Western Mass business leaders mobilize push for legislative fix to jump in unemployment tax

Executive Board members of the East of the River Five Town Chamber of Commerce urge business owners to call their legislators and push for a fix to the skyrocketing solvency fund assessments. Political consultant and business owner Anthony Cignoli moderated the discussion. Courtesy of Nancy Connor, ERC5

By Steph Solis | ssolis@masslive.com

Western Massachusetts business leader urged their peers to fight the latest tax notices showing massive unemployment tax hikes — the kinds of increases lawmakers had hoped to prevent with the new unemployment insurance law.

Executive board members of the East of the River Five Town Chamber of Commerce started circulating a petition and a letter to send lawmakers. They told employers on a call Thursday afternoon to contact their state legislators to push for a fix to the solvency fund before the end of the fiscal quarter on April 30.

Business owners found out last week the solvency fund rate jumped up to 1600% because of COVID-related unemployment claims, raising unemployment taxes by thousands of dollars for Massachusetts business owners.

“We should not be penalized for the insolvency of the UI trust fund due to COVID-19 related UI claims as a result of the mandated shutdown of our economy to protect the community at large,” the letter states.

Legislative leaders and Baker administration officials are looking into how many businesses were hit with massive unemployment taxes because of the jump insolvency fund rates and how to reduce the hit to employers.

Lawmakers in March passed an unemployment insurance bill that was supposed to provide relief to business owners. The new law, which took effect earlier this month, authorizes the state to borrow up to $7 billion to close the $4 billion-plus deficit in the unemployment insurance trust fund. They also froze the payment schedules that would have cost business owners hundreds more per employee.

Yet the spike in the solvency fund, set under state statute, eluded state leaders. The solvency fund typically remains below 2% but jumped after the CARES Act mandated that states divert COVID-related unemployment claims to the solvency fund.

That provision made the solvency fund rate jump from 0.58% to as high as 9.23% for Massachusetts employers. That rate drove the overall employer contribution rates business owners must pay into the unemployment insurance system. For some, the employer contribution rate doubled, seeing their unemployment tax bills increase more than tenfold.

“It’s a very, very difficult pill to swallow when we spent a year trying to figure out how to calculate things and make projections and then all of a sudden we get whacked,” said Charlie Christianson, board president of the ERC5. The chamber represents some 200 businesses in East Longmeadow, Hampden, Longmeadow, Ludlow, and Wilbraham.

 
1/19/2021 - Customers checking out products at Webs - America's Yarn Store in Northampton. (Hoang 'Leon' Nguyen / The Republican)
 
‘It just doesn’t sit well’

When the pandemic was declared, Steve and Kathy Elkins closed their shop, WEBS - America’s Yarn Store in Northampton, like other retailers in Massachusetts, did to comply with the governor’s mandate to close non-essential businesses.

Their employees moved to the warehouse to help the business ramp up its online sales. Those who couldn’t stayed home, continuing to get paid.
“We had done everything in our power to support our staff, who did such a great job throughout the whole thing,” Steve Elkin said.
The yarn store joined the minority of businesses that saw a windfall during the COVID-19 pandemic. Maybe it was the stay-at-home advisories or the fear of contracting COVID-19. The yarn store’s customer base tends to be above age 50 and female.

The Elkins, second-generation owners who took over the shop 18 years ago, announced in January they sold their store to the national craft retailer LoveCrafts. But they continue to run the store and work with the parent company.

Things were looking up. Then came the state tax notice. WEBS faced a 120% increase in unemployment taxes, despite not laying off anyone. The company owes $33,000 instead of $15,000.

“It just doesn’t sit well,” said Steve Elkin, now general manager of the yarn store. “It’s $18,000 that we don’t have to spend elsewhere in our business.”

Other businesses are seeing similar tax hikes. A Springfield-based company saw the tax bill increase by roughly $300,000. The Retailers Association of Massachusetts saw its tax bill jump from $500 to nearly $10,000. A downtown Northampton cafe that paid close to $4,000 a year earlier now faces a bill of $15,000.

“To get a really large bill like this is going to shut people down, and it’s probably going to lead to more layoffs and rising prices and all kinds of things as businesses figure out how to adapt,” said Rep. Linsday Sabadosa, a Northampton Democrat, “because nobody was ready for that.”

 

 
Massachusetts UI tax noticesScreenshot

The state Department of Unemployment Assistance cannot revise the solvency fund rate because it is set by statute.

Trade groups and several chambers of commerce signed onto a letter calling for state officials to use new federal aid to reduce the deficit in the UI trust fund. Fifty-five lawmakers signed onto a letter led by Rep. Bradley Jones and Sen. Bruce Tarr, the Republican minority leaders, making similar recommendations.

House Speaker Ron Mariano and Senate Ways and Means Chairman Michael Rodrigues said they were working with the Baker administration to address the solvency rate increases. Mariano said he’s waiting for a cost estimate from the governor’s office to determine the magnitude of the problem.

Massachusetts is expected to receive $4.5 billion over two years from the federal American Rescue Plan. Mariano doesn’t foresee using funds before the federal government releases its guidance on how to appropriate the money. The guidance is due in mid-May.

“It is premature to have any discussion about how our government would make up any deficit or fix any problem that the solvency fund created,” Mariano said Wednesday.

Even if lawmakers wait to use the federal funds until mid-May, Sabadosa said she hopes they can push for a short-term solution so business owners aren’t left in limbo.

“What I would like to see is some relief for business owners at least in the short term where we’re either giving them a longer period to pay into this or we’re easing the pain a little bit,” she said.

 Originally posted on MassLive.com, please CLICK HERE to view the original article.