Treasury report referenced does not factor in over $2 billion the Commonwealth borrowed from the federal government in order to pay benefits last year, which is currently owed to the federal government,” the Baker administration statement said. “It also does not account for credits owed back to employers who essentially overpaid their unemployment insurance rates during Q1 of this year, before the administration and the Legislature worked together to pass legislation that ultimately reduced 2021 unemployment insurance payment obligations for many employers. That legislation also authorized the Commonwealth to take out bonds that will help repay those federal advances and replenish the solvency of the Trust Fund.
“Given the many factors that impact the solvency and balance of the unemployment insurance trust fund, the administration is continuously analyzing the situation and given the enormous impact of COVID-related claims on the system ($24 billion in benefits paid out since March 2020), proposed investing $1 billion to stabilize the unemployment insurance trust fund. While the situation with the unemployment insurance trust fund is constantly evolving, it is not accurate to say that the fund is in a position to be able to pay back federal advances while continuing to pay benefits without additional stabilization funding.”
A Baker administration spokesman could not be reached for comment on Thursday.
Baxandall issued a statement calling on the administration to clarify the situation and resume publishing monthly financial reports on the fund, which were halted in June.
“The administration notes that some companies’ contributions to the unemployment insurance fund were inflated by an erroneously high assessment early in the year, but that doesn’t change the bigger picture” Baxandall said in his statement. “Yes, credits were issued to companies to offset the overcharges; and as companies use these credits to reduce unemployment insurance assessments, it could depress subsequent collections. But the balance of the fund has continued to rise despite these credits. The fact remains that the rising and unprecedently large balance in the unemployment account is more than enough to pay off the federal debt that was the rationale for this bailout.
“We shouldn’t consider public bailout of employers’ unemployment insurance debt when accounts indicate no bailout is needed. If the administration thinks other data will change this picture, then it needs to produce the data. There is no reason statutorily mandated monthly information reports should have ceased in June when they could have shed light on this debate. There may be an explanation, but if the missing four months of reporting was intended to avoid transparency, then that’s a more serious matter.”