Rising unemployment darkens jobless benefits fund forecast
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Officials continue to project taxes on businesses used to fund unemployment benefits will increase every year until 2028, when they will reach the highest possible level. In addition to rate adjustments, the state can borrow money to replenish the unemployment fund and keep benefits paid. During the COVID-19 pandemic, Massachusetts took out federal advances, then issued bonds to spread repayment costs over multiple years.
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The new report forecasts that Massachusetts will pay hundreds of millions of dollars more in unemployment benefits across 2026, 2027, and 2028 than previously estimated. Its calculations are built on an assumption that unemployment will hover around 4.5 percent in the next five years, up from the roughly 3.7 percent rate baked into the prior quarterly report.
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Tufts University Center for State Policy Analysis executive director Evan Horowitz criticized prior state projections as relying on an overly optimistic unemployment forecast. He said Monday that he's 'glad we've finally acknowledged the obvious reality that unemployment isn't going to be low forever.'
'Now lawmakers need to face the equally obvious fact that our system is broken,' he said. 'In a few years, we're likely to see an unholy mix of high headline tax rates and even higher benefit costs, leading to large and persistent shortfalls. That's bad.'
Employers pay different amounts based on how many of their former workers collect unemployment benefits and how much they have set aside to cover unemployment costs. Right now, those contributions are assessed at what the state calls 'Schedule D,' the middlemost rung.
An employer can expect to pay between $124.50 and $1,897.50 per employee per year under Schedule D, according to
Many business groups have been pushing the Legislature to overhaul the unemployment system, arguing that the state offers some of the most generous benefits in the country and that the costs on employers hamstring competitiveness.
In January, the Healey administration pledged to convene business, labor, and other leaders and chart a path toward major reforms. The talks have not yet produced any major changes to eligibility or benefit levels.
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The administration has made other changes to overhaul UI technology and pilot extended call center hours, promoting those as making the system more efficient for users.
Jay Ash, a former housing and economic development secretary to former governor Charlie Baker who now leads the Massachusetts Competitive Partnership, warned last week that the state's 'UI system is broken.'
'We consistently rank at or near the bottom on cost, and it is just another reason that MA has an anti-competitive reputation,' he wrote in a LinkedIn post. 'The Administration and the Legislature are pledging to examine the system closely — here's hoping they do so and make reforms that make it easier to afford to hire our residents.'
Ash pointed to CNBC's latest
In addition to benefits, businesses are also paying an additional charge to pay back pandemic-era borrowing the state undertook to replenish the trust fund. The employer-funded account will be on the hook for an additional $203 million per year to repay the federal government for a Baker administration accounting error that used federal funding to pay benefits the state should have covered.
The first payment is due by Dec. 1 under
A coalition of influential organizations called the Massachusetts Opportunity Alliance
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Lawmakers have in the past intervened to freeze looming unemployment tax rate increases. They tend to take up economic development-related legislation in the second year of the two-year cycle, when all 200 legislative seats are up for reelection. Healey plans to seek reelection in 2026, and has so far drawn two Republican challengers.
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