ALBANY — Fearing employers face higher costs due to last year’s run on jobless benefits, business advocates are urging state leaders to tap federal COVID-19 relief funds to shore up the state Unemployment Insurance Trust Fund.
Business groups such as the National Federation of Independent Business and Upstate United are warning that the bills for unemployment insurance are expected to escalate rapidly due to the fund’s depletion.
UP 1,124 PERCENT
State-mandated restrictions and shutdowns imposed on businesses last year triggered a surge in layoffs and unemployment insurance claims across the state.
A report issued by State Comptroller Thomas DiNapoli last month found the amount of unemployment insurance paid out from the last quarter of 2019 until the second quarter of 2020 skyrocketed by 1,124 percent, having gone from $530 million to $6.5 billion in that time frame.
After borrowing money from the federal government to pay claims, New York was left with outstanding loans that as of Sept. 1 totaled $9 billion.
“Over the coming years, the obligation to repay these federal advances and rebuild the Trust Fund balance to appropriate levels will present a daunting challenge that could potentially impede the State’s overall economic recovery and prevent New York businesses from growing to the full extent of their capacity,” DiNapoli said.
SOUNDING AN ALARM
A number of states have tapped federal CARES (Coronavirus Aid, Relief, and Economic Security) Act funding or American Rescue Plan Act funding to pay back the federal sums they borrowed to meet their unemployment obligations. Hawaii, for instance, used a combination of those two funding sources to pay back nearly $800 million it borrowed to help it pay $6 billion in unemployment claims.
Justin Wilcox, director of Upstate United, an advocacy group, said New York should take that same step, noting his group is “sounding an alarm bell to make sure the policymakers are aware of the magnitude of the problem in New York.”
“We just want to make sure in addition to everything else small businesses are facing -- inflation , supply chain issues, the business tax climate -- that we don’t add this additional burden onto businesses that made it though the pandemic,” Wilcox said. “We are very, very worried that this (a boost in unemployment insurance costs) would be the last straw for some of them.”
He noted one upstate employer he has discussed the issue with is already paying more than $200,000 a year for unemployment insurance.
‘HAD NO CHOICE’
Previous spikes in unemployment claims have been triggered by recessions, but the one last year resulted from government action to freeze or restrict commerce to protect public health, noted Ashley Ranslow, assistant state director of the National Federation of Independent Business.
“Because the restrictions were state mandated, small businesses had no choice but to lay off employees,” Ranslow said.
Without decisive action by the state to cushion employers from the reverberating impacts of those orders, small businesses could see “exorbitant” increases in their unemployment bills for years to come.
For many New York employers, Ranslow said, unemployment costs have already increased.
Aides to Gov. Kathy Hochul did not respond to questions about the unemployment insurance fund.
New York is one of 10 states that have had to start paying interest on the federal funds they have borrowed for unemployment obligations, according to Route 50, a news site dealing with federal and state government matters.
DiNapoli has been counseling that state government should have sufficient funds in its reserves so it will be in better position to weather future economic slumps.
The state’s unemployment insurance rates are now at their highest levels since 2015, his report noted.
DiNapoli is urging the state to use federal economic assistance to “mitigate the impact on New York businesses in the midst of an uncertain economic recovery.”
Joe Mahoney is the CNHI statehouse reporter for New York. Reach him at: email@example.com