‘Historic’ Unemployment Reforms Win Final Legislative Approval

With less than 23 hours to go in the 2021 General Assembly session, the state Senate gave final legislative approval to a historic unemployment reform legislation.

The Senate passed HB 6633 on a 34-0 vote early in the morning of June 9. The bill, designed to improve the long-term solvency of the state’s unemployment trust fund, was approved by the state House 146-0 last month.

The wide ranging reform package was the product of intense negotiations between the business community, organized labor, the Lamont administration, and a bipartisan group of lawmakers. 

“This is the most significant set of reforms ever enacted in the history of Connecticut’s unemployment system.”

Gov. Ned Lamont

Gov. Ned Lamont was quick to praise final passage of the bill, saying “This package of reforms that I will soon sign into law is the most significant set of reforms ever enacted in the history of Connecticut’s unemployment system.”

“We are reinforcing the long-term solvency of the state’s unemployment insurance fund, ensuring that it will be there for those who need this assistance in the future while also providing predictability for our state’s employers when it comes to their contributions,” he said.

“Its final legislative approval is the result of the willingness of lawmakers on both sides of the aisle, as well as business leaders and labor representatives, to sit down with my administration and hammer out a solution to this longstanding problem that has persisted in our state for too many years.”

Collaboration

CBIA president and CEO Chris DiPentima echoed Lamont’s comments, noting unemployment reform was one of the major priorities in the organization’s Rebuilding Connecticut policy recommendations for the 2021 legislative session.

“Many of the changes in the bill represent reforms CBIA has advocated for since the end of the last recession to address one of the business community’s top concerns—the need for more predictable, certain, and stable policies,” he said.

“These reforms will help drive the state’s post-pandemic economic recovery, easing financial uncertainty, preventing future tax hikes and assessments on employers to cover fund shortfalls, and strengthening our workforce.”

“This shows what we can accomplish when the public and private sectors collaborate and develop solutions that benefit all.”

CBIA’s Chris DiPentima

DiPentima applauded the collaboration and support from the Lamont administration, Democratic and Republican lawmakers, the AFL-CIO, the Connecticut State Building and Construction Trades Council, and employer groups.

“Such comprehensive reforms show what we can accomplish when the public and private sectors collaborate and develop solutions that benefit all,” he said.

CBIA’s Eric Gjede also applauded the broad collaboration and support among state legislators, including House Majority Leader Jason Rojas (D-East Hartford), House Republican Leader Vincent Candelora (R-North Branford), Finance Committee co-chairs Rep. Sean Scanlon (D-Branford) and Sen. John Fonfara (D-Hartford), committee ranking members Rep. Holly Cheeseman (R-Niantic) and Sen. Henri Martin (R-Bristol), and Sen. Craig Miner (R-Litchfield).

Reform Measures

The bill makes a variety of reforms to the state’s unemployment system that will take effect in 2024, including: 

• 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

Fiscal Impact

The legislature’s nonpartisan Office of Fiscal Analysis projected that 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. 

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

However, the reforms mean 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.

Fortunately, the new two-year state budget—soon to be given final passage in the Senate after passing the House June 8—allocates $155 million in federal American Rescue Plan Act funds to help employers repay a portion of this debt. 

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