#2021-8 March 12, 2021

House Aid Bill Addresses Soundness of Unemployment Fund

On Thursday, the Massachusetts House unanimously approved a wide-ranging tax relief, paid emergency sick leave and unemployment insurance (UI) bill that mitigates the insurance premium hikes set to hit businesses in the coming weeks.  The measure, which will benefit both workers and businesses, is based on a proposal by Governor Charlie Baker to stabilize the state’s unemployment insurance system and includes provisions such as creation of a paid sick leave program for employees who are affected by COVID-19 and tax relief for pass-through businesses on any forgiven Paycheck Protection Program loans from 2020.

The bill, H 89, freezes the UI rate schedule, which results in smaller increases in unemployment taxes businesses pay in 2021 and 2022.  To offset the decrease in premiums, the legislation authorizes $7 billion in state borrowing to keep the depleted unemployment fund solvent and pay back federal loans.  The bill also imposes a separate surcharge on businesses to cover federal interest which would result in an average cost of $57 per employee in 2021 and $66 per employee in 2022.

With the state’s unemployment rate still among the nation’s highest, the Department of Unemployment Assistance projected the trust fund will post year-end deficits of $4.7 billion in 2021, nearly $5 billion in 2022, $4 billion in 2023, and $2.9 billion in 2024.  That outlook triggers a shift in the tax rate schedule that, without action, would push the average per-employee cost on businesses from $544 in 2020 to $866 in 2021, a nearly 60 percent jump.  The legislation freezes the rate schedule setting the average per-employee cost at $635 in 2021 and $665 in 2022

The bill also includes several other major sections including the creation of a tax credit to those who received unemployment benefits and have household incomes below 200 percent of the federal poverty level and waive penalties for any missed tax payments on those benefits last year.  The total tax credit is worth $30 million for the 2020 tax year and $20 million for 2021.

The House measure also establishes an emergency COVID-19 paid sick leave program making benefits available to employees who contract COVID-19, need to quarantine, or must care for a family member affected by the illness.  Full-time workers could access 40 hours of paid time off, while leave for part-time workers would vary based on their schedules.  Employers with fewer than 500 workers can access federal tax credits to help cover the costs.

Senate leaders expect to take the bill up next week and have already indicated their support.  To review the House-approved bill, click here.

Massachusetts Unemployment Rate Dips Below 8 Percent

The unemployment rate in Massachusetts fell to 7.8 percent in January, and revisions to 2020 estimates have pinpointed the highest spike of pandemic-era joblessness to last April, labor officials announced this week.  The January rate dropped 0.6 percentage points from the revised December rate of 8.4 percent, which is 1.5 percentage points higher than the US joblessness rate.

Despite continued improvement from double-digit figures in the early months of the COVID-19 crisis, the unemployment rate in Massachusetts remains more than two and a half times higher than it did before the virus upended public life.  Businesses reported adding 35,500 jobs in January, according to federal data based on a survey of employers.  From May to January, the state added slightly more than half of the roughly 690,000 positions that were lost last March and April.  

Friday’s release also revised the monthly data estimates for 2020.  Labor officials now say the unemployment rate peaked in Massachusetts at 16.4 percent in April, a change from the previously reported high of 17.7 percent in June.  The revised unemployment rates steadily declined from April to 15.3 percent in May, 14.8 percent in June, 9.8 percent in July, 9.3 percent in August, 8.9 percent in September, 8.5 percent in October, 8.4 percent in November and 8.4 percent in December.