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Business groups warn UI debt and program design will raise costs for Massachusetts employers
Summary
Representatives from NFIB and the Retailers Association told the committee that pandemic-era reimbursements and a separate $2.1 billion accounting error will saddle employers with roughly $5 billion and push the state's unemployment insurance trust fund toward insolvency.
Business groups told the Joint Committee on Community Development and Small Business that the state's unemployment insurance (UI) finances are strained and that scheduled repayments and program design will raise employer costs.
Christopher Carlozzi, state director of the National Federation of Independent Business, and Bill Rennie of the Retailers Association of Massachusetts presented a shared message: pandemic-related UI costs plus a recent federal accounting problem create a large liability for employers and risk higher UI tax schedules.
"Businesses are repaying $2.7 billion from pandemic-related layoffs," Carlozzi said. "On top of that, auditors discovered a $2.1 billion error by the previous administration that will come out of the UI trust fund over the next decade. That's nearly $5 billion in total UI debt that the state's employers are forced to pay." He warned that, without action, projections show the UI trust fund could be insolvent by 2028–2029, which would trigger higher employer tax schedules.
Rennie told the committee his members already feel the strain. "Employers are currently paying back the $2.7 billion bond that was floated to repay the federal government for COVID costs," he said, and warned the Trust Fund's solvency outlook will drive future tax increases.
Witnesses urged the legislature to consider reforms and additional state-level funding to reduce employer exposure, pointing to other states that used general reserves or ARPA funds to avoid passing costs onto small businesses. Carlozzi noted New York's recently announced plan to cover UI debt from reserves as a model and asked the Commonwealth to pursue similar options.
In addition to debt levels, witnesses cited program design choices — including benefit levels and duration — that affect long-term UI costs. Carlozzi said Massachusetts' maximum weekly benefit and long duration contribute to above-average costs and urged the committee to evaluate benefit design in light of employer burdens.
Lawmakers asked for additional data on projected rate impacts for small firms and whether short-term reserve transfers could avoid a step-up in tax schedule. No binding action was taken during the informational hearing.
