House Members Pass Legislation to Address Unemployment Fund Deficit, Business Contributions to Unemployment and Tax Credits

Representative James Arciero announced, March 12, that the Massachusetts House of Representatives unanimously passed a bill to address the state’s unemployment system which has been under pressure over the past year of the COVID-19 pandemic. Additionally, the bill provides critical relief to businesses, establishes paid emergency COVID-19 leave and provides tax credits and breaks to both businesses and residents of the state.

“This critical legislation will address some of the serious after effects of the COVID pandemic in our state. We are seeking to both stabilize our stressed unemployment system and assist our state businesses as they come out of this year long shutdown. These are bold moves which will enable both our citizens and our business to get up and running as the state is vaccinated and life returns to normalcy this year,” said Arciero, who was joined by 154 of his House colleagues in supporting the passage of the bill.

In an effort to stabilize the system, the bill provides tax relief benefits for both laid-off workers and their employers.  Specifically, the bill would freeze the annual premium increases typically paid by business on their contributions to the unemployment system.  This halt on the rate increase means that businesses will pay less into the system during the next two years as they seek to get up and running again.  In addition, the legislation will allow for the borrowing of $7 billion in funding to make sure that the unemployment system remains solvent with enough funds to cover unemployment benefits, repay federal loans, and establish a separate surcharge on business to help cover the repayment of interest due on federal loans in September. This surcharge would be an average cost of $57 per employee this year and $66 per worker next year.

Another provision of the bill will provide for tax breaks for any forgiven loans granted under the Paycheck Protection Program. By forgiving PPP loans, this creates additional capital reserves which businesses can draw upon and used to both re-open and expand.

The goal of the bill is to not only stabilize the unemployment system, but to offer relief to businesses in order that they can get up and running again as the pandemic recedes.  It is hoped that the bill will allow businesses to hire more people while the freeze is in place, resulting in a drop in the state’s unemployment rate.  At the height of the recession, Massachusetts’ unemployment rate hit a high of 17.7 percent last June and has since dropped to 7.4 percent currently.

At the beginning of the pandemic, the state’s unemployment fund has a balance of $1.6 billion. Over the last year, those funds were disbursed and the account is now in a $2.2 billion deficit.  It is projected that the fund will be $4.7 in the red by the end of this year and continue to be in deficit of $5 billion by next year. The contribution of businesses typically fund the unemployment trust fund, but with this deficit the rates were scheduled to increase by 60 percent, rising from $544 per employee to $866.  The rate freeze will cap the per-employee cost at $635 and $665 over the next two years.

The omnibus legislation also creates tax credits for those who have received unemployment payments during the pandemic. These credits will apply to household incomes which are below the 200 percent of the federal poverty level. It is estimated that the total tax credit will be $30 million for the first year and $20 million for 2021 for those individuals and families who qualify.

“This bill takes a comprehensive approach to these issues that we are expecting to be challenges as our Commonwealth moves out of the pandemic. It addresses straight on several of the obstacles that workers, businesses and the state face going forward.  I think it is a well-balanced and realistic approach to the pandemic and its aftermath in Massachusetts,” said Arciero.

A final provision of the bill creates an emergency COVID sick leave program for those who either get the virus personally, have a family with COVID that needs medical assistance and care, or who were exposed to the virus and must be quarantined.  The new leave program would allow full-time workers to utilize up to 40 hours of paid time off for these purposes, while part-time workers would receive the benefit on a sliding scale based on their weekly employment hours.  For those businesses with 500 or fewer employees, federal tax credits would be available to assist with the cost of the new program.

The legislation now heads to the Senate and it is expected that the bill will be taken up next week, and ultimately must be approved by the Governor who has his own proposals on these matters.