Panel deadlocks over jobless fund overhaul

BOSTON — A state panel tasked with addressing a massive hole in a fund that pays unemployment benefits has deadlocked over a series of recommendations aimed at ensuring the fund's long-term solvency.

Last Tuesday, the Unemployment Insurance Trust Fund Study Commission weighed several recommendations that sought to pump more money into the fund, lessen the financial impact on employers who pay into the system and ensure more equity by boosting unemployment benefits for low-wage workers.

Under the panel's rules, the recommendations needed a two-thirds vote to be approved. An initial vote on the six recommendations failed to meet that threshold, so the panel voted on individual items. All but one failed. The votes exposed deep divisions between panel members over the recommendations.

A key recommendation called for updating the wage base used to set unemployment insurance rates, to boost the overall amount of money going into the trust fund, and indexing it to inflation. Under current law, the limit is $15,000, which represents 18% of the state's average annual wage. It was last increased in 2015.

Another recommendation called for requiring workers to be employed for at least two quarters, or six months, to qualify for unemployment insurance.

A summary of the proposed changes said the move would put Massachusetts in line with most states, which require at least two quarters of work. It would allow the fund to receive more contributions before paying out benefits, and prevent fraud from unscrupulous workers who take a job for a short period to claim jobless benefits.

The panel also balked at recommending the state study offering unemployment benefits to "gig" economy workers, who currently do not pay into the system. Laid off gig workers received federal jobless benefits under pandemic unemployment programs, but those expired last year.

Panelists did, however, approve a recommendation to promote the state's WorkShare program, which provides businesses with alternatives to laying off workers by offering partial unemployment benefits.

Much of the opposition to the key recommendations came from panelists who represent the business community, with several members pointing out that the plan lacked details about how the changes would cost employers.

Panelist Jon Hurst, president of the Retailers Association of Massachusetts, pushed to amend the recommendations to ease the burden on business owners, but was rebuffed by a majority of the commission. He argued the plan should also include a reduction in weekly benefits, which are among the most generous in the nation.

"What's good for the goose should be good for the gander," Hurst said Tuesday. "If we're going to index taxes, we need to somehow put some guardrails around the increases and the maximum weekly benefit amount, in order to have a well-balanced system."

Business leaders have long argued that the generous unemployment benefits, minimal requirements to qualify and lax enforcement of work-search requirements is allowing unscrupulous workers to game the system.

Panelist Chris Carlozzi, state director for the Massachusetts chapter of the National Federation of Independent Businesses, pointed out that the commission was prevented from looking at reducing benefits but said many of the recommendations would increase the financial burden on employers.

The 20-member panel, which included lawmakers, academics, representatives of building trades and business groups, legal aid attorneys and policy experts, was created last year to address a massive deficit in the jobless trust fund, which exploded amid a crush of pandemic-fueled layoffs and business closures.

Panelists held several live-streamed hearings over the past year where they heard testimony from labor experts, state officials and economists.

Massachusetts paid out an unprecedented $6 billion in jobless benefits during the pandemic as hundreds of thousands of workers were sidelined by government-imposed shutdowns meant to stop the spread of COVID-19. Laid-off workers also received millions of dollars from federal pandemic unemployment programs.

The balance of the trust fund was estimated at more than $2.6 billion at the end of March, according to the latest report from the state Executive Office of Labor and Workforce Development. The money comes from employer contributions and federal loans obtained by the state government.

But the positive balance masks the trust fund's structural deficit, with the state already owing about $1.7 billion to the federal government to repay loans meant to fund the jobless benefits system during the pandemic. It also owes about $415 million in credits to employers for overpayments into the system.

To help pay off the debt and improve the fund's solvency, the state plans to borrow more money by issuing up to $2.6 billion in bonds, according to the report.

A pandemic relief bill signed by Gov. Charlie Baker in December diverts $500 million in federal pandemic funds and surplus revenue to reduce the fund's deficit.

But the red ink in the state's trust fund has driven up insurance rates paid by employers, who this year are projected to pay more than $1.5 billion in contributions to the trust fund. Over the next four years, businesses will pay more than $5.1 billion into the fund, according to estimates from state labor officials.

"We knew that we had a difficult task here even before we started," Sen. Pat Jehlen, D-Somerville, the panel's co-chair, said in remarks Tuesday before votes on the recommendations were taken. "We are among the least solvent systems in the country ... and the solutions are never easy to find."

Christian M. Wade covers the Massachusetts Statehouse for North of Boston Media Group's newspapers and websites. Email him at [email protected].