Bill Threatens Unemployment System Reforms
Connecticut lawmakers are reviewing legislation that undermines negotiated reforms to the state’s unemployment compensation system.
Those reforms, passed unanimously by the legislature in 2021 and scheduled to take effect Jan. 1, 2024, are designed to improve the long-term solvency of the state’s troubled unemployment trust fund.
The wide-ranging reform package was the product of negotiations between the business community, organized labor, the Lamont administration, and a bipartisan group of lawmakers.
SB 1237, currently before the legislature’s Finance, Revenue, and Bonding Committee, threatens those reforms by delaying the phase-in of the experience rate increases that are a key part of the unemployment system overhaul.
CBIAs’ Eric Gjede said the bill “jeopardizes long-needed benefit reforms sought by the business community for decades.”
“The reforms enacted in 2021 were well thought out and required sacrifice by all involved,” he said. “These reforms will rebalance the unemployment system and create much needed stability of the fund.”
Experience Rate Increases
Gjede said while delaying experience rate increases will benefit some employers, CBIA opposes SB 1237 because of the implications for the broader business community and the unemployment system.
Based on the 2021 reforms, experience rates will change from the current range of 0.5%-5.4% to a new range of 0.1% to 10%.
Those changes push more of the responsibility for funding the unemployment fund to employers that use the system most—while still being partially subsidized in some cases—with tax savings for 73% of employers.
Gjede told the committee that advocates for SB 1237 “are better served seeking additional reforms to correct costly inequities within the unemployment system.”
Gjede noted that a seasonal worker that only works two quarters and earns $10,000 in each quarter, for a total of $20,000 annually, receives the same unemployment benefits as a full-time employee earning $10,000 a quarter in each of four quarters for a total of $40,000.
“Seasonal workers receive comparably higher benefits based on their total earnings,” Gjede said.
Gjede added that employees in the construction industry—and only that industry—have their unemployment benefits based on a single quarter of earnings.
“A construction worker earning just $10,000 in a year during one quarter is entitled to the same benefits as a full year employee in another industry earning $40,000,” he said.
Fragile Unemployment System
Gjede noted that the 2021 reform package addressed long-standing issues with the state’s unemployment trust fund that were exacerbated by the 2008-2010 recession and the COVID-19 pandemic.
“As employers know all too well, the unemployment trust fund was drained by the Great Recession and the pandemic,” he said.
“While every claimant received benefits, the state was forced to borrow, in each of the two economic downturns, a billion dollars from the federal government.
“While the state borrowed the money, employers are responsible for paying it back.”
It took seven years of tax hikes and special assessments on employers to pay off the federal loans from 2008-2010.
Based on current projections, Connecticut will not repay its federal pandemic loans until 2026, although CBIA’s advocacy during the 2021 and 2022 legislative sessions led to lawmakers acting to slightly reduce the loan principal and mitigate a planned 2022 tax increase.
“Absent additional assistance from the General Assembly, employers will see tax increases each year beginning Jan. 1, 2024,” Gjede said.
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