Bill Restoring Unemployment Trust Fund Solvency Moves Forward

Issues & Policies

A bill restoring solvency to Connecticut’s unemployment compensation fund while preserving a critical safety net now awaits action by the state House.
The legislature’s Appropriations Committee approved HB 6461 25-23 in a vote this week. The Labor and Public Employees Committee had earlier passed the bill unanimously.
Unemployment Compensation Trust FundDespite broad bipartisan support for the bill, several members of the Appropriations Committee spoke against it before the May 12 vote.
It is unclear whether this opposition is based on the mistaken belief that HB 6461 represents a windfall for the business community.
The true winner is the state’s unemployment compensation safety net, which many state lawmakers recognize.
The legislature’s nonpartisan Office of Fiscal Analysis says the bill saves the fund approximately $114 million in the first year, and about $152 million in subsequent years.

Reform Measures

Reform measures in the bill are expected to help grow the unemployment compensation fund from its current $355 million balance to more than $900 million by 2020.
If the state’s fund solvency goal of $1 billion dollars is reached—something that’s not projected to happen until after 2020—businesses may see a slight drop in unemployment taxes, provided there’s no economic downturn before then.
So while Connecticut businesses support of the bill, they have little to gain financially. The money saved is not returned to the business community.
Instead, it’s used to beef up the trust fund for use by workers who become unemployed, preventing future borrowing to shore up the fund.

Reform measures will help grow the fund from its current $355 million balance to more than $900 million by 2020.

HB 6461 makes a number of overdue reforms to the unemployment compensation system, including:

  • Raising the minimum earnings threshold to qualify for benefits to $2,000. Claimants in Connecticut need only earn $600 in a year to qualify for benefits—second-lowest in the country.
  • Prohibiting claimants from receiving unemployment benefits until they have exhausted severance pay.
  • Basing benefits on three quarters of an employee's earnings rather than two highest quarters, to avoid unfairly rewarding seasonal workers.
  • Freezing the maximum weekly benefit rate any year we don't reach 70% of the fund's solvency goal.

HB 6461 was referred to the Appropriations Committee due to a one-time cost estimated at $2.1 million. However, that cost is covered entirely by federal and private funds—no state tax dollars will be used.
The construction industry was concerned about an inadvertent mistake in the bill—now addressed with an amendment—that changes special rules for calculating their workers' unemployment wages.

Neighboring States

Many neighboring states have already adopted the reforms featured in HB 6461, giving businesses there a competitive advantage over their Connecticut counterparts.
HB 6461, in many ways, is symbolic of the state's current and past budgetary problems.
Those who benefit the most from the bill's considerable costs savings are among those attacking the common sense reforms that will ensure the fund's future viability.
Businesses, in turn, are frustrated that the only solutions ever considered involve them paying more unemployment taxes to bolster the fund.
The fate of HB 6461 is uncertain.
More lawmakers are needed to do the right thing to fix the unemployment trust fund.
The business community continues to push for these reforms because they are important for Connecticut workers during tough economic times.
We urge you to tell your lawmakers in the state House and the state Senate to support HB 6461.

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


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