THE BAKER ADMINISTRATION on Friday gave lawmakers its most detailed accounting yet of the state’s unemployment insurance trust fund, and said it is preparing to issue bonds to put the fund on sound financial footing.
“We will have to bond. There is no doubt,” said Rosalin Acosta, the secretary of labor and workforce development, in a presentation to the Senate Post Audit and Oversight Committee.
Acosta didn’t provide a full accounting of the fund — she promised that by the end of the month — but she did provide more information than she has in months. The Baker administration stopped issuing a monthly report on the unemployment insurance trust fund’s financial status in June and pushed the Legislature to use $1 billion in federal American Rescue Plan Act funds to bolster the fund’s finances.
The Legislature in the spring also gave the governor the authority to issue up to $7 billion in bonds to deal with any shortfall in the fund. At the time, the expectation was that the fund was deep in the red and the assumption was that bond proceeds would make the fund whole while lessening the financial blow on businesses. Instead of having to pay off any fund deficit immediately, the bonds would allow businesses to pay the deficit off over the multi-decade life of the bonds.
The unemployment insurance trust fund pays out benefits to workers who lose their job through no fault of their own. The money comes from taxes on businesses, which were hit hard during the pandemic as layoffs and unemployment skyrocketed and business activity in many sectors plummeted.
Last month the US Treasury Department released data indicating the state’s unemployment insurance trust fund was in much better shape than many believed. Instead of being in the red, the fund had a balance of $2.9 billion, although the fund owed significant debts. For example, the fund owed the federal government $2.3 billion for loans it provided during the pandemic. Acosta revealed on Friday that another $400 million is owed businesses who were overassessed last year.
Subtracting the $2.3 billion in federal loans and the $400 million in over-assessments from the $2.9 billion balance, the fund would appear to have a remaining balance of $200 million. “Further accounting may reduce the number even more,” Acosta said.
The Legislature provided $500 million for the fund in the American Rescue Plan Act spending plan, which is sitting on Gov. Charlie Baker’s desk.
Even though the fund appears to be in surplus, Acosta said the Baker administration is moving ahead with plans to issue bonds to raise money to replenish the unemployment insurance trust fund. Acosta declined to say how much the state will borrow, but it would appear the number will be far less than $7 billion.
Acosta said the $7 billion figure was developed last fall when vaccines were still not available. “We preferred to overestimate so we wouldn’t have to come back,” she said.
The activity in the state’s unemployment insurance trust fund during COVID was historic. Acosta said in 2020 and 2021 the fund distributed $33 billion in state and federal benefits to almost 4 million claimants — 2.25 million claimants in 2020 and 1.7 million so far in 2021. By contrast, the state distributed $1.4 billion to 400,000 claimants in 2019.
Acosta said fraud and overpayments did occur in the rush to get emergency funding to unemployed workers, but she said the bulk of fraud and overpayments occurred with federal — not state — funds.