Behind The Sound Bite
On the blog of the Associated Industries of Massachusetts, Executive Vice President John Regan wrote that “[a]t a time when states such as California, Michigan and Rhode Island are paying hundreds of millions of dollars to borrow federal money to cover shortfalls in their unemployment systems, the overall Massachusetts [Unemployment Insurance] Trust Fund showed a nearly $300 million balance at the end of September.”
How has the fund done over the past year?
At the end of 2010, the account balance for the fund was negative—it owed $89 million. At the end of 2011, it’s now estimated that it will be in positive territory with $63 million in reserve, and it should hit $718 million by the end of 2012.
How bad is it for the fund to go into debt?
As long as it doesn’t stay in the red for too long, not too bad. States can borrow from the federal government to pay for benefits, and if they repay the money within a year, they aren’t charged interest. The Boston Globe reports that some states now owe significant interest on their borrowing—$300 million for California, and more than $100 million each for Michigan and Pennsylvania—but Massachusetts owes nothing because it was able to repay its debt quickly.
Why is the Massachusetts fund relatively healthy?
Over the last few years, unemployment never got as high in the state as in the nation as a whole, and the numbers have gotten better this year.
What does all this mean for employers’ payments into the fund?
The fund got back into the black even though the state government twice froze unemployment insurance taxes, in 2010 and 2011, preventing them from rising from $713 per employee to $879. AIM is advocating a third freeze in 2012. However, state projections showing the fund returning to healthier reserve levels in 2012 and beyond are based on the assumption that payments will rise in 2012, then slowly fall over the following years as the fund fills up.
WBJ Web Partners
Most Recent
Most Recent
0 Comments