Unemployment Insurance
Whenever I meet with local business owners
about how the Commonwealth can help them compete and grow, they almost
always stress the soaring costs of doing business in Massachusetts. In fact,
they often tell me that it feels as though Beacon Hill is working against
them. This is a troubling reality.
These rising costs incurred are both direct and indirect and rank
Massachusetts as one of the most expensive States for businesses to operate.
Health care coverage, workman’s compensation, business income tax,
inflation, energy and fuel costs, sales and property taxes all take their
toll on businesses and employees.
I am happy to report that that we recently passed legislation that freezes
the Unemployment Insurance (UI) rate that businesses are required to pay for
2008. This assessment goes into the Unemployment Fund which serves as a
temporary assistance source for those that have lost their employment.
When Governor Patrick signed the bill into law, businesses were spared an
expected increase in the UI tax rate. This freeze will help bring
much-needed relief for Massachusetts employers.
The Unemployment Insurance program is expensive, and Massachusetts has the
fourth highest UI costs in the country. In 2006, employers of the
Commonwealth paid an average of $671 per employee for Unemployment
Insurance. That was more than double the national average of $315 and
substantially more than bordering states like Rhode Island ($489), New York
($399) and New Hampshire ($118).
This legislation is also good news for anyone hoping to work in
Massachusetts. Many businesses are already in a tenuous position, and given
the state of our economy, adding the additional financial burden of a rate
increase would have been disastrous and could have resulted in further job
loss. Massachusetts currently ranks 49th in job creation, and has yet to
recover almost 100,000 of the jobs lost during the last recession following
9/11.
Currently, businesses in the Commonwealth pay $13.5 billion a year in state
and local taxes, including more recently $175 million to comply with the
state’s new health insurance reform law. Furthermore, businesses have seen
UI costs increase more than $600 million since 2004.
The freeze is an appropriate balance between making sure that there is help
for those that find themselves jobless, and employers struggling to afford
doing business in our state. The relief comes at a time when Massachusetts
must do more to ease the regulatory and administrative burdens on businesses
amidst a potential economic downturn.
At the same time, the freeze won’t put our UI system at risk. Currently, the
UI Trust Fund has a robust balance of more than $1.1 billion. Even without
the rate increase, the fund’s balance is expected to grow to about $1.4
billion by the end of 2008, which most experts agree is more than sufficient
to cover the benefits requested and keep the fund solvent. Massachusetts UI
benefits will remain among the highest in the nation.
The Legislature must not be short-sighted and lean too heavily on businesses
to fill our revenue shortfalls. We must take the time to realize the long
term ramifications of our actions on our employers. The Legislature and the
Governor have taken a positive step forward towards providing some temporary
relief for small companies, but we must do more to remain attractive to
businesses in order to create more jobs, and help the Commonwealth maintain
a competitive edge.