Employers would see some of their long-term unemployment insurance liability disappear under a proposal Gov. Charlie Baker made Wednesday to spend $1 billion of the state's sizable surplus to wipe a chunk of debt from COVID-19 claims off the books.
Baker filed legislation to spend almost $1.57 billion in surplus tax collections from the budget year that ended June 30, while another $1.1 billion from the surplus would be used to cancel a planned draw on reserves.
Another $1.1 billion from capital gains tax collections would be deposited into the state's stabilization fund, and the governor has asked the Legislature to reconsider its decision to delay for one year the implementation of a tax deduction for donations to charity.
Baker had initially proposed to spend as much as $900 million of the surplus on a two-month sales tax holiday as a way to give back to taxpayers who helped keep the economy afloat during the pandemic, but that proposal was dismissed by Democratic leaders.
The decision by the governor to recommend using surplus revenue to reduce the unemployment insurance burden on employers comes after months of pressure from the business community to use federal dollars from the American Rescue Plan Act to offset the cost of unemployment benefits paid out during the pandemic.
Baker and the Legislature devised a plan to borrow up to $7 billion to replenish the unemployment insurance trust fund and spare businesses sharp increases in their rates, but employers would still have to pay that money back over the next 20 years.
"This transfer will reduce the need to borrow funds for COVID-era claims, and thereby reduce the need for future employer assessments," Baker wrote in his filing letter Wednesday. "Throughout the pandemic, the Legislature and the Administration have worked closely to respond to the unprecedented experience of employers and workers as we navigate through an unfamiliar economic environment and we hope to continue to do so through the expenditure of these funds."
Associated Industries of Massachusetts CEO John Regan called it a "good-faith proposal," but continued to advocate for the use of ARPA funds in addition to the surplus.
Baker's budget bill to close the books on fiscal year 2021 also proposes to spend $405 million on retroactive and fiscal year 2022 union contract costs, $39 million on rate increases for human service workers, $17 million to support 800 temporary shelter beds, and $3 million to accommodate nursing students at Quinsigamond Community College and Worcester State University who were displaced by the closure of Becker College.