Upstate United, a nonpartisan pro-taxpayer organization, has published a fact sheet detailing what it says is a potential $9 billion tax increase for employers statewide.
Troubling Trends — New York’s $9 Billion Unemployment Insurance Crisis makes the case for the state government to use untapped federal funds to provide unemployment insurance relief to struggling businesses.
“The impending unemployment crisis will be a big problem for small businesses across the state. Hitting employers with $9 billion in UI-related costs right now would derail our economic recovery at a critical time,” said Justin Wilcox, executive director of Upstate United. “Providing UI relief with unused federal dollars will help employers keep their doors open and workers employed.”
At the height of the pandemic, nearly 2 million New Yorkers were unemployed. As a result, the state’s UI fund ran out of money and New York ultimately had to borrow $11.9 billion from the federal government to cover its UI payments, the organization noted. While some of that money has been repaid, New York still owes Washington $9 billion. The state’s UI fund — which currently is insolvent — must be replenished.
Upstate United points to a recent analysis from the Tax Foundation that found that New York has more than $11 billion in federal aid available through the American Rescue Plan Act. That analysis also found that, unlike the majority of states nationwide, New York has not spent any federal aid to address its UI shortfall.
“Over the last 20 months, elected officials encouraged their constituents to support local businesses. Now, we’re asking those same officials to give a lifeline to employers before they go under,” Wilcox said.
In a report issued last month, New York State Comptroller Thomas DiNapoli voiced concerns about the state’s UI issues. According to the report, from the fourth quarter of 2019 until the second quarter of 2020, regular UI benefits paid increased from $530 million to $6.5 billion — an increase of 1,124 percent. Total benefit payments, including federally funded enhanced benefit programs, were nearly $100 billion in New York from March 1, 2020, through Aug. 6, 2021.
“The surge in UI claims rapidly depleted the balance of the New York State Unemployment Insurance Trust Fund, requiring the State to borrow from the federal government to pay claims, with $9 billion in outstanding UI loans as of Sept. 2, 2021,” DiNapoli wrote in the report. “Over the coming years, the obligation to repay these federal advances and rebuild the Trust Fund balance to appropriate levels will present a daunting challenge that could potentially impede the State’s overall economic recovery and prevent New York businesses from growing to the full extent of their capacity.”
DiNapoli called for a collaborative approach to address the crisis, stating “Working together, New York State, participating employers and the federal government can develop solutions that restore the Trust Fund while allowing the ongoing economic recovery to continue.”
Upstate United’s fact sheet noted that unless New York takes swift action, the state’s borrowing will result in many employers paying a 254 percent UI tax increase in 2025.
“There is a solution to this crisis. New York can pay down its debt and fully fund its UI trust fund using unspent federal dollars from COVID-19 relief programs,” the group stated. “Failing to do so will stick overburdened businesses across New York with a $9 billion tax hike and stall our economic recovery.”