A federally guided shift in how Massachusetts distributed the burden of unemployment costs led to higher-than-expected bills this spring for many businesses, and the step also spared industries hardest hit during the pandemic from being "clobbered" with taxes, Labor and Workforce Development Secretary Rosalin Acosta said Friday.
In the first virtual meeting of a new commission created to study potential reforms to the state's unemployment system, Acosta outlined the massive toll the COVID-19 outbreak — and the government-ordered closures and shifts in consumer behavior it prompted — took on workers.
Acosta confirmed that states are empowered to deploy stimulus funding through the American Rescue Plan to replenish unemployment insurance trust funds. She did not say if the Baker administration plans to do so or whether it would use federal dollars to mitigate the sticker shock that many businesses face from an unexpected spike in the solvency fund assessment section of their unemployment taxes.
Employers that lay off significant numbers of workers typically receive a higher experience rating, requiring them to pay more into the jobless system. The U.S. Department of Labor told states not to apply those penalties for pandemic-related losses, leaving them instead to spread the costs out across all industries through the solvency fund assessment.
"If those rates had not been socialized, you would've had certain industries that would've been clobbered because they had the highest layoffs," Acosta said. "Instead of affecting one industry or two industries or three industries disproportionately, the Department of Labor in Washington encouraged us to socialize those rates into a solvency account so that the effects of COVID would not be felt by particular industries."
Like states across the country, Massachusetts faced an "unprecedented year" in 2020, Acosta said. The state paid about $22 billion in unemployment benefits to roughly 1 million claimants. About $5.9 billion of that came from the Massachusetts UI trust fund, Acosta said, while the rest was paid using federal dollars through several pandemic-related programs.
The commission, created in a bill Gov. Charlie Baker signed in April, will hold its next meeting on June 4 when it expects to hear a presentation about unemployment systems in other states. It faces a deadline of Dec. 15 to report findings and recommendations about reforming the state's unemployment system to keep it solvent in the long-term. House lawmakers early this week may roll out their own plan to address solvency assessments.