Experts Address Possible Reforms of State’s Unemployment Fund

With employers still feeling the sting of the unemployment compensation special assessment bills they received August 1, the Employment Security Advisory Board continues to address the long-term solvency of Connecticut’s Unemployment Compensation Trust Fund. 

Employers have been hit with a series of steep taxes in order to repay loaned federal dollars and to enable the state to meet current unemployment system obligations. 

In July, the advisory board hosted a forum to discuss possible ways to reform the trust fund. Labor and business advocates on the board produced experts to support their different views on how to fix the fund. 

Two unemployment compensation experts invited by businesses provided a national perspective on the issue and shed light on how Connecticut compares with other states. 

Modernize IT

According to Richard Siegel of the Unemployment Tax Management Corp., Connecticut could achieve savings simply by modernizing the online capabilities of the state’s unemployment compensation system.

He said Connecticut should adopt the State Information Data Exchange (UI-SIDES) program that 45 other states have adopted which has led to fewer overpayments by employers.  

Siegel also advocated increasing the earnings needed by employees to qualify and requalify for benefits, as well as apportioning a higher cost for the unemployment system on employers that use it the most.

Douglas Holmes, president of the National Foundation for Unemployment Compensation and Workers’ Compensation, said that beginning in January 2015, Connecticut employers will have the highest unemployment tax burden in the nation.

Returning the state’s fund to solvency, he said, will require significant policy changes.

Benefits Check

Holmes said Connecticut should review where it’s being overly generous in benefits. For example, changing to a system in which benefit claimants are required to wait a week before receiving unemployment benefits–as do 40 other states–would save Connecticut employers more than $30 million each year. 

In addition, said Holmes, Connecticut also could opt to modify the way benefits are calculated, which currently unfairly rewards seasonal workers.      

Labor advocates are pushing hard to increase taxes on Connecticut employers in order to shore up the trust fund without making any changes to benefit payouts.

They claim that had employers been paying more all along, they wouldn’t be facing unemployment taxes that continue to rise each year until the federal debt is repaid. 

Essentially, they argue that if employers don’t want to keep paying higher taxes, they should pay higher taxes.

Unfortunately, we’ve seen that story play out before. During the last unemployment compensation reform, taxes on employers were increased to maintain solvency–but years and years of annual benefit increases have taken their toll, and system solvency is once again in jeopardy. 

Discussions between labor and business advocates will begin this fall and will likely be the subject of a legislative proposal in the 2015 legislative session.

CBIA will continue to promote reform measures that will help reduce the unemployment tax burden on Connecticut employers.

For more information, contact CBIA’s Eric Gjede at 860.244.1931 | eric.gjede@cbia.com | @egjede