Trump triggers Mass. rush to settle huge federal debt

?? Welcome to Trendlines. The secret password is "welcome to Harvard Square ."

I am Boston Globe financial columnist Larry Edelman , and today I look at why Massachusetts employers may be hit with a painful increase in unemployment insurance taxes unless the state can cut a deal with the US Labor Department.?

Plus: A Danvers man is poised to score big with a rare Babe Ruth baseball card.

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? Beat the clock

Time is running out for Massachusetts Governor Maura Healey to clean up a $2.5 billion mess left by her predecessor, Charlie Baker.

• During the crush of pandemic layoffs in 2020, Baker’s administration mistakenly used federal funds to cover jobless benefits that should have been paid by the state.

• Healey’s administration uncovered the error in spring 2023 and has been negotiating with the US Labor Department since then to forgive the debt.

?? Why it matters

A waiver would likely violate federal law, leaving Healey with tough choices: taking a low-interest Treasury loan that employers would repay through higher assessments or using taxpayer funds to offset the debt.

The urgency has escalated with the potential return of a Republican administration under Donald Trump, which would likely be less sympathetic to true-blue Massachusetts' request.

• “There is a last-minute push to work it out,” said Michele Evermore, a senior fellow and unemployment insurance expert at The Century Foundation, who expressed doubt about the state’s legal arguments for debt forgiveness.

??? Big picture

The $2.5 billion error is the largest accounting mistake ever made by a state unemployment insurance (UI) system.

The money, which should have come from the state’s UI trust fund financed by employer taxes, were instead pulled from federal dollars designated for COVID-related benefits.

• Massachusetts’ UI fund, long constrained by structural flaws, is projected to fall below $1 billion next year and into deficit by 2028, even without repayment to the federal government.

Employers, already burdened with some of the nation’s highest UI taxes, are frustrated by the prospect of additional liabilities. They are on the hook for $3 billion through 2028 to pay off bonds issued during the pandemic, and rates are projected to climb further as the fund’s balance declines.

• “The last thing business owners need is billions of dollars in additional UI tax liabilities piled on top of the existing mess,” said Christopher Carlozzi, Massachusetts director of the National Federation of Independent Business.

?? Final thought

Healey’s administration took a calculated risk by holding out for an unlikely waiver. With time running out and the political landscape shifting, it seems Massachusetts employers will face yet another financial blow tied to the pandemic — a stark reminder of the cost of the state’s massive UI mistake.

?? Trending

Development : A multibillion-dollar data center project is coming to Western Massachusetts.

Antitrust : US regulators seek to break up Google, forcing a Chrome sale to loosen its monopoly in internet search.

Higher Education : Generous financial aid programs are under threat as more colleges eliminate loans.

?? The Closer?

Grand slam: A trove of baseball cards discovered in Danvers included a coveted 1916 Babe Ruth rookie card (center). (Robert Edward Auctions)

It was not just any Babe Ruth baseball card.

A Danvers man, with the help of baseball card aficionado Jeff Gross, discovered he owned a 1916 rookie card for the young Red Sox pitcher who would — as a Yankee, of course — become the most famous player in baseball history. The Globe's Billy Baker explains :?

And this particular card, which was issued as part of a promotion by the Morehouse Baking Company in Lawrence, is so rare that Gross had to enlist several experts to figure out what it might be worth, because no one had ever seen one before, and it had certainly never come up for auction.

That will change Friday, when the first of the two Ruth cards — yes, the Danvers man found two of the Morehouse Ruth rookie cards in his father’s collection, though the second one is in slightly worse condition — will go up for auction. Bids start at $150,000, but the card is expected to fetch at least $500,000, and possibly far more.

When it comes to baseball cards, never, ever get rid of them before checking if you might have a classic.

A 1952 Topps Mickey Mantle rookie card sold in 2022 for $12.6 million, a record for a sports card. Thanks for reading. I will be back on Monday.