New York businesses stuck with $7.7 billion in unemployment debt

The $7.7 billion federal loan from New York’s pandemic-era unemployment insurance comes due next month, and employers will foot the bill despite the state’s plea to Washington to forgive the debt.

Private companies in the state have until September 30 to pay about $27.60 per employee to repay accrued interest on the state loan to the federal government, the first of many payments that could continue for more than ‘a decade. This is in addition to the regular state unemployment insurance tax, a levy that automatically increases when the fund is low.

New York employers say the extra burden will cause them to slow growth and hiring. This is a pandemic side effect that could increase the cost of doing business for years to come and expand the challenges businesses face while dealing with post-pandemic inflation and supply chain limitations. supply.

For many employers, unemployment insurance costs will increase by thousands of dollars a year, said Ashley Ranslow, New York state director for the National Federation of Independent Business, which represents 11,000 small businesses across the country. ‘State. Companies pay an average of about $200 more per employee per year, she said.

“You’re pushing companies to cut the workforce, or withhold hiring, or raise prices, or some combination of the three,” she said.

New York is one of six states that has not paid its unemployment insurance debt to the federal government. The state currently owes more than $7.78 billion, second only to California, which owes more than $17.5 billion, according to the US Treasury.

Business leaders say New York should help its employers with the burden, while state legislative leaders say the federal government should step in.

“Although the federal government has allocated the necessary funds to deal with the pandemic, we believe that more federal resources need to be provided to deal with these necessary costs,” said Senate Majority Leader Andrea Stewart- Cousins ​​(D), in an emailed statement.

“The pandemic was not a New York State pandemic, it was a national pandemic,” Assembly Speaker Carl Heastie (D) said earlier this month. “I think the federal government should bear this expense and it should not be borne by New York State businesses.”

A $10.2 billion loan

New York, like other states, borrowed money from the federal government starting in the spring of 2020, when the state was the epicenter of the US Covid-19 pandemic with cases exceeding 10,000 a day. The economy was at a standstill and tax revenues were expected to fall.

The state depleted its unemployment insurance trust fund and borrowed $10.2 billion to maintain unemployment insurance and Covid benefits. That’s more than three times the amount he’s borrowed in recent recessionary periods.

“It really reflects the extraordinary impact of Covid,” said Ken Pokalsky, vice president of government affairs for the Business Council of New York State.

Even though the layoffs were prompted by a pandemic and public policy decisions, the system is set up to pass on 100% of unemployment insurance costs to employers, he said.

Although the state has repaid nearly a third of the debt, interest payments are due to the federal government each year until the loan is repaid.

A June report of State Comptroller Thomas DiNapoli predicts that “in the absence of any significant federal or state action, costs to employers will continue to escalate, which could impede the recovery of employment in the state in a context of increasing economic uncertainty”.

A group of state senators led by Sen. Anna Kaplan (D) earlier this month called on Governor Kathy Hochul (D) to send some of the state’s surplus funds from tax revenue from higher-than-expected sales and mobile sportsbooks to “make a large payment on unemployment insurance debt.

“We cannot expect small businesses to shoulder the burden of reimbursing the federal government alone, and our long-term economic recovery depends on us taking bold steps now to reduce the outstanding unemployment debt of the federal government. ‘State,’ Kaplan, who chairs the Senate Committee on Commerce, Economic Development and Small Business, said in an emailed statement.

A spokesperson for Hochul said the administration is monitoring the situation closely and pointed to the more than $1 billion the state has provided for business resumption programs.

An outlier

Most other states used federal pandemic relief funds to pay off unemployment insurance debt before the bill was due.

New York sent a formal request to the Federal Department of Labor asking for the loan to be canceled, and also said it “will continue to monitor the Fund’s balance as it works to eliminate the debt.”

The DOL did not return a request for comment.

NFIB’s Ranslow doesn’t expect this to work.

“The feds don’t just want to cancel New York’s debt when 44 other states have zero debt and more than 30 states have used pandemic relief to pay down their debt,” she said.

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John A. Bogar