What will the state’s pandemic unemployment debt cost employers? |
“What will be the financial impact on businesses of repaying all of the federal loans taken out to shore up the state’s Unemployment Trust Fund?”
That’s the question Appropriations Committee Co-Chair Sen. Cathy Osten (D-Baltic) posed to AABC’s Eric Gjede during a recent committee hearing.
The committee plans to use additional federal pandemic relief funds to address debt and mitigate the impact of tax hikes and special assessments that employers will face later this year.
Connecticut borrowed $888 million from the federal government to cover historic jobless claims caused by pandemic-related government shutdowns and restrictions.
While 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 massive pressure that’s really undermining the economic recovery of the state,” Gjede told the committee.
“Satisfying this debt and avoiding the strain it places on businesses, along with additional tax relief for businesses, is critical to preparing Connecticut’s economy for long-term growth.”
Cost per employee
Gjede told the committee that Connecticut employers are responsible for $763 million in federal loan repayments, or $467 per employee. However, the tax hikes and special assessments that employers will face this fall will vary depending on their experience rates.
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 HB5003which allocates an indeterminate amount to the repayment of the debt.
Gjede noted the committee’s leadership during the 2021 legislative session, when it earmarked $310 million from pandemic relief funds for unemployment debt.
This amount was later reduced to $155 million in the final budget following negotiations with the Lamont administration, which had originally offered $50 million for debt payment.
The DOL directed $125 million of this budget allocation to the principal of the loan, with the balance used to cover interest payments.
To date, $425 million in loan repayments have been made, with companies covering $300 million. In the absence of additional assistance, employers are responsible for the remaining loan balance of $463 million.
Gjede also thanked Rep. House Republican Leader Vincent Candelora (R-North Branford) and his caucus for continuing to highlight the issue, which is of particular concern to 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, National Federation of Business, National Electric al Contractors Association, Connecticut Construction Industry Association and the Roofing Contractors. from Connecticut.
President and CEO of the Greater New Haven and Quinnipiac Chambers of Commerce Garrett Sheehan told the committee that state debt from the 2008-2010 recession was not paid off until 2016. , after six years of raising taxes on employers.
“This is an opportunity for the Legislature to deliver tax clawbacks to our businesses that will result in long-term economic growth and recovery,” he said.
Connecticut’s AFL-CIO testified against the bill, with union president Ed Hawthorne telling the committee that “the renewal of public sector jobs, for example, and the full value of the services provided by these workers would do more for economic growth than paying down more unemployment insurance debt.”
For more information, contact the CFIA Eric Gjede (860.480.1784) | @egjede