What Will the State’s Pandemic Unemployment Debt Cost Employers?

Issues & Policies

“What will be the financial impact to businesses of repaying the entirety of the federal loans taken to shore up the state’s Unemployment Trust Fund?”

That was the question Appropriations Committee co-chair Sen. Cathy Osten (D-Baltic) asked CBIA’s Eric Gjede during a recent committee hearing.

Unemployment debt support: Appropriations Committee co-chairs Sen. Cathy Osten and Rep. Toni Walker.

The committee is considering using additional federal pandemic relief funds to address the debt and mitigate the impact of the tax hikes and special assessments that employers face later this year.

Connecticut borrowed $888 million from the federal government to cover the historic unemployment benefit claims caused by pandemic-driven government shutdowns and restrictions.

As employer taxes fund the UTF, businesses face tax hikes through November 2026—based on Department of Labor estimates—to pay off those federal loans.

“It’s a massive strain that really undermines the state’s economic recovery,” Gjede told the committee.

“Satisfying this debt and avoiding the strain it causes businesses, along with additional business tax relief, is critical to priming Connecticut’s economy for long-term growth.”

Per Employee Cost

Gjede told the committee that Connecticut employers are responsible for $763 million in federal loan repayments, representing $467 per employee.

Gjede thanked Osten, committee co-chair Rep. Toni Walker (D-New Haven), and ranking members Sen. Craig Miner (R-Litchfield) and Rep. Mike France (R-Ledyard) for raising HB 5003, which appropriates an unspecified amount for debt repayment.

Connecticut employers are responsible for $763 million in federal loan repayments—$467 per employee.

Gjede noted the committee’s leadership during the 2021 legislative session, when it designated $310 million from pandemic relief funds toward the unemployment debt.

That was later reduced to $155 million in the final budget following negotiations with the Lamont administration, which originally proposed $50 million for debt payments.

DOL directed $125 million of that budget allocation toward the loan principal, with the balance used to cover interest payments.

Loan Balance

To date, $425 million in loan repayments have been made, with businesses covering $300 million. Absent additional help, employers are responsible for the remaining $463 million loan balance.

Gjede also thanked House Republican Leader Rep. Vincent Candelora (R-North Branford) and his caucus for continuing to highlight the issue, which is of particular concern for small businesses.

The caucus was among a number of groups that testified in support of the bill, including the Greater New Haven and Quinnipiac Chambers of Commerce, the National Federation of Business, the National Electric al Contractors Association, the Connecticut Construction Industry Association, and the Roofing Contractors of Connecticut.

“This is the legislature’s opportunity to provide tax recovery for businesses that will result in long-term economic growth.”

Greater New Haven Chamber’s Garrett Sheehan

Greater New Haven and Quinnipiac Chambers of Commerce president and CEO Garrett Sheehan told the committee the state’s debt from the 2008-2010 recession was not paid off until 2016, after six years of higher taxes on employers.

“This is the legislature’s opportunity to provide tax recovery for our businesses that will result in long-term economic growth and recovery,” he said.

The Connecticut AFL-CIO testified against the bill, with union president Ed Hawthorne telling the committee “refilling public sector jobs, for example, and the full value of services these workers provide, would do more for economic growth than paying down more UI debt.”

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


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