Connecticut's Department of Labor has warned the state's Unemployment Insurance Trust Fund faces insolvency, sparking new calls for making long overdue reforms to the fund.

The department told Governor-elect Ned Lamont's transition team the fund needs a balance of $1.7 billion to navigate an economic downturn.

Connecticut's unemployment fundThe fund's current balance is $609 million. Connecticut employers pay federal and state taxes to fund benefits for unemployed residents.

Labor department officials said Connecticut could be forced to borrow from the federal government to pay unemployment benefits, as it did in 2009 during the last recession.

The cost of paying that loan back—with interest—fell on employers, who saw their federal per-employee unemployment tax jump from $42 to $189 per employee between 2011 and 2015.

That was in addition to the larger state unemployment tax.

Structural Changes

CBIA vice president of government affairs Eric Gjede said the state's unemployment compensation system must be reformed before businesses are hit with another round of higher taxes.

"We really want to hold the line on new taxes unless we see some of these structural changes that need to happen in order to ensure solvency going forward," he said.

"We just can't keep throwing money at the problem because the problem keeps coming back. We need to make long-term changes."

We just can't keep throwing money at the problem. We need to make long-term changes.
— CBIA's Eric Gjede
CBIA has proposed a series of reforms over the last few years, including raising the minimum earnings threshold to qualify for unemployment benefits from $600 to $2,000.

"Connecticut's minimum earnings threshold is the third-lowest in the U.S." Gjede said.

"For perspective, 32 states or territories require between $2,000 and $5,000 in earnings. Connecticut hasn't raised its requirement in 50 years."

Reform Legislation

Raising the earnings threshold was among a series of reforms included in a bill that passed both the Finance and Labor committees during the 2018 session, but was not called for a vote in the state House.

The legislature's nonpartisan Office of Fiscal Analysis said the bill's reforms would save the fund $163.7 million in the first two years.

Many of the bill's reforms stemmed from recommendations made in 2017 by Connecticut's Employment Security Advisory Board, including prohibiting claimants from receiving benefits while also receiving severance pay.

For more information, contact CBIA's Eric Gjede 860.480.1874 | @egjede