New Haven Register (New Haven, CT)
Lamont pushed to pay back unemployment debt
“We’ve been advocating for additional funding because it just falls on the back of businesses. It’s technically a tax increase — not caused by the state, caused by the pandemic, but business have to pay a tax to the federal government.”
Chris DiPentima, CBIA president and CEO
Connecticut’s largest business lobby is putting pressure on Gov. Ned Lamont to use pandemic relief funds to pay back the state’s unemployment debt that resulted from the large number of jobless claims during the pandemic.
At its annual business day in Hartford, which featured the governor as the keynote speaker, the head of the Connecticut Business & Industry Association said if the state doesn’t act, businesses will be on the hook for the money starting this fall.
“We’ve been advocating for additional funding because it just falls on the back of businesses,” said CBIA President and CEO Chris DiPentima. “It’s technically a tax increase — not caused by the state, caused by the pandemic, but business have to pay a tax to the federal government.”
Connecticut borrowed nearly $900 million from the federal government to cover record-high unemployment claims during the pandemic. About half of the money has been paid back with $300 million coming from employers and the state using COVID relief funds to cover $125 million.
Employers are responsible for the remaining $463 million, which CBIA said will result in four years of tax hikes. The average cost of state and federal unemployment taxes for businesses per employee is $542, according to CBIA. That would grow to $563 in 2023; $584 in 2024; $605 in 2025 and $661 in 2026.
“To me it’s a question of prioritization,” David Lehman, commissioner of the state Department of Economic and Community Development, said at Tuesday’s event.
Lehman said the best “bang for the buck” for the state is to continue to pay down its pension debt, which is a very high cost of capital, compared to the unemployment debt, which “is lower cost debt and it happens further into the future.”
“If you can pay down the high cost of capital debt, you’d rather do that and do it soon,” he said. “Pensions have been a big burden to the state for a long time and we need to get out of that albatross.”
Lamont, who appeared at CBIA’s event virtually, made a similar argument at an online news conference later Tuesday saying the interest rate is much lower for paying back the unemployment debt. But the governor, who is proposing $336 million in tax relief, said he was open to proposals to address the insolvency of the unemployment trust fund.
“Obviously everything is a choice,” said Lamont, who begun budget negotiations with lawmakers this week. “You know how important workforce is and affordable housing. Do I take money from there to pay down the unemployment? Maybe you pay down a little less of the pension fund then use a little more for the unemployment fund.”
But DiPentima said at an afternoon news conference Tuesday with legislative Republicans that the unemployment debt falls squarely on the shoulders of the state’s business owners whereas the pension debt affects all Connecticut taxpayers. The added burden on employers would come after two years of disruptions due to the pandemic and now decades-high inflation, he said.
Keith Beaulieu, chair of the Connecticut Restaurant Association and owner of the Main Pub in Manchester, said at the press conference that the added cost of repaying the unemployment debt to businesses such as his would be detrimental.
“In just this coming year alone, my single, sole proprietor business with 38 employees would be looking at a $20,000 increase,” Beaulieu said.