New York’s unemployment insurance fund, which the state Labor Department said has paid out over $100 billion dollars in benefits to millions of New Yorkers during the COVID-19 pandemic, is now running a deficit. The state’s comptroller, Tom DiNapoli, is proposing some ways to make the fund, which owes the federal government $9 billion, solvent.
The state’s private businesses are responsible for keeping the unemployment insurance fund in balance. States are allowed to borrow from the federal government when the fund runs a deficit. Employers have to provide the additional money to pay off the loan.
Comptroller DiNapoli said the pandemic caused an unprecedented number of temporary and permanent job losses, with over 4.7 million New Yorkers collecting benefits. In January of 2020, before the pandemic hit, the fund had a $2.65 billion surplus, and paid an average of $531 million in benefits each quarter. That rose to $6.5 billion dollars in the second quarter of 2020, the months of April, May and June.
“That’s an increase of over 1,000%,” DiNapoli said. “The magnitude is something that I don’t think anyone could have ever envisioned.”
He said business owners could see their unemployment insurance fees, which are calculated on a company’s total payroll, rise by as much as 9% at a time when the economic recovery has been uneven, and many employers are struggling to stay afloat.
“It will hurt employers, it will make it harder for them to get back on their feet, it might make it harder for them to hire people,” DiNapoli said. “We’re not back to pre-pandemic employment levels, and this could certainly be a negative in getting us back to that point.”
DiNapoli, in a report, said Governor Kathy Hochul and legislative leaders should look at alternatives. The state this year has collected $5.9 billion more dollars in taxes and other revenues that originally projected. Business groups have asked that some of that money be used to help replenish the fund. DiNapoli said there is merit to that argument.
“Maybe some of those billions could be put towards paying this down this unemployment loan that we owe as a way to relieve the burden on business,” DiNapoli said.
A financial update from the governor’s budget office says the additional revenues that were collected will be used to keep the state’s budget in balance for the next two years. $1.1 billion dollars will be placed in a reserve fund to deal with the ongoing pandemic and potential new variants of the virus that could disrupt the economy and the health care system.
A spokeswoman for the state’s Department of Labor did not answer specific questions about the unemployment insurance fund. But in a statement, spokeswoman Deanna Cohen said New York, along with many other states, has sought loans from the federal government to make up for the deficit. And she said the existing state budget already gives business over a billion dollars in subsidies to help deal with the pandemic.
Cohen said the state is also asking the federal government to forgive the state’s unemployment insurance deficit altogether, due to the “historic nature of the economic downturn” during the pandemic.
The state’s Business Council has also asked that the federal government absolve the state from having to pay back the deficit.
Comptroller DiNapoli was expected to talk about the unemployment insurance fund deficit and other issues when he spoke to the annual meeting of the state’s Business Council Wednesday night.
