Business experts pressure N.Y. to pay off $6B unemployment insurance debt

As small businesses across the state steadily decline, lawmakers and business experts want state leaders to take action next session — starting with paying off New York’s $6 billion in unemployment insurance debt.

Empire State Development officials Tuesday told lawmakers at a public hearing the number of small businesses in the state has declined by at least 3% per year since 2019. Lawmakers said the figure is difficult to measure, and is estimated to be higher.

The state’s $6 billion in outstanding unemployment insurance from the pandemic continues to hold small businesses back. 

“We have many, many economic development programs that offer loans and grants, and the question I ask is: ‘Would we have to do quite so much of that if we just paid down this UI debt?'” Assembly Small Business Committee chair Carrie Woerner said. 

Woerner wants the state to dip into its rainy day, or reserves, fund to pay the outstanding unemployment balance and attract more small entrepreneurs.

“There is a real cost to us failing to do what every other state has done,” she said.

The state spends billions of dollars each year on workforce development programs to spur economic growth. Assemblymembers held a hearing in Albany on Tuesday to measure the economic impact and return on investment. 

Lawmakers said paying down the state’s unemployment debt will be a top budget priority next session — even as legislative leaders must negotiate significant budget deficits, including plugging the Metropolitan Transportation Authority’s capital plan after Gov. Kathy Hochul suspended congestion pricing in June.

Assemblyman Al Stirpe, who chairs the Economic Development, Job Creation, Commerce & Industry Committee, criticized the state’s inaction. 

“I think we’ve ignored the problem,” Stirpe told Spectrum News 1. “The Legislature tried every way from Sunday to come up with some kind of a plan to help and the executive, it seems, is just not into that for some reason.”

A spokesperson with Hochul’s office said the state continues to monitor the federal unemployment insurance trust fund and reduce the state’s principal balance whenever possible.

“We expect to make strides every year until it is paid off,” they said.

During testimony, Ashley Ranslow, New York state’s director with the National Federation of Independent Businesses, said small businesses in the Empire State pay an average of $400 to $450 per employee, per year, on unemployment insurance taxes.

“We should have been doing this the last three years,” Ranslow said. “If we had allocated a billion at at time, it woudln’t have been as dire or as difficult.”

State officials dispute that figure — citing Department of Labor data that the outstanding balance costs New York employers about $15 per employee.

Ranslow said the $15 only applies to interest, and does not include adjustments in the state UI tax brackets or federal unemployment trust fund. That sum equals an average of over $400 for New York businesses.

“The debt has been paid off over the last few years because of the higher taxes — not because of anything the state did,” Ranslow said.

Empire State Development President and CEO and Commissioner Hope Knight told lawmakers at least 24,000 new businesses have started in the state over the last year-and-a-half. Lawmakers counter it does not outpace the annual decline. 

Stirpe said the state funds several programs that fail to produce a significant return on investment. Several business leaders criticized how the state mainly funds loans for small businesses, and largely reserves grants or tax incentive programs for large companies.

“Loans are great if you’re expanding your business or you’re looking to start a new venture, but they’re not great in the sense of the same benefit because that’s money you have to pay back, and pay back with interest, even if it’s a lower interest rate,” Ranslow said.

Civic groups and other business experts have blasted the state’s film and TV tax credit that costs $700 million per year, totaling over $7 billion through 2034.

Knight refuted state Department of Taxation and Finance data that shows the tax credit provides, at best, a 31-cent return on the dollar.

“With respect to the report that Taxation and Finance put together, we do take issue with a little bit of the methodology used,” Knight said.

ESD data shows the credit returns $1.70 in tax revenues for every dollar spent, she added.

“The film industry is a very impotant opportunity for New York,” Knight said. “It creates 65,000 employment opportunities over the course of a year, so we believe it’s a very signifciant industry for New York’s economy.”

Critics argue the TV and film industry bring temporary jobs to the state and do not support a sustainable economic development model.

The state’s program to certify Minority and Women-Owned Businesses, or MWBEs, expires next year.

Several lawmakers told Knight they often hear from businesses in their districts that struggle to get certified, or have experienced issues and delays getting the certification renewed.

Knight said the agency will work with the Legislature to address disparities within the program next session.