Unemployment Debt Crisis Threatens Small Business Recovery

Connecticut small business leaders and organizations today called for policymakers to use federal pandemic relief funds to address the unemployment debt crisis threatening the state’s economic recovery.

CBIA, NFIB Connecticut, the Connecticut Restaurant Association, the Connecticut Food Association, the Connecticut Retail Merchants Association, the Lumber Dealers Association of Connecticut and the Greater New Haven and Quinnipiac Chambers of Commerce urged the Lamont administration and lawmakers to prevent pending unemployment tax hikes on employers.

Three small business leaders—Wendy Traub, president of Torrington-based Hemlock Directional Boring; Carmen Romeo, owner of Fascia’s Chocolates in Waterbury; and Keith Beaulieu, owner of The Main Pub in Manchester and chair of the Connecticut Restaurant Association—spoke about how those tax hikes hurt their ability to recover from the pandemic.

They were joined by House Republican Leader Vincent Candelora (R-North Branford) and Senate Republican Leader Kevin Kelly (R-Stratford).

CBIA president and CEO Chris DiPentima noted that the state borrowed $888 million from the federal government to cover pandemic-driven unemployment compensation benefit claims after the unemployment trust fund became insolvent.

To date, $425 million has been repaid, with employers repaying $300 million and federal COVID relief funds covering $125 million, plus $26 million in interest payments.

Employers are responsible for the remaining $463 million loan balance—and face four years of tax hikes, beginning this fall, to cover those repayments.

Projected Unemployment Tax Hikes

State and federal unemployment taxes (average per employee):

• Current: $542
• 2023: $563 
• 2024: $584
• 2025: $605 
• 2026: $661 (22%)

Unemployment-Debt-Crisis_0422

Small Business Recovery

“It took six years of higher unemployment taxes on employers to pay off federal loans following the 2008-2010 recession and we can’t hold that debt over small businesses again,” he said. 

“State and federal unemployment taxes will jump 22% by 2026, money better invested by employers in addressing the labor force crisis, the biggest threat to Connecticut’s economic recovery.”

“Unemployment taxes will jump 22% by 2026, money better invested by employers in addressing the labor force crisis.”

CBIA’s Chris DiPentima

NFIB Connecticut state director Andrew Markowski said that while the legislature has made some positive steps recently to help small businesses recover from the pandemic, employers are still hurting and worried about higher costs. 

“Here’s what we know: our small business owners are bearing the brunt of the unemployment debt crisis,” he said.

“That’s why we are again calling on the General Assembly and the Governor to help pay down the hundreds of millions of dollars in remaining unemployment fund debt.” 

‘At Risk’

Connecticut Retail Merchants Association president Tim Phelan said retailers of all sizes endured a challenging two years, and the threat of tax hikes makes it tougher to remain in business.

“Legislative action to ease that burden is needed, appropriate, and necessary to better enable retailers to continue their important role in Connecticut’s economic recovery, benefitting their customers and communities,” he said.

“It’s hard to understand why legislators are unwilling to help small businesses.”

Restaurant owner Keith Beaulieu

Beaulieu said with Connecticut experiencing record surpluses and lawmakers proposing new spending programs, “it’s hard to understand why legislators are unwilling to help small businesses.”

“Small businesses like mine are still working to recover from the pandemic while dealing with new challenges like inflation, the rising costs of goods, and labor shortages,” he said.  

“Unless the unemployment debt crisis is fixed, many small businesses will continue to be at risk.” 

‘Relieve Pressure

Garrett Sheehan, president and CEO of the Greater New Haven and Quinnipiac Chambers of Commerce, said small businesses, struggling with inflation, supply chain bottlenecks, and the worker shortage, cannot afford additional costs. 

“Paying off the unemployment trust fund will relieve pressure on businesses across the board and reduce uncertainty regarding higher taxes at a time when we should be focusing on business recovery,“ he said.

“There is still a constant fear that the state may again impose operating restrictions or increase taxes.”

Small business owner Wendy Traub

Traub said Hemlock has been in business for more than 25 years, yet COVID-19 and other challenges, including the threat of higher taxes, threaten to shut down her small business.

“Our business is attempting to grow its workforce, yet there is still a constant fear that the state may, once again, impose operating restrictions or develop new or increased taxes on business owners,” she said. 

“This leads to uncertainty and limits our investments in new capital equipment or additional labor. For economic recovery to be successful in Connecticut, we must have faith that the government is recognizing and supporting our efforts.”

‘Top Issue’

Candelora said so far this session, the legislature’s efforts to meet the concerns of business leaders has been inadequate or in the case of the Labor and Public Employees Committee’s agenda, the opposite of what’s needed. 

“We have less than a month left in the session to address perhaps the top issue, paying down federal unemployment debt, and I implore my colleagues to revisit this problem during budget discussions,” he said.

“We have less than a month left to address perhaps the top issue, paying down federal unemployment debt.”

House Republican Leader Vincent Candelora

Kelly said without action, Connecticut faces a massive job-killing problem on the horizon.

“Connecticut still needs to pay back the loan it took to pay unemployment benefits to residents during the pandemic,” he said.

“Delaying full repayment of that loan jeopardizes our unemployment safety net and places financial burdens on the creation of new jobs.”

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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 Ali Warshavsky (860.244.1929).