Small Businesses Call for State to Use Federal Relief Funds to Address Unemployment Debt Crisis

Small business leaders and organizations today called for policymakers to use federal COVID-19 relief funds to address an unemployment debt crisis that threatens the state’s economic recovery.

CBIA, NFIB Connecticut, the Connecticut Restaurant Association, the Connecticut Food Association, and the Greater New Haven Chamber of Commerce urged the Lamont administration and the legislature to move quickly to address the issue.

The leadership of those organizations spoke at a press conference with three small business leaders—Wendy Traub, chief financial officer of Torrington-based Hemlock Directional Boring; Kathy Saint, president and CEO of Schwerdtle, Inc. in Bridgeport; and Max Restaurant Group partner Scott Smith.

They were joined by House Republican Leader Vincent Candelora (R-North Branford) and state Rep. Kerry Wood (D-Rocky Hill), who co-chairs the legislature’s Insurance and Real Estate Committee and the Moderate Democratic Blue Dog Caucus.

CBIA president and CEO Chris DiPentima said employers are solely responsible for repaying the $700 million—plus interest—the state has borrowed from the federal government to pay pandemic-related unemployment compensation benefits.

The total amount of those loans—made necessary after the state’s Unemployment Compensation Trust Fund became insolvent—is likely to exceed $1 billion.

DiPentima noted that 24 states are using federal coronavirus relief funds to either help meet unemployment benefit obligations or pay down the principal on their federal loans.

“This is a looming crisis and absent federal relief dollars, businesses in Connecticut will be paying down this debt for many years to come—threatening jobs recovery and the state’s economic recovery,” DiPentima said.

“We cannot afford what happened after the 2008-2010 recession, with Connecticut employers paying four times the unemployment taxes of those in neighboring states, a financial strain that prolonged the economic downturn and hurt job recovery and economic growth.”

Connecticut has recovered just 58% of the 292,400 jobs lost last March and April to COVID-related shutdowns and restrictions. The state’s unemployment rate is 8.5%, New England’s highest and well above the U.S. rate of 6.2%.

Andrew Markowski, NFIB state director in Connecticut, warned that another round of tax hikes and special assessments will have a devastating impact on the state’s struggling small businesses.

“The COVID-19 pandemic hit small businesses harder than it did large ones, and while a recovery here in Connecticut has slowly begun, it is uneven and fragile,” Markowski said.

“Without a significant infusion of money, small business owners will be faced with devastating tax hikes, special assessments, and surcharges like they were post-2009.

“By committing federal money to our state’s unemployment trust fund, lawmakers can avoid placing higher costs on job creators at a time when they can least afford it.”

Connecticut Restaurant Association executive director Scott Dolch said Connecticut was one of the last states to pay off its federal loans after the 2008-2010 recession, with employers burdened by six years of higher taxes and special assessments.

“Connecticut’s restaurant industry was among the earliest and most directly impacted sectors of our economy when COVID hit, and what restaurants need now more than ever is stability and predictability,” he said.

“Unfortunately the looming problem with our state’s unemployment trust fund is a crisis that will deliver exactly the opposite.

“Our industry is made up almost entirely of small businesses, and their owners remember what happened after the Great Recession, when they had to foot the bill for borrowing related to this fund.

“That can’t happen again—Connecticut needs to address this problem by using available federal dollars, not asking any more of struggling businesses like ours.”

Rep. Candelora said he hoped today’s news conference would spotlight the issue and generate a greater degree of bipartisan momentum for using federal funds, adding that the legislature must support the state’s job creators—particularly small businesses.

“While a growing sense of hopefulness driven by the vaccine signals a return to normalcy, members of the General Assembly can’t lose sight of the fact that the pandemic has pushed many Connecticut businesses to the brink—and, unfortunately, some beyond it,” he said.

“The legislature must, of course, do all it can to support our state’s job creators in their recovery. Focusing on the unemployment trust fund seems a logical place to start not just because there’s some bipartisan interest, but because history tells us the years-long burden the business community would face in paying back the state’s accumulated unemployment debt could slow our economic recovery to an uncomfortable crawl.

“I urge the governor and all of my colleagues in the legislature to turn their attention to this issue today to ease some of the pressure businesses will face in the future.”

Rep. Wood said the state must prioritize job recovery and economic growth and adopt the practices of other states that are utilizing federal COVID relief funds to relieve the burden on businesses.

“Our pandemic recovery should be about investing in our economy and doing everything possible to encourage growth,” she said.

“This includes using American Rescue Plan Act dollars to help our state’s businesses with unemployment debt.”

---

CBIA is Connecticut’s largest business organization, with thousands of member companies, small and large, representing a diverse range of industries from every part of the state. For more information, please contact Joe Budd (860.244.1951).