Unemployment insurance debt a concern
Small businesses on Wednesday called on the Lamont administration to tap federal money to cover increasingly burdensome debt in the unemployment insurance fund depleted by record high joblessness caused by the corona virus pandemic.
The unemployment insurance fund now is nearly $700 million in debt, according to the state Department of Labor. The Connecticut Business & Industry Association expects it will eventually reach $1 billion.
Unless the state steps in, small-business owners fear a repeat of the aftermath of the Great Recession when they were charged special assessments to pay down debt accrued by borrowing from the federal government.
“The recovery for us wasn’t instant,” Kathy Saint, president of Schwerdtle Inc., a 142-year-old
Bridgeport manufacturer of industrial steel stamps and other products, said of the 2008-09 recession. “It took years for us to get the business back that we had lost during the recession. It was a real struggle.”
Due to high unemployment, a special assessment cost the company more than $40,000 that could have otherwise been used for hiring or buying machinery, she said during an online business conference.
“It had a really big impact at a point in time when we were very fragile and every single penny counted,” Saint said.
COVID-19 andthe business shutdowns it caused led employers to slash 299,300 jobs from a peak in December 2018 to April 2020 when the full impact of Connecticut’ s lockdown was felt. The state has since recovered 57% of the lost jobs, or nearly 171,000.
Businesses and the Lamont administration differ on legislation that would tackle underfunded unemployment insurance programs. Jonny Dach, Gov. Ned Lamont’s policy director, told the legislature’s finance, revenue and bonding committee March 17 that taxes funding unemployment insurance are levied on a “taxable wage base” that has fallen in value over time, threatening the fund’s solvency.
Effective in 2024, the legislation would broaden the taxable wage base, he said.
MaxReiss, Lamont’s spokesman, said the administration is “working with legislators and stakeholders on a bipartisan path toward a healthier and more equitable way to fund” the unemployment system.”
The CBIA said the legislation is “not reasonable.” It would increase the taxable wage base for unemployment insurance to more than $70,000 from $15,000, lobbyist Eric Gjede said in written testimony to lawmakers.
The measure would call for yearly indexed increases to the wage base, he said. Connecticut would have the highest taxable wage base in the U.S., while keeping “some of the least stringent criteria for benefit payouts,” he said.
It’s not the first time the state’s largest business advocacy group and Lamont have clashed over unemployment insurance. Gjede told lawmakers that in an “unprecedented move,” the state has tapped the fund to provide“unearned additional funds for individuals so they could qualify for federal supplemental benefits .”
“This fund has never been used in the past by lawmakers to fund policy objectives,” he said.
During the last economic downturn during the Great Recession, Connecticut borrowed $1.25 billion from Washington, which it repaid with $85 million in interest over six years, the Lamont administration said. The business community was solely responsible for repaying the debt, the CBIAsaid.
The higher taxes and assessments strained the finances of many businesses, whichresponded by putting off hiring and investment, prolonging Connecticut’s slow economic growth, the CBIAsaid.
“The tax hikes and assessments from the ’08-09 recession were one of the key factors that hampered our total state recovery,” said Chris DiPentima, president of the business group.
With the economy still struggling as it emerges from the recession caused by government-ordered shutdowns last year to slow the spread of COVID19, owners of small businesses “wonder how they’re going to get through the next six months,” said Andrew Markowski, Connecticut State Director of the National Federation of Independent Business.