The state’s new projections show that even without a significant increase in the unemployment rate, the state’s unemployment insurance system will grow into hundreds of billions of billions of dollars within four years, even before accounting for the amount Massachusetts might pay to the federal government. There is a possibility that the dollar will fall into a deficit.
A new report on the fiscal health of the Unemployment Insurance Trust Fund once again projects that states will continue to pay out more in unemployment benefits than they collect from insurance companies to cover their costs, and forecast The gap widened in the latest calculations.
The latest report released by the Healey government estimates the fund will approach zero by the end of 2027 and face a deficit of nearly $300 million by the end of 2028.
Compared to the past two quarterly reports, the deficit widened further. In April, the Healey administration predicted the balance in the UI trust fund would be about $859 million by the end of 2028, and in August it estimated the account would have $192 million by the end of 2028.
Officials at the Labor and Workforce Development Administration, which relies on economic forecasts from financial services firm Moody’s, said the changes are due to revisions to historical data and expected reductions in taxable payrolls.
Healey administration officials say Moody’s data used to prepare the August Unemployment Insurance Trust Fund quarterly report was more optimistic than it is now. The latest data also shows that wages are expected to grow further, with the result that projected benefit payments continue to exceed projected tax collections to finance them.
“In the August quarterly report, wage and salary growth was expected to slow to 1% per quarter by the end of 2024. Current forecasts are for a slightly higher growth rate, delayed until mid-2025. will be implemented,” the officials wrote. Latest report. “Growth is expected to remain broadly stable at just under 1% per quarter for the remainder of the forecast period.”
The latest report predicts the state’s overall unemployment rate will rise faster than previously predicted, reaching a ceiling of 3.7% by the end of 2024 and falling by a few hundredths of a percentage point over the next few years.
In fact, the state’s unemployment rate in September was 3.8%, the Department of Labor and Workforce Development announced Friday, up 0.1 percentage point from August and 0.5 percentage point higher than the revised September 2023 unemployment rate of 3.3%. .
Experts warn that predicting the unemployment rate will remain at that low level for more than four years may be too optimistic and that rising rates could put further pressure on unemployment funds. are.
As trust fund balances shrink, the Healey government predicts in its latest report that taxes on employers to fund benefits will rise to the highest level, Schedule G, by the end of 2028.
This is also a change from the August outlook, which estimated that taxes would only reach Schedule F by that year.
The amount each employer must pay depends on both economic factors and an individual “experience rating” that is calculated based on the company’s unemployment history. Businesses must pay tax on the first $15,000 of wages per employee.
“Our administration is looking at changing economic and labor market conditions that may impact the trust fund, and is making decisions to best address any challenges the state will face in the future,” said Matthew Kissos. We are committed to working with stakeholders to ensure that we are in a position to do so.” Office of Workforce Development Public Relations Officer. “We continue our efforts to stabilize the trust fund while maintaining benefits for affected workers and support for our employer partners.”
Cheating by the Fed
A big wild card continues to loom over the state’s jobless aid system.
Gov. Maura Healey and her agents revealed in the summer of 2023 that during the Baker administration, Massachusetts mistakenly spent about $2.5 billion in federal funds on unemployment benefits that should have been covered by the state budget. .
Since then, state and federal officials have not said whether Massachusetts will be obligated to repay some or all of that money to the federal government or how the repayments will be made.
Healey administration officials said Wednesday that discussions are underway to identify a resolution that would minimize the impact on Massachusetts, particularly employers.
The state’s forecast for the Unemployment Insurance Trust Fund does not factor in the potential impact of a $2.5 billion error. In its latest trust fund report, EOLWD reiterated the same description of the situation it has been using for several months.
“The amount that may be paid to the federal government, the timing, manner, and source of its reimbursement are currently unknown,” the officials wrote. “The Commonwealth is in discussions with the (U.S. Department of Labor) to resolve this issue.”
