Reform Unemployment Compensation to Avoid Repeat Mistakes
While Connecticut added 4,200 jobs in February, the state’s unchanged unemployment rate is New England’s highest and underscores the fact that concerns over the economy are still very real.
The Department of Labor’s monthly jobs report revealed that the state’s jobless rate held steady at 5.5%, almost a full percentage point higher than the regional rate of 4.6%.
A bill that could simultaneously help give Connecticut an economic boost (at no cost to taxpayers) while preserving the trust fund is waiting for action in the state House.
HB 5367 could bring long-term savings for employers by improving Connecticut’s unemployment compensation system with reforms that neighboring states have successfully made.
And this positive proposal would have no impact on the state budget.
Connecticut’s unemployment trust fund was hit hard by the recession—the state had to borrow nearly $1 billion in federal funds to keep the system above water.
It’s a billion-dollar debt—plus yearly interest rate hikes and special assessments— that Connecticut businesses have been paying back for the last five years.
Employers here were paying more than four times the rate that businesses in neighboring states were paying: $189 federal tax per employee in Connecticut instead of $42 per employee elsewhere.
That high federal tax has been paid back, but employers want to be sure it doesn’t come back.
Connecticut businesses have shouldered that burden for years now, but it didn’t have to be this way.
Much of the borrowing could have been avoided if Connecticut had made the same reforms our neighboring states had made and are contained in HB 5367, such as:
- Raising the minimum earnings to qualify for unemployment benefits to $2,000. Claimants in Connecticut need only earn $600 in a year to qualify for benefits—the third lowest earnings requirement in the U.S. For perspective, 32 states/territories require between $2,000 and $5,000 in earnings. The earnings requirement in Connecticut has not been raised since the statute went into effect in 1967.
- Requiring claimants to post their resumes online to receive benefits after six consecutive weeks of unemployment. Rhode Island recently instituted this reform which studies show gets the unemployed back to work faster. Connecticut’s labor department already has an online resume listing portal in operation that can be utilized for this purpose.
- Basing benefits on an employee’s annual salary rather than two highest quarters, to avoid inequitably rewarding seasonal workers. Sixteen states base employees’ benefits on a full year’s salary. Under current law, a seasonal worker in Connecticut earning $30,000 over the course of two calendar quarters would get the same amount of unemployment benefits as a full time worker earning $60,000 over four quarters. This reform will provide relief to businesses, especially farms, that hire a lot of seasonal workers.
- Freezing the maximum weekly benefit rate for three years. The maximum benefit rate is allowed to increase by $18 every year. Freezing this for three years could save as much as $10 million per year.
Employers urge lawmakers in the House to move forward on HB 5367.
While Connecticut businesses had to pay a heavy price for lawmakers’ failure to enact solvency promoting reforms in the past, the mistake doesn’t have to happen again.
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