THE BAKER ADMINISTRATION released a long-awaited report on New Year’s Eve indicating the state’s unemployment insurance trust fund is in much better shape than expected.

After issuing warnings earlier this year about huge deficits that needed to be offset with an infusion of billions of dollars, the report said the actual deficit as of November 30 was $115 million.

“It’s better news than many people expected,” said Sen. Patricia Jehlen of Somerville, co-chair of the Legislature’s Labor and Workforce Development Committee and co-chair of a commission evaluating the unemployment insurance trust fund.

The report, produced by KPMG LLC, arrived at the deficit figure by reconciling the fund’s existing $2.9 billion balance with the estimated $3.015 billion the fund owes. The resulting deficit of $115 million is not insignificant, but it’s nothing compared to what many had forecast, which may explain why the report was released on New Year’s Eve.

The Legislature approved legislation earlier this year filed by Gov. Charlie Baker authorizing the administration to borrow up to $7 billion to deal with the deficit in the unemployment insurance trust fund. Baker also urged the Legislature to approve the use of $1 billion in federal American Rescue Plan Act funds to help address the deficit, while the business community pushed for a $2 billion investment of federal funds.

The Legislature ultimately approved using $500 million in federal American Rescue Plan Act funds to deal with the deficit, which would leave the fund with a positive $385 million balance.

The big question facing Beacon Hill now is what sort of balance is needed going forward in the unemployment insurance trust fund to keep it solvent and whether assessments on businesses are sufficient to meet the fund’s future needs or whether more money should be deposited in the fund using bond proceeds or taking out loans from the federal government.

A press release issued by the Executive Office of Labor and Workforce Development hinted that the Baker administration believes issuing bonds will be necessary. The press release said the KPMG report “will inform the Commonwealth’s efforts to issue bonds … and begin to restore the UI Trust Fund to a more solvent level.”

The 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.

During the pandemic, payments from the fund dramatically increased. According to the KPMG report, the volume of benefits in 2020 was seven times what it was in 2018 and 2019 combined. A large chunk of those benefits were paid using federal funds, but taxes assessed on Massachusetts businesses accounted for a large share as well.

Halfway through the year, it appeared the unemployment insurance trust fund was drowning in red ink and there was widespread concern about how to offset the deficit without overburdening already cash-strapped businesses.

The governor and lawmakers settled on bond money and federal aid to deal with the problem, but it was difficult to determine how much money was needed because the executive office of labor and workforce development stopped issuing a monthly accounting of fund inflows and outflows in June.

In November, in the midst of a legislative debate over how much federal aid to use to bailout the trust fund, the US Treasury issued a report indicating the Massachusetts fund had a surprisingly high positive balance of $2.9 billion.

What was unclear was how much the fund owed. The KPMG report issued Friday shed light on the situation for the first time, identifying three debts owed by the fund.

The biggest was $2.3 billion owed to the federal government for loans it provided the trust fund during the pandemic. The report said the state also owed businesses $415 million in credits for overpayments they made into the fund earlier this year.

Lastly, the report identified $318 million in unclaimed unemployment insurance payments that were returned to the fund. KPMG said this money should have been accounted for and returned to the original source, but instead if was used to cover other fund debts. KPMG estimates about $300 million should have been returned to the federal government.

Combined, the $2.3 billion owed the federal government, the $415 million owed businesses for over-assessments, and the $300 million in unpaid claims add up to $3.015 billion.

A commission is studying what kind of balance is needed in the fund as well as possible reforms to the way it is operated, but its work has been hampered by the lack of information on the fund’s current financial status.

The KPMG report provides some of the needed information, but what’s still missing is how much money is expected to flow into the fund over the coming months and years from businesses — and whether that money is sufficient to keep the fund solvent.