The State will borrow more to maintain the solvency of the unemployed fund | Local News

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BOSTON — Massachusetts is preparing to borrow billions more to help replenish a state fund that pays unemployment benefits.

The borrowing, which is authorized by the state legislature, is intended to fill a structural deficit in the Unemployment Insurance Trust Fund, which has ballooned over the past two years following a wave of layoffs and business closures fueled by the pandemic.

The balance of the trust fund was estimated at more than $2.6 billion at the end of March, according to the latest report from the state Executive Office for Labor and Workforce Development. The money comes from employer contributions and federal loans obtained by the state government.

But the positive balance masks the structural shortfall in the trust fund, with the state already owing about $1.7 billion to the federal government to repay loans intended to fund the unemployment benefit system during the pandemic. It also owes about $415 million in credits to employers for overpayments in the system.

To help pay down debt and improve the fund’s solvency, the state plans to borrow more money by issuing up to $2.6 billion in bonds, according to the report.

Massachusetts has paid out an unprecedented $6 billion in unemployment benefits during the pandemic as hundreds of thousands of workers have been sidelined by government-mandated shutdowns meant to stop the spread of COVID -19. The laid-off workers also received money from federal pandemic unemployment programs.

To date, the Baker administration has borrowed more than $2.2 billion from the federal government to continue paying unemployment claims.

But dire warnings about the impact of the trust fund’s growing shortfall prompted Beacon Hill to come up with plans to address the shortfall.

Last year, the legislature authorized the Baker administration to borrow up to $7 billion from the federal government to help keep the trust fund afloat.

A pandemic relief bill signed by Governor Charlie Baker in December diverts $500 million in federal funds and surplus revenue to reduce the fund’s deficit.

Business leaders, however, have complained that the relief falls short of the amount needed to reduce the estimated $6 billion long-term deficit in the unemployment fund without forcing employers to raise their contributions.

Baker has filed a proposal to divert $1 billion from surplus revenue and pandemic relief funds to help pay off the trust fund shortfall. But lawmakers took no action on the bill.

Red ink in the state trust fund has driven up insurance rates paid by private employers who pay into the trust fund for unemployment. Legislation Baker signed last year was intended to soften the impact on businesses, but many have still been hit by higher contribution rates.

Managers of the state trust fund currently plan to spread the cost of replenishing the fund over the next 20 years.

This year, employers are expected to contribute more than $1.5 billion to the trust fund. Over the next four years, companies will contribute more than $5.1 billion to the fund, state labor officials estimate.

Greg Sullivan, a senior analyst at the Pioneer Institute, a Boston think tank, said despite government borrowing, companies will have to bear the cost of digging the government out of the hole for years to come.

“They are putting a $5 billion deficit on the backs of employers, who will have to bear the brunt of it,” he said. “It’s like dropping an anchor to a drowning man.”

Christian M. Wade covers the Massachusetts Statehouse for North of Boston Media Group newspapers and websites. Email him at [email protected]

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