Infusion of CARES Act funds to keep NH’s unemployment tax at a lower level

State takes action to shore up trust fund and avoid ‘sticker shock’ for employers
Richard Lavers 72

Deputy Department of Employment Security Commissioner Richard Lavers

Unemployment compensation taxes in New Hampshire will probably decrease next year, and remain at that level, for all of 2021, thanks to an influx of unspent CARES Act funds, Deputy Employment Security Commissioner Richard Lavers told business leaders during a remote conference on Tuesday.

Those funds will be crucial in keeping the unemployment trust fund at a high enough level to prevent triggering tax increases. In November, the Governor’s Office of Emergency Relief and Recovery had already transferred $50 million in CARES Act money to the trust fund to not only prevent the base tax rate from going up, but also to bring it down a half-percent, to 2.7%.

That move came high unemployment during the spring depleted the fund, causing rate increases in the third quarter. That caused “sticker shock,” said Kathy Garfield, president of Keller Companies a building materials manufacturing company in Bow. Garfield, who shared a panel with Lavers in the opening webinar of the two day Leadership Summit organized by the Business and Industry Association of New Hampshire, said her unemployment taxes rose from $12,000 to over $90,000 in September.

“It was quite a hit,” she said.

The unemployment trust fund was pretty healthy before the pandemic hit. In fact, it was so flush – over $300 million – that employers enjoyed a discounted rate of 1.2% from the full 2.7% rate.

But even with the CARES Act money paying for extended, expanded and enhanced benefits, the state trust fund was still paying about out $13 million a week, as weekly claims grew from 4,000 to 120,000. That wiped out the discount and caused many employers to experience the same sticker shock as Garfield.

‘Another infusion of CARES funds’

Even with the $50 million the transfer, the trust fund still stands at only $126 million, Lavers reported.

But with the current number of weekly claims there would still be a drain of about $2.5 million a week. That would eventually trigger another tax increase, but “we are expecting another infusion of CARES funds,” said Lavers. “All those dollars unspent would waterfall back into the trust fund.”

While Lavers could not give an exact amount, he said he thought it would be enough to keep the rate at 2.7%, though not enough to bring back the discount.

Lavers’ expectation coincided with statements by Gov. Chris Sununu and a GOFERR response to an NH Business Review inquiry from Business and Economic Affairs Commissioner Taylor Caswell on the status of the state’s share of unspent CARES Act funds, which would lapse back to the federal government under current law if not spent by the end of the year.

“We will continue to assess and, when necessary, redeploy the remaining unspent allocated funds and plan on utilizing any remaining funds not dedicated in the days leading up to the deadline to cover the Covid-19 related costs of state agencies and to replenish the state’s unemployment trust fund,” said Caswell. “Doing so will not only significantly contribute to the long-term solvency of the state’s UI trust fund, but will result in a significant tax savings for New Hampshire employers.”

While all of the $1.25 billion in CARES act funding has been allocated, $197 million has yet to be spent as of Nov. 11, according to the latest data on GOFERR’s transparency web page. But its not clear how much of that will be spent by the end of the year.

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