Connecticut's state House unanimously approved a historic unemployment reform package May 12, sending the legislation to the Senate and one step closer to implementation.

The reforms restore solvency to the state's Unemployment Compensation Trust Fund—insolvent for 48 of the past 50 years, burdening businesses with paying off federal government loans through higher taxes and assessments.

HB 6633 represents an agreement announced April 20 between the business community, the AFL-CIO, the Connecticut State Building and Construction Trades Council, a bipartisan group of legislative leaders, and the Lamont administration.

The legislation, which the Finance, Revenue, and Bonding Committee unanimously approved April 22, received a favorable fiscal impact report from the legislature's nonpartisan Office of Fiscal Analysis before this week's House vote.

Fiscal Impact

OFA projected that beginning in fiscal 2024, when the bill takes effect, the reforms will save the unemployment fund $84.25 million annually while generating $130.9 million in new annual revenues.

CBIA president and CEO Chris DiPentima applauded House passage of the bill, with unemployment reform featured as one of the organization's key Rebuilding Connecticut policy priorities this legislative session.

“This is most significant set of reforms in the history of the state’s unemployment system,” DiPentima said. "And shows what we can accomplish when the public and private sectors collaborate and develop solutions that benefit all."

The reforms will save the unemployment fund $84.25 million annually while generating $130.9 million in new annual revenues.

DiPentima thanked House Majority Leader Jason Rojas (D-East Hartford), House Republican Leader Vincent Candelora (R-North Branford), Finance Committee co-chair Rep. Sean Scanlon (D-Guilford), committee ranking member Rep. Holly Cheeseman (R-Niantic), and Rep. David Rutigliano (R-Trumbull), a longtime advocate for unemployment reform.

Gov. Ned Lamont also congratulated House lawmakers for supporting the reforms, saying "I look forward to the state Senate taking action on this bill so that I can sign it into law.”

“This measure provides long-term solvency for the fund, which ensures our residents who need this assistance have it in the future, and our employers have predictability when it comes to their contributions," Lamont said in a statement.

"Rep. Sean Scanlon, Rep. Holly Cheeseman, workers, and employers collaborated on a commonsense solution to a longstanding problem and showed what’s possible when we all work together."

Reforms

The following reforms would take effect in 2024:

  • Raise the taxable wage base from $15,000 to $25,000, then index it to inflation
  • Reduce the maximum solvency tax rate from 1.4% to 1%
  • Reduce the minimum and expand the maximum experience tax rate, from 0.5-5.4% to 0.1-10%
  • Increase the minimum base period earnings required to qualify for unemployment benefits from $600 to $1,600, then index it to inflation, except when the federal government is providing additional benefits to UI claimants
  • Freeze the maximum weekly benefit amount for four years
  • Defer unemployment insurance benefits until a claimant's severance payments are exhausted
How the changes to the taxable wage base and solvency tax will impact an employer's per employee unemployment taxes. Source: HB 6633.

Solvency

The reforms will help reduce the likelihood the state will need to again borrow from the federal government during the next economic downturn to pay unemployment claims.

The bill also requires businesses that heavily utilize the unemployment fund to shoulder a bigger portion of the tax burden, likely resulting in employers modifying their compensation policies to reduce future usage.

The Lamont administration estimates that based on the reform measures, 73% of all Connecticut businesses will pay lower unemployment taxes.

The unemployment fund was in desperate need of reform. Even prior to the 2008-2010 recession, the fund was only a fraction of the way toward meeting its solvency goal.

The state was forced to borrow more than $1.2 billion from the federal government during that economic downturn and will borrow more than $1 billion to meet pandemic-related unemployment claims.

The reforms do not address the unemployment fund debt employers face because of the pandemic and DiPentima said he is hopeful lawmakers will use federal coronavirus relief funds to resolve that burden, which threatens the success of the state's economic recovery.


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