New York Clears Nearly $7 Billion Unemployment Insurance Debt Accumulated During Pandemic

New York State has paid off nearly $7 billion in unemployment insurance (UI) debt owed to the federal government—a debt that surged during the COVID-19 pandemic—Governor Kathy Hochul announced on Monday. This payoff was included in the state budget passed in May.

Earlier this year, Hochul had indicated the state would only cover the interest on the UI debt. However, after discussions with business leaders during spring budget negotiations, she concluded that fully paying off the debt would better support businesses if an economic downturn occurs. The repayment was funded from the state’s reserves, often referred to as the “rainy day fund.”

The burden of this debt had fallen heavily on businesses through increased taxes, and the state had cut unemployment benefits until the debt was repaid. New York was one of only two states still carrying COVID-related federal UI debt, partly due to not using $25 billion in federal stimulus funds designated for unemployment tax relief.

“By paying off this unprecedented Unemployment Insurance Trust Fund debt, we are delivering long-overdue relief to New York’s workers and businesses,” Hochul said. “This is about doing what’s right — raising benefits for unemployed New Yorkers who need support, cutting costs for businesses that are driving our economy forward, and putting money back into New Yorkers’ pockets.”

With the debt cleared, the state plans to increase the maximum weekly unemployment benefit from the current frozen rate of $504 to $869 starting in October.

Eliminating the UI debt was a key priority for lawmakers this budget season, including Assembly Speaker Carl Heastie, who actively pushed for this resolution.