The state’s unemployment system is a fiscal time bomb. Can Healey defuse it? - The Boston Globe (2025)

Why it matters: If Beacon Hill doesn’t tackle a comprehensive overhaul now, it may well face a crisis in a few years — and by then, the budget may not be so flush.

Just this week, the Healey administration was required to extend the maximum period for collecting benefits from 26 to 30 weeks — a statewide change triggered when the unemployment rate in the Springfield metro region crossed a threshold established in a 2003 UI reform bill.

The extra payments are good news for newly laid-off workers. But there is a cost: Accelerating the depletion of the UI trust fund.

The big picture: Talk to anyone in business about what makes the Bay State a tough place to compete and you’ll get an earful about UI.

• The average weekly benefit, at just over $730, was the highest in the country at the end of last year.
• The average duration of benefits — almost 19 weeks — trailed only Delaware and New Jersey.
• Massachusetts is the only state to provide up to 30 weeks of benefits. Most states are around 26 weeks, though Florida, Kentucky, and North Carolina offer only 12 weeks.

Advocates for robust UI counter that by some measures Massachusetts isn’t that far out of line with other states.

Employers face a 1.9 percent average rate on taxable wages — just a tick above the national 1.7 percent. And the amount of pay subject to UI tax — $15,000 — is well below the national average of $21,800.

“Massachusetts covers about the right amount of people and covers about the right amount of income,” said Michele Evermore, a senior fellow at the nonpartisan National Academy of Social Insurance and a former US Labor Department official.

Moreover, UI payments help stabilize the economy during downturns by ensuring the laid-off workers can continue to spend on necessities, she said.

But the fact remains: The UI program is financially unsustainable.

The numbers: The trust fund is projected to slip into the red by 2028, with a $364 million deficit by 2029 — even as annual employer contributions climb 63 percent to $2.66 billion at the end of the decade. That forecast assumes a reversal in the jobless rate’s upward trend.

The state’s most recent projections assume a jobless rate of about 3.7 percent over the rest of the decade — a rosy scenario with March’s rate at 4.4 percent and recession fears mounting.

No easy fix: Stabilizing UI will be painful.

Benefits will need to shrink. Employer taxes will rise. The state should soften the blow by tapping its $8.8 billion rainy day account to keep the trust fund in the black through the transition.

Time is running out. No governor or lawmaker wants to make tough choices in 2026 — an election year.

Vowing to work with business and labor, the Healey administration has a goal of “long-term solvency while also supporting employers and impacted workers,” Lauren Jones, secretary of the state labor department, said in a statement to the Globe.

A place to start: The state could scrap automatic extensions like the one just triggered in Springfield.

Current law requires benefits to revert to 30 weeks statewide when the 12-month average jobless rate hits 5.2 percent (unadjusted) in any metro area. Springfield hit the mark in March.

That threshold was set in 2003 but has proved less of an exception than the norm.

“We’ve definitely set the trigger for this at a very low level,” said Evan Horowitz, director of the Center for State Policy Analysis at Tufts University. “But in this particular case, it sure feels like the rest of the state will soon be following Springfield into higher unemployment.”

Horowitz — a member of a special legislative commission that spent the better part of a year developing recommendations to right the UI ship — suggests capping benefits at 26 weeks under all circumstances.

“But that would have to be done as part of a broader package of benefit cuts, tax increases, and process reforms,” he said.

Final thought: The commission laid out a roadmap. In addition to resetting the maximum benefit period to 26 weeks, it proposed:

• Freezing weekly benefits increases for four years.
• Tightening eligibility standards.
• Studying tax hikes, including an increase to the taxable base wage.

Jon Hurst, president of the Retailers Association of Massachusetts, has tracked UI longer than most.

One stat caught his eye: The percentage of recipients making over $2,000 a week — more than $100,000 a year — has doubled since 2019 to 21 percent.

That’s a red flag, he said — both for the trust fund’s solvency and the broader economy.

Because weekly benefits are tied to past earnings, an uptick in high-income claimants accelerates fund depletion. “But it’s also a broader economic yellow flag,” Hurst said.

Think about it: If workers making six figures are getting laid off in growing numbers, that’s a troubling sign for the high-skilled, knowledge-based economy Massachusetts depends on.

Larry Edelman can be reached at larry.edelman@globe.com.