New York State's 2022 legislative session ended with no action to address the state’s Unemployment Insurance (UI) debt. As a result, in July, New York employers received a bill from the New York State Department of Labor (DOL) for an “interest assessment surcharge” of 0.23% to be applied to New York's current UI taxable wage base of $12,000. The end result of this added charge is $27.60 per employee, payable by the employer by September 30.
As a result, the charge is in addition to elevated levels of state UI taxes paid by employers, due to automatic shifts under the state’s tax tables. Standard UI payroll taxes for 2021 and 2022 already increased from $180 to $250 per employee, compared to the pre-pandemic levels, and will stay at these elevated levels until the state’s federal advances are fully repaid. Additionally, beginning in 2023, New York employers will also see annual increases in their net federal UI tax rates until the federal advances are fully repaid.
As of September 29, only five states had outstanding federal UI advances, with two states – California ($17.9 billion) and New York ($7.9 billion) accounting for 93% percent of all states’ totals.
Two states have taken legislative action in 2022 that partially addressed their UI program debt and lessened the impact on in-state employers. Illinois, in passing Public Act 102-0696 in April, made a $2.7 billion partial repayment of its UI, using American Rescue Plan Act (ARPA) funds. In its 2023 budget, California approved several UI debt-related measures. It authorized $800 million from the General Fund, over a two-year period, to pay down a portion of its outstanding UI debt; $500 million to offset increased federal unemployment insurance taxes; and $342.4 million to pay interest on the federal advances.
As result, New York remains the sole state that has taken no significant action to address federal UI advances.
With the unprecedented spike in unemployment in 2020, driven by state-mandated reductions-in-workforce in response to the COVID pandemic, the actions drove New York’s UI fund deep into the red currently, with more than $7.9 billion in federal loans. Under existing state law, the entirety of its federal advances will be repaid through increased payroll taxes on employers, with these high federal and state payroll taxes likely lasting the rest of this decade, or beyond.
The Business Council has strongly recommended New York State follow the example of 31 other states who have already acted and used some of their federal COVID relief funds to alleviate UI tax burdens on in-state employers. This action will provide valuable relief to businesses across New York State recovering from the national recession and still dealing with the ongoing pandemic.