Sen. George Borrello, R-Sunset Bay, discusses the state’s unemployment insurance deficit during a floor debate earlier this week in the state Senate.

Sen. George Borrello is supporting legislation to lessen unemployment insurance taxes on businesses — but that doesn’t mean he’s happy with the state’s handling of its unemployment insurance fund.

At issue is the state’s borrowing of $11 billion from the federal government to satisfy pandemic-related unemployment costs. There is now $9.3 billion remaining on that loan — and the presence of the loan is driving up costs for businesses. S.6791, sponsored by Sen. Anna Kaplan, D-Carle City, lowers 2022 contribution rates to the unemployment fund and gradually increases in 2023 and 2024, when businesses may be better able to pay more into the fund. The legislation passed the state Senate on Tuesday in a unanimous vote.

Borrello, R-Sunset Bay, said the bill will help small business owners who have seen unemployment insurance costs increase dramatically during the COVID-19 pandemic, even for small business owners who haven’t laid off employees due to the pandemic.

“I really think we need to look at what we spend our money on here in New York state,” Borrello said on the Senate floor. “We have a huge budget surplus. We have unspent federal relief money and we have yet to address the fundamental problem that every single employer in New York state is paying more for unemployment insurance than they ever have. According to the Business Council, it’s going to take more than a decade to make up that $9 billion shortfall if some of that money from the fed government isn’t diverted to that fund. A decade on the backs of every single employer in New York state.

So this is kind of like a bucket of water in the ocean. Happy to have it. Glad we’re doing it. But we need to step up and fill that crater and make sure that $9 billion deficit is not a burden on our already overburdened businesses in New York state.”

Unemployment contributions are set in part based on two factors — a business’ experience ratings, which are based on how often unemployment insurance is claimed by a business’ employees; and the rate table, which determines an employer’s unemployment insurance tax obligation based on the overall size of the unemployment insurance fund index and an employer’s positive or negative account balance. Because the unemployment insurance fund has a negative balance, employers are placed into the highest possible rate column. That is what is driving the rate increases on businesses.

The state Legislature passed legislation in 2021 that prohibits employer’s experience ratings from being affected by COVID-19-driven unemployment. S.6791 is an attempt to lessen the impact of the rate table on businesses.

“Without legislative action, New York’s businesses are paying the highest allowable rate determined in the employer contribution rate table. As long as New York’s UI trust fund has a negative balance, employers will continue to pay the highest allowable rate. This legislation temporarily moves employers into a different rate column resulting in a lower tax rate than currently set in statute. The tax rate schedule steps up in 2023 and 2024 as businesses may be in a better position to absorb higher UI tax bills,” wrote Kaplan, who was not in Albany to debate the bill on the Senate floor, in her legislative justification.

Borrello said the move will help businesses, but continued his criticism of the state Labor Department’s unwillingness to provide legislators with an accounting of unemployment fraud. It’s an issue Borrello and Republicans raised in May 2021, when the minority party asked for a complete, forensic audit of the state’s information technology systems to identify failures and weaknesses, and to strengthen the digital infrastructure to avoid future catastrophic failures in the future and an accurate assessment of potential fraud and efforts to recoup it.

“What this bill really is doing, as good as it is, is essentially kicking the can down the road because it’s not addressing the fundamental problem of a $9 billion, with a ‘B’, deficit in the unemployment insurance fund. Now we may disagree how that number came about, but I can tell you that New York state has still yet to address how much fraud was in our unemployment insurance. I asked that question of the commissioner of the Department of Labor. She danced around it and said, ‘Well, we avoided about $2 billion in fraud but she wouldn’t actually tell us, because I’m sure that she doesn’t know, how much fraud we actually experienced in our unemployment insurance. And that’s really troubling because other states, including California, have identified that number.”

Borrello echoed a request from business organizations statewide to begin paying down the $9.3 billion outstanding in the state’s loan from the federal government. Compared to 2020 levels, total state and federal unemployment insurance taxes paid by New York employers will increase by at least 45.4 percent to as much as 254 percent in 2025, according to business groups who cited a state Comptroller’s Office analysis.

The business groups are asking the state to devote federal and/or state money to the unemployment insurance system to either restore unemployment insurance tax levels to their 2019 levels; pay the cost of any regular UI benefits paid in 2022 that exceed the amount of state employer-paid UI taxes; pay any interest payments due on New York State’s federal UI program advance for 2022 and 2023; or offset any increase in net federal FUTA taxes applicable to New York employers for 2022 and 2023.

“This is a good step,” Borrello said. “It will help us. But ultimately we are going to have to pay that bill at some point. And right now we are kicking that can down the road as interest accrues on that $9 billion that is on the backs of every single employer in New York state. That’s the troubling part of this.”