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NYS Comptroller Seeks Alternatives To Pay Down Unemployment Fund Deficit

Written unemployment benefits application form
Lane Erickson -
Written unemployment benefits application form

New York’s unemployment insurance fund, which the state Labor Department says has paid out over $100 billion in benefits to millions of New Yorkers during the COVID-19 pandemic, is now running a deficit.

State Comptroller Tom DiNapoli is now proposing some ways to make the fund -- which owes the federal government $9 billion -- solvent.

The state’s private businesses are responsible for keeping the unemployment insurance fund in balance. States are allowed to borrow from the federal government when the fund runs a deficit. Employers have to provide the additional money to pay off the loan.

DiNapoli said the pandemic caused an unprecedented number of temporary and permanent job losses, with over 4.7 million New Yorkers collecting benefits.

In January 2020, before the pandemic hit, the fund had a $2.65 billion surplus and paid an average of $531 million in benefits each quarter. That rose to $6.5 billion in the second quarter of 2020.

“That’s an increase of over 1,000%,” DiNapoli said. “The magnitude of the increase is something that I don’t think anyone could have ever envisioned.”

He said business owners could see their unemployment insurance fees, which are calculated on a company’s total payroll, rise by as much as 9% at a time when the economic recovery has been uneven, and many employers are struggling to stay afloat.

“It will hurt employers, it will make it harder for them to get back on their feet, it might make it harder for them to hire people,” DiNapoli said. “We’re not back to pre-pandemic employment levels, and this could certainly be a negative in getting us back to that point.”

In a report, DiNapoli said Gov. Kathy Hochul and legislative leaders should look at alternatives. The state this year has collected an additional $5.9 billion in taxes and other revenues than originally projected. Business groups have asked that some of that money be used to help replenish the fund.

DiNapoli said there is merit to that argument.

“Maybe some of those billions could be put towards paying down this unemployment loan that we owe as a way to relieve the burden on businesses,” DiNapoli said.

A financial update from the governor’s budget office said the additional revenues that were collected will be used to keep the state’s budget in balance for the next two years, and $1.1 billion will be placed in a reserve fund to deal with the ongoing pandemic and potential new variants of the virus that could disrupt the economy and the health care system.

A spokeswoman for the state’s Labor Department did not answer specific questions about the unemployment insurance fund. But in a statement, spokeswoman Deanna Cohen said New York, along with many other states, has sought loans from the federal government to make up for the deficit. She also said the existing state budget already gives businesses over a billion dollars in subsidies to help deal with the pandemic.

Cohen said the state is also asking the federal government to forgive the state’s unemployment insurance debt altogether due to the “historic nature of the economic downturn” during the pandemic.

The state’s Business Council has also asked that the federal government absolve the state from having to pay back the deficit.

DiNapoli was expected to talk about the unemployment insurance fund deficit and other issues when he spoke to the annual meeting of the state’s Business Council on Wednesday night.

Karen DeWitt is Capitol Bureau Chief for New York State Public Radio, a network of 10 public radio stations in New York State. She has covered state government and politics for the network since 1990. She is also a regular contributor to the statewide public television program about New York State government, New York Now. She appears on the reporter’s roundtable segment and interviews newsmakers. Karen previously worked for WINS Radio, New York, and has written for numerous publications, including Adirondack Life and the Albany newsweekly Metroland.