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May 13, 2021

CT House passes agreement to reform, refund Unemployment Trust Fund

Yehyun Kim | CT Mirror The state Capitol.
By Sean Teehan

Connecticut's state House of Representatives approved a bipartisan agreement to restore the state's Unemployment Insurance Trust Fund in a plan that cuts taxes for most Connecticut businesses by 2024, while reducing some worker benefits.

“This measure provides long-term solvency for the fund, which ensures our residents who need this assistance have it in the future, and our employers have predictability when it comes to their contributions," Gov. Lamont said Tuesday, praising the bill's passage in the House.

Endorsed by both major business and labor coalitions, the move would reduce unemployment taxes starting in 2024 on about three-quarters of all businesses. Those that lay off high numbers of workers, though, would pay more.

Lamont said Tuesday he looks forward to a vote by the state Senate, which must also approve the bill before the he can sign it into law. 

Connecticut, like nearly all states, has run up hundreds of millions of dollars in debt to maintain unemployment benefits since the pandemic began in early March 2020.

The state has borrowed roughly $700 million from the federal unemployment trust to date, and the projections hold that Connecticut’s debt may exceed $1 billion before the majority of its population has been vaccinated.

The state was paying weekly benefits to more than 390,000 filers during the worst of the pandemic last spring, and the weekly caseload still tops 190,000. By comparison, Connecticut lost about 120,000 jobs during the last recession, which stretched from December 2007 through mid-2009.

To whittle down more than $100 million per year off that debt, according to state officials, the state will take three major cost-cutting measures that limit future benefits for the unemployed:

The minimum annual earnings required to qualify for unemployment would rise from $600 to $1,600, and then the number would increase annually according to the rate of inflation. Connecticut hasn’t raised the threshold since 1968.

The deal also suspends four annual $18 increases in the maximum weekly state unemployment benefit beginning in 2024.

And workers no longer could tap unemployment benefits until they exhaust any severance pay.

The compromise deal, which was endorsed by House leaders on the finance committee, Reps. Sean Scanlon, D-Guilford and Holly Cheeseman, R-East Lyme, also asks more from businesses, which pay the unemployment tax that fuels the state trust.

Businesses currently are taxed on the first $15,000 they pay their employees. That base would rise in three years to $25,000.

A second change would expand the maximum experience rate — a component of the unemployment tax that penalizes companies more heavily as they lay off more workers.

To mitigate those rate hikes, though, state officials lowered other elements of the tax, including the minimum experience rate and a special “solvency” rate imposed on all businesses to keep the fund afloat.

The net result of these changes, according to Lamont’s office, is that 73% of all businesses would pay less in unemployment taxes, while the remainder would pay more.

The agreement won the backing of the Connecticut Business and Industry Association and the state chapter of the AFL-CIO, and the Connecticut State Building and Construction Trades Council.

This report includes content from CT Mirror.

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