The Massachusetts unemployment rate crept up to 4.3% in February, once again trending in the wrong direction. That seems hard to believe when the most recent National Federation of Independent Business Jobs Report shows 40% of small businesses have open positions they cannot fill. Of course, Massachusetts consumers notice longer lines at store checkouts with fewer cashiers and spending more time in restaurants waiting for their meal because there are not enough servers, all while “Help Wanted” signs hang on windows.

As challenging as the current labor crunch is, Massachusetts’ small businesses are still shouldering the burden of the Commonwealth’s $2.7 billion in pandemic-related Unemployment Insurance (UI) debt with little help or relief from Beacon Hill. But let’s be clear, the state is not paying off that debt; every business in Massachusetts, including Main Street businesses, is paying it off through the highest possible state UI taxes and special assessments. The average small business pays significantly more per employee per year in UI taxes, and all because they followed the rules imposed by the state of Massachusetts.

Small business owners have been calling on state elected officials to help pay down the debt and ultimately reform a very broken system. But those calls have gone unanswered.

To add insult to injury, a 2023 audit uncovered that state officials made a colossal $2.1 billion accounting error in the UI program during COVID (under the Baker administration) that will now add even further to the sky-high taxes and assessments small businesses must pay. This is plainly unfair and unacceptable. The state’s COVID shutdowns and restrictions caused the layoffs and resultant debt, which were beyond the control of Massachusetts employers, and lawmakers all but refused to utilize ample federal relief aid as intended to fill the multi-billion-dollar hole in the UI trust fund.

Last October, the annual Department of Unemployment Assistance (DUA) report warned the UI trust fund may be facing insolvency by 2028 without a change in trajectory. To be clear, Massachusetts’ small businesses have argued since before the pandemic that state lawmakers needed to get serious about our unemployment insurance crisis. Massachusetts has been an irresponsible outlier for unemployment insurance policy, providing overly generous benefits and weak eligibility standards. The program’s wanton spending, coupled with rampant UI fraud and overpayments during the pandemic that were never fully examined, left businesses holding the bag to repay the federal UI debt.

While the state’s UI crisis should have been dealt with several years ago when Massachusetts’ coffers were overflowing with money from D.C. and excess state tax revenue – now squirreled away in the state’s roughly $9 billion “rainy day fund” – the time for action is here. The Commonwealth simply cannot afford to continue kicking this can down the road. No one knows what the economy will look like in the future, and a recession would send the state back into UI borrowing mode. Small businesses cannot afford a decade or more of high UI taxes; it is unsustainable and will have an irreversible impact on Main Street.

Now is the time to secure the long-term security of our UI system through reforms while providing desperately needed relief for Massachusetts employers.

Christopher Carlozzi is the Massachusetts State Director for the National Federation of Independent Business (NFIB)