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With some Massachusetts businesses facing sudden and sharp unemployment tax increases just weeks after implementation of a new law aimed at limiting their costs, a top lawmaker wants Gov. Charlie Baker to intervene with a legislative fix.

Sen. Patricia Jehlen, co-chair of the legislature’s Labor and Workforce Development Committee, said Monday that she was surprised — as were many small businesses and industry groups — to hear reports about employers who now face greater-than-anticipated unemployment contributions because of an unexpected jump in the solvency fund assessment.

In an interview with the News Service, Jehlen said she is concerned the fifteenfold jump in the solvency assessment rate might offset the benefits from the wide-ranging legislation Baker signed April 1 aimed at stabilizing the state’s unemployment system and relieving pressure on businesses.

“We did not hear anything, ever, from the governor, whose administration runs the UI system and has much deeper experience for many years with that system, and we assume knew that this would happen,” Jehlen told the News Service. “It was a surprise to us, and it was a disappointment that it was not covered.”

“It will have to be addressed. If it’s addressed, it will require legislation, so we hope that he will quickly send us something that would remedy this problem,” she continued.

The state’s unemployment insurance trust fund has been overwhelmed by the unprecedented surge in joblessness during the COVID-19 pandemic, forcing the state to turn to federal loans to keep benefits flowing.

What Caused the Rate Jump?

Without action, the rates that businesses pay to fund unemployment benefits would have jumped from schedule E to schedule G, carrying a roughly 60 percent average increase in the per-employee cost.

Baker, who had been pushing to freeze the rate schedule since December, signed a bill on April 1 keeping the current rate schedule in place for two years, limiting the increases to a more modest 18.5 percent. The legislation also authorized tax breaks for businesses and workers, $7 billion in borrowing to pay back and replace federal loans that have kept the UI fund afloat, and an additional surcharge on businesses to cover interest payments on the federal loan.

Many business groups applauded those changes, but late last week, they started to voice concerns about another factor in the fees they pay to fund the unemployment system: a part of the unemployment payments they need to make known as a solvency assessment jumped from a rate of 0.58 percent in 2020 to 9.23 percent in 2021.

As a result, costs spiked for many employers.

Suzanne Murphy, CEO of Springfield’s Unemployment Tax Control Associates, told MassLive last week that the change effectively doubled her overall employer contribution rate.

Bob Luz, president of the Massachusetts Restaurant Association, said a small catering company on Cape Cod saw a $15,000 annual increase in unemployment taxes due to the solvency assessment jump.

“This sort of surprised everybody,” Luz said. “It’s almost like it was the fine print.”

Christopher Carlozzi, state director for the National Federation of Independent Business, said some NFIB members are finding any savings they expected to realize thanks to the rate schedule freeze to be “totally overridden” by the higher solvency rate.

“It does seem like there was some neglect on the regulators side to not red flag that the solvency assessment was going to become such a big portion of the bill,” Carlozzi told the News Service.

Biz Groups Pitch Solution

NFIB, the Mass. Restaurant Association, the Retailers Association of Massachusetts and other business groups signed a letter to Baker on Friday imploring the administration to redirect federal stimulus funding from the CARES Act or American Rescue Plan toward the unemployment system to reduce the burden on businesses.

The Baker administration did not comment on the record in response to the letter. An offical who spoke only on background said the administration is examining the issue and that the Department of Unemployment Assistance does not have discretion to set the solvency rate because it is computed according to statute.

Asked about that comment, Jehlen replied that the rate schedule that lawmakers froze is also a function of state law.

“That’s in statute, too, and we fixed that because they asked us to. They filed legislation twice, and they did not include the solvency. We will have to do it,” she said.

In a Retailers Association email on Friday, the group wrote, “The assessment, which normally pays certain socialized system costs like dependency allowances and claims from businesses that have closed, is now being utilized to cover COVID-related layoffs in a socialized, non-experience rated manner.”

Arguing for the use of recovery funds to address the problem, retailers said assessment costs are “primarily the result of state and federal government decisions to enhance and expand UI benefits and shut down private business operations during the pandemic” and “it is only fair that government take on a shared responsibility in this manner.”

Jehlen did not say specifically what kind of legislative fix she wants to see. Federal funding could play a partial role, she said, but she cautioned against leaning too heavily on that option.

“We are ready and willing to talk about this and figure out a solution,” she said. “But we need some leadership from the governor.”

Her House counterpart, Rep. Josh Cutler of Duxbury, did not explicitly call for legislation. In a statement, he also said he has heard concerns from businesses “about steeper than expected increases in the solvency fund rates” and that lawmakers are “actively reviewing those concerns.”