28 Business Groups Call for New York State Funds to Help Alleviate the Unemployment Insurance Debt
ALBANY – Employer groups from across New York State are calling on the governor’s administration and state legislature to address one of the most significant lingering financial burdens caused by the COVID pandemic - $8 billion in outstanding federal loans to New York’s unemployment insurance (UI) program. This debt results in hundreds of millions in higher federal and state payroll taxes on New York’s private-sector employers.
Since this debt results from state-directed office closings, it makes sense that public funds be used to help address the debt of this otherwise 100% employer-funded program.
State contributions were the approach taken by a majority of states. To date, thirty-three states have devoted more than $26 billion in public funds – mainly from the federal CARES Act or ARPA – to pay off federal advances, stabilize their UI programs, and reduce the UI tax burden on their employer community.
Unfortunately, New York is the only state that took significant federal UI loans and failed to apply state resources to provide UI payroll tax relief to employers.
Recommendations to Address the Debt
Today, New York employers are providing four specific options for addressing this debt and tax burden that can be adopted as part of the state’s FY 2024 budget:
1. Pay the annual interest on outstanding federal loans, estimated at up to $130 million in 2023. This would prevent the state from sending employers a second UI tax bill each fall to generate funds to pay federal interest.
2. Offset the impact of increased federal UI taxes on employers. Employers in states with outstanding federal UI advances see their federal unemployment insurance tax increase yearly until the debt is fully repaid. Without state relief, this FUTA increase will cost New York employers more than $250 million in 2023.
(Note: In 2022, California – the only state with a larger UI debt than New York – authorized $340 million from its General Fund to pay interest on its federal UI advances and another $500 million to offset increased FUTA taxes.)
3. The state Labor Department has estimated COVID-related fraudulent payments in New York’s regular, employer-financed UI program as high as $400 million. Under current law, these costs are spread across all employers through a UI program “subsidiary” tax. General fund reimbursement of fraudulent payments would avoid adding the cost of these state-approved payments to be borne solely by employers through increased payroll taxes.
4. Finally, public funds can be devoted to paying down a share of the state’s now $8 billion federal UI advance ($8.096 billion as of today, according to the US Department of Labor. )
The state should make a material down payment on this federal debt in the FY 2024 budget and adopt a multi-year commitment for additional payments at a level that can be accommodated in the state financial plan.
An open letter to the Administration and State Legislature on UI tax and debt relief from 26 business organizations across New York State is attached.
For more information, please contact any of these organizations, or Ken Pokalsky, Vice President, at The Business Council of New York State (518-694-4460 or [email protected]).
Members of the coalition include:
American Council of Engineering Companies of New York
Association for a Better Long Island
Associated General Contractors of New York State
(The New) Bronx Chamber of Commerce
Brooklyn Chamber of Commerce
Buffalo Niagara Partnership
Business Council of New York State
Business Council of Westchester
Capital Region Chamber of Commerce
Empire State Forest Products Association
Food Industry Alliance of New York
Greater Binghamton Chamber of Commerce
Greater Rochester Chamber of Commerce
Long Island Association
Manufacturers Association of Central New York
National Federation of Independent Business
New York Association of Convenient Stores
New York Construction Materials Association, Inc.
New York Farm Bureau
New York Insurance Association
New York State Economic Development Council
New York State Restaurant Association
Northeastern Retail Lumber Association
Queens Chamber of Commerce
Retail Council of New York State
Rochester Technology and Manufacturing Association
Upstate New York Black Chamber of Commerce
Upstate United