The RI Unemployment Trust Fund is in Trouble

The Rhode Island Unemployment Trust Fund is in trouble, and the General Assembly is looking to the State’s employers to fix it. In any normal year, this would be routine. It is required that when a State’s IU trust fund drops, the employers have the burden of replenishing it.

However, these are not normal times. The global COVID-19 pandemic has wreaked havoc on the job market over the last two years, resulting in an unprecedentedly rapid rise in unemployment, which in turn caused the State’s trust fund to drop from $500 million to approximately $190 million.

Prior to the pandemic, Rhode Island’s employers were taxed at a “schedule F rate”. There had even been talk of dropping the rate to schedule E (the lower the alphabetical designation, the lower the corresponding tax rate). However, with the substantial depletion of the fund due to the pandemic, to fill the coffers once again, the tax rate has been raised to schedule H. The approximately $300 million drop in funds came from money that the business community had paid into the trust fund, and would not have been spent except for the pandemic. Without help from the State or the federal government, the business community will bear the burden of paying back the $300 million, rather than with assistance from the ARPA, which was created to assist the business community in overcoming pandemic related setbacks.

As has been determined, some bad players took advantage of the pandemic by filing multiple fraudulent claims. At least $70 million in fraudulent claims were paid out in Rhode Island. Of that $70 million, about $37 million was paid by the Trust Fund – by Rhode Island employers. At the very least, they should not be responsible for paying dishonest claims.

Enter the American Rescue Plan Act (ARPA), intended to address losses associated with the pandemic. The losses to the IU trust fund were directly attributable to the pandemic, yet none of the $1.1 billion the State received from the ARPA has yet been used to replenish the fund. In October of 2021, the RI Task Force endorsed allocating some of the ARPA funds to replenish the unemployment fund, but as of today, this has not happened.

There are no shortages of ideas as to how to spend the $1.1 billion

The Rhode Island Foundation released recommendations for apportioning the ARPA funds in October of last year. As reported in UPRISE, the Foundation has suggested $405 million for housing, $255 million for behavioral health, and $305 million in workforce development and small business relief. Additionally, BLM RI PAC, the RI Political Co-op, Sunrise Providence, Sunrise RI Youth, Rebuild Woonsocket, and Renew RI want to spend $700 million of the ARPA funds on green, affordable housing. Other organizations, such as the Rhode Island Childhood Lead Action Project, have advocated for the use of $500 million in ARPA funds to enable “full, free lead service line replacement for all Rhode Islanders.”

Governor Daniel McKee’s proposed budget instead has earmarked $250 million for housing, and $42 million on addiction and behavioral health. However, on workforce development and small business, McKee has allotted over $400 million.

To date, the recommendation from the Rhode Island Task Force to allocate funds to replenish the trust fund have been ignored.

Obviously, the business community will benefit from some of the governor’s proposals, such as workforce development, but the issue of the replenishment of the trust fund is still a glaring problem for the business community. Having been hit hard with business closures and hefty losses of income, not to mention labor shortages and now inflationary pressures, the additional burden of being left alone to restock the unemployment trust fund is a bridge too far.

Lastly, it is important to stress that once the ARPA funds are spent, those funds are gone. Should the General Assembly choose not to replenish the IU Trust Fund, and Rhode Island experiences another downturn in the economy, there will be no funds to assist the UI trust fund. In that case, the tax rate would have to be further increased or the state would have to borrow from the federal government.

The Rhode Island Staffing Association urges its members to contact your legislators now and express how important it is to replenish the Unemployment Trust Fund. Please use the links below to send an email to your legislators. You can customize your message telling your own experience with the unemployment insurance taxes.

If you have any questions regarding this issue or would like some help in compiling a response to your legislator, our professionals at ASN would be happy to assist.

Tell Your Legislator to use ARPA Money to replenish the

UI Find- HB 7385

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Tell your legislator to Pass HB 8096- Waives interest and penalties on the taxable portion of loans taxed or forgiven

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Changes the rate of interest for underpayments of tax to prime rate plus six percent (6%) Support HB 6658

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