Labor Committee Hears Bill Boosting Unemployment Fund

Issues & Policies

The General Assembly’s Labor and Public Employees Committee heard testimony Feb. 21 on a bill that helps restore solvency to the state’s unemployment trust fund.
The bill is the product of a bipartisan team of legislators—including Rep. Jason Rojas (D-East Hartford), Rep. David Rutigliano (R-Trumbull), and Rep. Chris Davis (R-Ellington)—and has continued to gain support from both Democrats and Republicans.
HB 6461 makes a number of overdue reforms to the state’s unemployment system, including:

  • Raising the minimum earnings threshold to qualify for unemployment benefits to $2,000. Claimants in Connecticut need only earn $600 in a year to qualify for benefits—the second-lowest earnings requirement in the U.S. For perspective, 32 states and territories require between $2,000 and $5,000 in earnings. Connecticut’s earnings requirement has not changed since the statute went into effect 50 years ago. Savings: $5.6 million annually.
  • Prohibiting all claimants from receiving unemployment benefits until they have exhausted their severance pay. According to Connecticut’s Department of Labor, this would save up to $57 million per year.
  • Basing benefits on three quarters of an employee’s earnings rather than two highest quarters, to avoid inequitably rewarding seasonal workers. Under current law, a seasonal worker in Connecticut earning $30,000 over two calendar quarters would get the same unemployment benefits as a full time worker who earns $60,000 over four quarters. Savings: approximately $68 million a year.
  • Freezing the maximum weekly benefit rate any year we have not attained 70% of the fund’s solvency goal. The maximum benefit rate is allowed to increase by $18 every year, and did increase throughout the recession. Foregoing increases in years when the fund is unhealthy would prevent the problem from getting worse. Savings: approximately $1.6 million per year—without reducing anyone’s benefits from current levels.

Reforms Will Grow Fund

What’s more, these reforms will grow the state’s Unemployment Trust Fund from its current $355 million to more than $750 million over three years.
CBIA Assistant Counsel Eric Gjede urged committee members to adopt changes to improve the system.
“This is exactly the type of courageous and necessary action you should be taking to provide relief to your constituents,” Gjede said.
During the Great Recession when the state lost tens of thousands of jobs, Connecticut was forced to borrow almost $1 billion from the federal government to bring solvency to the unemployment trust fund.

These reforms have zero cost to the state and will result in no reduction in benefits for the average full-time worker.

But Connecticut’s employers were solely responsible for paying the loan back, and saw their federal unemployment tax balloon to an unheard of $189 per worker.
The loan has since been paid off, and the tax has decreased dramatically. But CBIA wants to ensure Connecticut’s employers never face a similar situation again.
“Other states have made cost-saving reforms like the ones in this bill years ago,” Gjede said, "and as a result, their trust funds were in much better condition than Connecticut’s.
“So when the recession came, they were not forced to borrow, or did not have to borrow as much.”

Reducing Unemployment Taxes

If the state's unemployment trust fund can be restored to solvency, it will help prevent future recession-related borrowing by the federal government that resulted in Connecticut businesses paying escalating federal unemployment taxes.
Further, restoring the fund to solvency will help reduce the unemployment tax for all businesses in the short term—essentially creating a stimulus package that will be given to every business in the state without costing taxpayers a dime.
Employees aren't harmed by the proposal either. The bill takes a "do no harm" approach because the savings are targeted at those who do not need unemployment benefits, and those who are being unfairly rewarded by the system.
“The best part is these reforms have zero cost to the state and will result in no reduction in benefits for the average full-time worker who becomes unemployed through no fault of his or her own,” Gjede said.
He also spoke in favor of a proposal that would require those receiving unemployment compensation to verify that they are actively seeking employment.
“Given our state’s current fiscal climate, we would hope this proposal involved methods that avoid the hiring of additional state employees or unnecessarily tapping into the unemployment trust fund,” he said.
Please tell your Connecticut state legislators that you support HB 6461.

For more information, contact CBIA’s Eric Gjede (860.480.1784) | @egjede


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