Before Governor Dannel Malloy makes his first state budget proposal and before lawmakers, news media and the public start debating it, Connecticut employers face a $40 million tax this year to start bailing out the state’s unemployment compensation system. Next are millions more to start paying back principal on loans and restore solvency to the Unemployment Compensation Trust Fund.

The taxes and payments are a big part of the reason businesses are saying that it’s time for a grown-up discussion on Connecticut’s unemployment system that includes a reality check on of the primary role they play in it--and the state of the state’s economy.

High unemployment compensation taxes are making it much more difficult to encourage economic development and job creation, ultimately keeping Connecticut’s economic recovery pace uncomfortably slow.

The $40 million tax will be used to pay interest on loans the state took out to keep the Trust Fund solvent after 100,000 job losses in the recession overwhelmed the employer-funded pool.

Employers are the sole source of funds for the unemployment compensation system and they have been hard hit by taxes to keep it afloat. Connecticut’s unemployment rate is stuck on nine percent and economists believe the road to recovery will be slow.      

As lawmakers look to make changes to the system’s financial side, so should they review the benefits side.  The reality is, many types of jobs that were flourishing in Connecticut before the recession—such as those in the financial services industry—aren’t necessarily going to return soon.

Policymakers need to encourage individuals to expand their expectations of “suitable employment” so that they return to work as soon as possible. Widening their searches to other fields or expanding their skill sets would be a prudent strategy to get back into the workforce.

Connecticut’s job market is slow, but there is some upward movement. Many CBIA members are saying they do have some positions open this year.   

Next week, the legislature’s Labor Committee is holding a public hearing on unemployment compensation that is likely to include recommendations of the state Department of Labor.

For more information, contact CBIA’s Kia Murrell at 860.244.1931 or kia.murrell@cbia.com.