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February 5, 2025
Dear Governor Healey, Secretary Jones, Speaker Mariano, and Senate President Spilka,
On behalf of the Massachusetts Chambers Policy Network, we write to highlight our ongoing concerns with the condition of the Commonwealth’s Unemployment Insurance (UI) system. We greatly appreciate the recent efforts of the Healey/Driscoll Administration to reach a settlement with the federal government regarding the previous Administration’s $2.5 billion error that improperly utilized federal funds for state unemployment benefits during the pandemic. However, the combination of increasingly high costs on employers, including those imposed by the $2.1 billion settlement, and the impending insolvency of the Unemployment Insurance Trust Fund, raise serious questions about the system’s long-term stability, the impacts on employers, and their ability to hire and retain talent in the Commonwealth. Therefore, we urge the Administration and the Legislature, in partnership, to find the necessary funds within the Commonwealth’s budget and/or Rainy Day Fund to pay this settlement debt.
As Chambers of Commerce from across the Commonwealth stretching from the Cape to the Berkshires, the Massachusetts Chambers Policy Network (the Network) prioritizes public policies that advance the competitiveness of our local businesses and workforce. The Network appreciates the leadership of the Governor and Legislature for focusing on a strong and stable economic environment in recent legislative accomplishments such as comprehensive tax reform, the Mass Leads Act, and the Affordable Homes Act.
It is with this leadership in mind that we raise the issue of our UI system that has significant impacts on our employers and makes it more expensive to hire employees and do business in the Commonwealth than other states. The system must be reformed to address rapidly increasing costs and a lack of accountability regarding increasing levels of benefits and ongoing struggles with fraud and waste.
$2.1 billion in extra costs to employers
The Network commends the Healey Administration for its advocacy with the Department of Labor to resolve a problem it did not create. The result is likely the best the Commonwealth could hope for: the repayment of $2.1 billion to the federal government spread over the next 10 years, a waiver of substantial interest payments owed and penalties imposed, and a pledge to pay the interest accrued on the outstanding debt through the General Fund equaling $73 million.
However, the result will add roughly $203 million a year in added costs onto employers beginning on December 1, 2025, hitting employers through the UI rate schedule likely in 2026. These are costs that could have been offset by other funds available to the Commonwealth during and after the pandemic but now will be borne by businesses unless action is taken by the Legislature and Governor.
We acknowledge and understand that this problem is not the fault of the current Administration or the Legislature. In fact, the Legislature took pains to mitigate the strain imposed on the UI system during the pandemic years by dedicating resources and authorizing borrowing to keep the system from collapse while offsetting some of the immediate costs on employers.
However, employers also share no fault for a $2.5 billion error, pandemic shutdowns, and the resulting strain on the UI system. The lingering impacts are matters of broad public policy, and the Commonwealth should play a role in offsetting these costs to employers. Thankfully due to the Administration’s negotiations, the Commonwealth could absorb the burden of the error without drastic changes to the budget or significant withdrawals from rainy day funds. We urge the Administration and the Legislature, in partnership, to find the necessary funds totaling less than $300 million a year within a $62 billion budget to keep UI costs down for employers.
A System in Need of Reform
According to the Executive Office of Labor and Workforce Development, the UI Trust Fund is likely to become insolvent in 20281, even without this added burden. Despite having the 6th highest UI Trust Fund in the country as of September 20242, the Commonwealth is ranked 47th in its UI tax burden in 2025.3 This places Massachusetts at a significant disadvantage with its competitor states. Additionally, employers are still paying an annual COVID-19 assessment, totaling an estimated $349 million in 2025 and likely remaining above $300 million a year through 2028.4 To keep the UI Trust Fund solvent, the predicted rate schedule, and associated higher costs, will jump from Schedule D to Schedule F in 2026, not factoring in either the COVID assessment, and now, the $203 million repayment due to the federal government.
Policy changes have exacerbated these impacts on employers. The maximum weekly benefits amount now equals $1,051 in the Commonwealth, the second highest in the country behind only Washington.5 Massachusetts also offers an additional weekly dependency allowance of $25 per dependent. While these policy choices may be well intentioned, their impacts on the UI Trust Fund, and ultimately on increasing the UI taxes on employers, are rarely analyzed. Now is the time to consider the cost burden on businesses, and their impact on job growth and the economy overall.
We thank Governor Healey, Secretary Jones, and Secretary Gorzkowicz for beginning their review of the solvency of the UI system and assessment of potential reforms. As you conduct your review, the business community stands ready to assist in evaluating possible cost-saving reforms, increased accountability and transparency, and efforts to reduce waste and fraud within the system. However, we caution policymakers against imposing even more drastic cost increases on employers as they navigate more costly rate schedules and COVID assessments. Policy proposals such as increasing the $15,000 wage base would add even more disincentives to hire employees in the Commonwealth.
In conclusion, while we appreciate the Administration’s and the Legislature’s efforts to navigate complicated and costly circumstances around our UI system, employers ultimately shoulder the burden of paying higher UI tax rates. While we accept that responsibility, the high cost of our current system hurts our competitiveness and job growth. We urge policymakers to avoid passing on costs to employers who played no role in the $2.5 billion systemic error under the previous Administration, and to take a serious look at necessary reforms to mitigate an unsustainable and costly UI system. We stand ready to partner with you at the appropriate time.
Sincerely,
Massachusetts Chambers Policy Network
James E. Rooney, President & CEO, Greater Boston Chamber of Commerce
Tim Murray, President & CEO, Worcester Regional Chamber of Commerce
Rick Sullivan, President & CEO, Western MA Economic Development Council
Karen Andreas, President & CEO, North Shore Chamber of Commerce
Tim Cahill, President & CEO, South Shore Chamber of Commerce
Greg Reibman, President & CEO, Charles River Regional Chamber
Michael O’Sullivan CEO, One SouthCoast Chamber
Jonathan Butler, President & CEO, 1Berkshire
Paul Niedzwiecki, President & CEO, Cape Cod Chamber of Commerce
Diana Szynal, President, Springfield Regional Chamber
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