New York Businesses Stuck With $7.7 Billion Unemployment Debt From Covid | Business Insurance

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New York’s $7.7 billion pandemic-era federal unemployment insurance loan is due next month, and employers will foot the bill despite the state’s plea to Washington for debt forgiveness.

Private businesses in the state have until Sept. 30 to pay about $27.60 per employee to repay the federal government for accrued interest on the state loan, the first of many payments that could continue for more than a decade. That’s in addition to the regular state unemployment insurance tax, a levy that automatically increases when the fund is low.

New York employers say the added burden will slow growth and hiring. It’s a side effect of the pandemic that could drive up the cost of doing business for years to come and expand on the challenges businesses face in dealing with post-pandemic inflation and supply chain constraints.

For many employers, unemployment insurance costs will increase by thousands of dollars a year, said Ashley Ranslow, New York state director for the National Federation of Independent Businesses, which represents 11,000 small businesses in the state. Companies on average are paying about $200 more per employee per year, she said.

“You’re putting pressure on companies to have to cut labor, or delay hiring, or raise prices, or a combination of all three,” he said.

New York is one of six states that has not paid its unemployment insurance debt to the federal government. The state currently owes more than $7.78 billion, second only to California, which owes more than $17.5 billion, according to the The United States Treasury.

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Business leaders say New York should help its employers shoulder the burden, while state legislative leaders say the federal government should step in.

“While the federal government has appropriated the necessary money to address the pandemic, we believe more federal resources should be provided to address these necessary costs,” said Senate Majority Leader Andrea Stewart-Cousins ​​(D), in an emailed statement.

“The pandemic was not a New York State pandemic, it was a national pandemic,” Assembly Speaker Carl Heastie (D) said earlier this month. “I think the federal government should bear this expense and it shouldn’t be passed on to businesses in New York State.”

A loan of $10.2 billion

New York, like other states, borrowed money from the federal government beginning in the spring of 2020, when the state was the epicenter of the US covid-19 pandemic with cases exceeding 10,000 per day . The economy was at a standstill and tax revenues were expected to plummet.

The state depleted its unemployment insurance trust fund and borrowed $10.2 billion to maintain unemployment insurance and Covid benefits. That’s more than three times the amount it borrowed during recent times of recession.

“It really reflects the extraordinary impact of Covid,” said Ken Pokalsky, vice president for government affairs at the New York State Business Council.

Although the layoffs were motivated by a pandemic and public policy decisions, the system is set to pass 100% of unemployment insurance costs to employers, he said.

Although the state has paid off almost a third of the debt, interest payments are due to the federal government each year until the loan is paid off.

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A June report of State Comptroller Thomas DiNapoli predicted that “in the absence of significant federal or state action, costs to employers will continue to rise, which could impede the recovery of employment in the state amid growing economic uncertainty.”

A group of state senators led by Sen. Anna Kaplan (D), earlier this month, asked Gov. Kathy Hochul (D) to send a portion of the state’s surplus funds from higher sales tax revenue than anticipated and mobile sports betting to “make a significant payment on unemployment insurance debt.

“We cannot expect small businesses to shoulder the burden of paying the federal government alone, and our long-term economic recovery depends on us taking bold action now to reduce the state’s outstanding unemployment debt,” Kaplan, who chairs the Committee Senate Committee on Commerce, Economic Development and Small Business, said in an emailed statement.

A Hochul spokesman said the administration is closely monitoring the situation, noting the more than $1 billion the state has provided for business recovery programs.

an outlier

Most other states used federal pandemic relief money to pay off their unemployment insurance debt before the bill was due.

New York has sent a formal request to the federal Department of Labor requesting loan forgiveness, saying it will “continue to monitor the Fund’s balance as it works to eliminate the debt.”

The DOL did not respond to a request for comment.

NFIB’s Ranslow doesn’t expect that to work.

“The federal government doesn’t want to just forgive New York’s debt when 44 other states are debt-free and more than 30 states used pandemic aid to pay off their debt,” he said.

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