Businesses ask state to pay owed unemployment taxes
Connecticut’s businesses on Wednesday called on the General Assembly and Gov. Ned Lamont to use federal coronavirus relief funds to spare firms as much as $1 billion in unemployment taxes.
The Connecticut Business and Industry Association, which leads the coalition, also said the failure to follow this approach during the last recession was a critical error that still haunts the state.
“It certainly hurt our recovery” in 2008 and 2009, Chris DiPentima, president and CEO of the CBIA, said during a late-morning, live-streamed press conference.
And if Connecticut businesses remain responsible for repaying the $1 billion debt the state expects to face in its unemployment trust fund, he added, “It will once again threaten job recovery.”
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 of 2020.
The state Department of Labor 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 200,000. By comparison, Connecticut lost about 120,000 jobs during the last recession, which stretched from December 2007 through mid-2009.
To ease the burden on states, the federal government has waived interest charges on loans to support unemployment trusts.
Still, Connecticut fuels its unemployment trust with taxes on businesses, and business leaders said the state’s economy simply can’t recover if companies remain on the hook to cover about $1 billion in debt.
Kathy Saint, president and CEO of Schwerdtle, Inc., a Bridgeport manufacturing firm, said her company paid more than $40,000 in special assessments to the state’s unemployment trust after the last recession — dollars that were needed elsewhere.
“That’s a machine we needed. That’s another person,” Saint said. “Every single penny counted, and we were doing without in a lot of ways.”
Wendy Traub, chief financial officer for Torrington-based Hemlock Directional Boring, Inc. said all of her firm’s pending projects were canceled or suspended when the coronavirus struck last spring.
And while a federal Payroll Protection Program loan has helped her company retain workers, the company still went almost eight months generating very little revenue.
Scott Dolch, executive director of the Connecticut Restaurant Association, added that about 600 restaurants here have closed over the past year and hundreds more shut down temporarily at times during the pandemic.
If Connecticut dedicated some of its resources to cover the unemployment trust debt, Traub added, it would send the right message to the business community — “that economic recovery works when the state supports the job creators.”
The American Rescue Plan Act of 2021, signed by President Joe Biden in early March, will send more than $6 billion to state, municipal and regional governments, school districts and other groups. And that doesn’t include billions of additional dollars going directly to households through stimulus payments, new and expanded tax credits and enhanced unemployment benefits.
State government’s direct share is $2.6 billion, and Lamont and the General Assembly are expected to dedicate most or all of that to help balance the next two-year state budget. That nearly matches the $2.5 billion deficit projected for the upcoming biennial budget, unless adjustments are made.
But state officials have other options. Connecticut has a record-setting $3 billion in its rainy day fund, and analysts say the current fiscal year’s budget is on pace to close with about $800 million left over.
Lamont’s communications director, Max Reiss, said that “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,” but he didn’t endorse or reject the bailout request.
Reiss added that the administration and legislators are working with stakeholders “on a bipartisan path toward a healthier and more equitable way to fund that system for the long term. The administration continues to look at multiple options.”