Pass re­forms to shore up un­em­ploy­ment

The Day - - OPINION -

A n As­so­ci­ated Press story pub­lished in The Day this week caught our at­ten­tion as a fine op­por­tu­nity for Gov.-elect Ned La­mont to demon­strate his stated de­sire to im­prove Con­necti­cut eco­nom­i­cally and fis­cally with smart struc­tural changes.

Re­think­ing how Con­necti­cut gov­ern­ment col­lects and spends tax dol­lars is La­mont’s stated method to ad­dress the $4 bil­lion deficit for Con­necti­cut in 2019 and 2020. La­mont takes of­fice in Jan­uary and must present a bud­get to the Gen­eral Assem­bly be­fore mid-Fe­bru­ary.

The AP story fo­cused on a tran­si­tion memo re­tir­ing Gov. Dan­nel P. Mal­loy asked each state agency to write for La­mont alert­ing him to the op­por­tu­ni­ties and chal­lenges ahead.

The story high­lighted the un­der­funded Un­em­ploy­ment In­sur­ance Trust Fund re­ported in the Depart­ment of La­bor tran­si­tion memo. The memo warned that the fund, which presently amounts to $609 mil­lion, re­quires a $1.7 bil­lion re­serve to be sus­tain­able through the next eco­nomic down­turn.

The fund dis­trib­utes about 25,000 checks weekly in a pe­riod of eco­nomic sta­bil­ity. That num­ber swells by mul­ti­ples dur­ing a re­ces­sion. In 2009 the state was forced to bor­row $1 bil­lion from the fed­eral gov­ern­ment to con­tinue pay­ing un­em­ploy­ment checks. Re­pay­ment of that re­ces­sion loan with in­ter­est was made be­tween 2011 and 2015 from in­creased fed­eral un­em­ploy­ment taxes on Con­necti­cut busi­nesses.

Dur­ing that pe­riod, the fed­eral un­em­ploy­ment tax went from an av­er­age of $42 per Con­necti­cut em­ployee to $189. Larger state un­em­ploy­ment taxes were levied on Con­necti­cut com­pa­nies that im­posed lay­offs dur­ing the re­ces­sion.

The Un­em­ploy­ment In­sur­ance Trust Fund had dwin­dled to $355 mil­lion re­serves in 2017. To­day, with a re­bound­ing state econ­omy, the fund has in­creased, but not enough. If the eco­nomic ex­pan­sion — now in its sev­enth year — con­tin­ues, the fund would cor­rect it­self and achieve its $1.7 bil­lion re­serve tar­get with­out reg­u­la­tion re­form or ad­di­tional taxes levied.

How­ever, some signs point to a pos­si­ble eco­nomic slow­down. La­mont says Con­necti­cut must be ready with struc­tural spend­ing changes now to pre­pare for the next down­turn.

A plan long ad­vo­cated by the Con­necti­cut Busi­ness and In­dus­try As­so­ci­a­tion (CBIA) would par­tially achieve just that.

“We re­ally want to hold the line on new taxes un­less we see some of these struc­tural changes that need to hap­pen in or­der to en­sure sol­vency,” Eric Gjede, vice pres­i­dent for gov­ern­ment af­fairs for the Con­necti­cut Busi­ness and In­dus­try As­so­ci­a­tion, told the AP. “We need to make long-term changes.”

The CBIA ad­vo­cates re­form­ing three com­po­nents of the state un­em­ploy­ment sys­tem:

Raise the min­i­mum earn­ings thresh­old to $3,000 to qual­ify for un­em­ploy­ment ben­e­fits. The thresh­old now for Con­necti­cut claimants is $600 a year — the sec­ond-low­est earn­ings re­quire­ment in the coun­try. That min­i­mum thresh­old has not changed since the statute was cre­ated in 1968.

Pro­hibit un­em­ploy­ment ben­e­fits un­til those who lost their job have ex­hausted any sev­er­ance pay. Work­ers who have lost jobs in Con­necti­cut can now “dou­ble dip” and col­lect both un­em­ploy­ment and sev­er­ance pay.

Freeze the max­i­mum weekly ben­e­fit rate in any year the un­em­ploy­ment fund is less than 70 per­cent of the sol­vency goal. The max­i­mum ben­e­fit cur­rently in­creases an av­er­age of $18 ev­ery year.

CBIA es­ti­mates these three mea­sures would add $70 mil­lion to the Un­em­ploy­ment In­sur­ance Fund in the first year of the bud­get and an ad­di­tional $93 mil­lion in 2020 with­out re­duc­ing ben­e­fits. Tak­ing steps to­wards fully fund­ing the Un­em­ploy­ment In­sur­ance Trust would sta­bi­lize the sys­tem and avoid as­sess­ing ad­di­tional taxes on the state’s busi­nesses.

Gjede is a mem­ber of the Con­necti­cut Em­ploy­ment Se­cu­rity Ad­vi­sory Board, equally com­posed of busi­ness and la­bor lead­ers. He is ad­vo­cat­ing the ad­vi­sory board rec­om­mend the un­em­ploy­ment sys­tem re­form pro­pos­als next year.

These re­forms have been pro­posed be­fore. They have made their way out of the Gen­eral Assem­bly’s La­bor and Pub­lic Em­ploy­ees Com­mit­tee but have never come up for a full vote.

Gjede said he is hope­ful that the at­ten­tion gen­er­ated by the La­bor Depart­ment tran­si­tion memo and sub­se­quent me­dia cov­er­age will in­crease the bill’s chances with the new leg­is­la­ture and ad­min­is­tra­tion. La­mont could ap­ply the po­lit­i­cal mus­cle to move the re­forms for­ward.

The CBIA pro­pos­als are good ideas that save money, main­tain the level of com­pen­sa­tion for the un­em­ployed, sta­bi­lize taxes for busi­nesses, and in­sti­tute struc­tural re­forms that pay ben­e­fits for years.

Cre­ative, thought­ful ini­tia­tives like these are pre­cisely the type of struc­tural improvements Ned La­mont says he wants. He should get be­hind this pro­posal and en­cour­age Gen­eral Assem­bly ap­proval.

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