After more than half a million Connecticut residents lost their jobs amid the COVID-19 pandemic, the state’s unemployment insurance trust fund was in need of financial assistance. Over the course of the current recession, Connecticut has borrowed more than $712 million, a debt that will need to be repaid with interest.
These problems have existed long before the pandemic. Connecticut had to borrow $1.25 billion during the Great Recession, and the trust fund has been insolvent for 48 of the last 50 years.
Gov. Ned Lamont, alongside leaders from business, labor and the legislature, announced a bipartisan proposal to bring the unemployment insurance trust fund to solvency in a news conference at the Department of Labor.
“A robust, sustainably funded unemployment insurance system is Connecticut’s most important tool for keeping our families out of poverty and our economy in motion during a recession,” Lamont said. “I appreciate legislators and stakeholders working together to develop a common path forward on this critical issue.”
Business leaders had advocated for using pandemic relief to pay off the debt, and many feared that the state would raise taxes on businesses already struggling to recover from the pandemic. This bipartisan deal does not tap federal relief funds, but it does lower taxes on 73 percent of the state’s businesses, while raising taxes on larger businesses with more frequent layoffs.
“This package represents the most significant set of reforms in the history of the state’s unemployment system,” said Chris DiPentima, president and CEO of the Connecticut Business & Industry Association, or CBIA. “Many of the changes represent reforms CBIA has advocated for since the end of the last recession to address one of the business community’s top concerns: the need for more predictable, certain, and stable policies.”
The proposal, if approved by the legislature, will increase the taxable wage base from $15,000 to $25,000, and defer unemployment benefits until after severance pay. It will also raise the minimum annual wages needed to qualify for unemployment from $600 to $1,600.
“People making $600 could claim unemployment without being meaningfully engaged in the workforce, and it would still count against their employer,” said Rep. Holly Cheeseman, R-East Lyme. “Raising it to $1,600 still doesn’t put us at the national average, but it does say that you should have real engagement with the labor market to claim unemployment.”
Rep. Sean Scanlon, D-Guilford, said the bill should move out of the Finance, Revenue and Bonding Committee, which he chairs, this week.
“In the wake of the greatest test of our unemployment system, the timing was right to strengthen and reform the system so that it’s not only solvent for the first time in a long time, but also more affordable for the majority of businesses in Connecticut,” Scanlon said.
The plan also revises the tax system based on lessons learned from the pandemic-induced recession by reducing tax increases on companies that laid off employees when those layoffs are due to sector-wide economic challenges rather than those facing an individual business.
“That advocates for the business community had a seat at the negotiating table is significant, and I’m hopeful the spirit of collaboration that led us to this point will fuel additional conversation about action we can take together to create a more competitive business climate,” said House Minority Leader Vincent Candelora.