Home Help Bill Takes State Unemployment Fund Solvency

The Massachusetts House unanimously approved broad tax relief, paid emergency sick leave and unemployment system financing bill On Thursday, that would soften the unemployment insurance premium hikes that are expected to hit businesses in the weeks to come.

Laid-off workers and employers should have access to tax breaks under the bill, which is based on a proposal by Governor Charlie Baker to stabilize the state’s unemployment system and also includes provisions such as the creation a paid sick leave program for employees. who are affected by COVID-19 and tax breaks on any Paycheck Protection Program loan canceled from 2020.

The bill would freeze a rate schedule, imposing smaller increases in unemployment taxes that businesses pay in 2021 and 2022. It would also allow $ 7 billion in borrowing to keep the depleted unemployment fund solvent and repay federal loans, in addition to imposing a separate surcharge on businesses. to cover federal interests.

House Speaker Ron Mariano told reporters after the bill was passed that “the main purpose of the bill is always to get people back to work.”

“We’re trying to help small businesses get back on their feet,” Mariano said. “The more money we can keep and under the control of small business owners, the better off we will all be. This allows them to hire more people with the rate freeze, P3 forgiveness allows it to conserve capital. This is all used to rehire employees. “

The House vote 155-0 in favor of the bill. Four lawmakers – the Republican representatives. F. Jay Barrows of Mansfield, Angelo D’Emilia of Bridgewater and Donald Wong of Saugus as well as Independent Representative Susannah Whipps of Athol – voted present.

Senate leaders plan to pass the bill next week and have already indicated their support.

The state’s unemployment system is funded by contributions from businesses, which can increase depending on how often an employer’s workers seek help.

COVID-19 and the widespread changes in public life it caused have created a wave of unemployment, reaching an unemployment rate of 17.7% statewide in June. The demand wiped out the UI trust fund, which fell from a balance of $ 1.6 billion in February 2020 to $ 2.2 billion in the red by the end of the year.

In his most recent monthly report, the State Department of Unemployment Assistance predicted the trust fund would show year-end deficits of $ 4.7 billion in 2021, nearly $ 5 billion in 2022, $ 4 billion in 2023 and $ 2.9 billion in 2024.

This dire prospect is expected to trigger a change in the tax rate schedule that, without action, would push the average cost per employee for businesses from $ 544 in 2020 to $ 866 in 2021, a jump of nearly 60%.

The legislation would freeze the rate schedule in 2021 and 2022, setting the average cost per employee at $ 635 in 2021 and $ 665 in 2022, according to Associated Industries of Massachusetts.

It would also allow the state to bond up to $ 7 billion to maintain profits and repay the more than $ 2.2 billion the state has at its disposal. borrowed federal government for unemployment so far.

Interest rates on municipal bonds are lower than the 2.27% rate that will be due on federal loans, and supporters say the move will save Massachusetts money in the long run.

“While unemployment has declined, certainly from where it was back in June of last year, we certainly still have challenges ahead, and backing this money is going to give us some flexibility so that we don’t put everything immediately on. business, ”said House Ways and Means Committee Chairman Representative Aaron Michlewitz.

Businesses would also face a new surtax, in the form of an excise tax on employee wages, until December 2022 to help pay off interest owed in September on federal loans. Representative Josh Cutler, co-chair of the Labor and Workforce Development Committee, told the News Service that the surcharge will result in an average cost of $ 57 per employee in 2021 and $ 66 per employee in 2022.

“Even with this additional surcharge for employers, Massachusetts businesses will save money as a result of our action today,” Cutler, a Democrat from Duxbury, told the House.

The bill also includes several other important sections.

This would create a tax credit available to those who have received unemployment benefits and whose household income is below 200 percent of the federal poverty line, and remove the penalties for any missed tax payments on these. benefits last year. The total tax credit is $ 30 million for the 2020 tax year and $ 20 million for 2021.

Businesses would also be exempt from paying state taxes on federal paycheck protection program loans, a step Republican lawmakers have highlighted in recent weeks as a significant relief.

Baker first tabled a version of the bill that included only UI changes in December, and then resubmitted his proposal in January with the start of the new session. Large business groups such as AIM and the National Federation of Independent Businesses supported This measure.

“By passing this legislation we will be able to use a much cheaper funding mechanism to borrow money and repay the fund,” Baker said of the bill on Wednesday.

The Republican governor has not taken a public position on the sections that Democratic leaders have added to the package, such as COVID-19 emergency paid sick leave or tax credits for the unemployed.

The House vote came after Senate Republicans delayed action on a revised climate bill, saying passage of the relief bill to prevent the taxation of PPP loans should “have place immediately “before the other questions.

About Hector Hedgepeth

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