CT needs emergency loan to pay for unemployment

After the Connecticut Unemployment Fund has paid billions of dollars in benefits since the coronavirus pandemic broke out in mid-March, it will go into bankruptcy later this month or early September, according to state Department of Labor officials.

That means Connecticut will need a federal emergency loan to maintain benefits for hundreds of thousands of unemployed here – a move that could result in higher taxes for local businesses.

“Right now, our main focus is on getting our customers, both the unemployed and businesses, through the pandemic,” Deputy Labor Commissioner Daryle Dudzinski told CT Mirror.


After receiving an unprecedented 750,000 unemployment benefit claims since mid-March, the state agency has paid out around $ 4.4 billion in benefits to date. Approximately $ 1.6 billion was in state benefits derived from Connecticut’s Unemployment Compensation Fund and more than $ 2.8 billion in various forms of federal improved aid to the unemployed funded by Washington grants.

Dudzinski said about $ 118 million remains in the state trust, but labor officials estimate that between now and early October it will take between $ 250 million and $ 350 million a month to cover state unemployment benefits.

States routinely deplete their unemployment benefits during recessions and other severe economic downturns. States then borrow from federal unemployment reserves to replenish their benefit programs.

Unless other arrangements are made, Connecticut companies would face higher unemployment rates by the federal government in order to repay principal on state loans. Local businesses would also face higher government assessments to cover the interest costs on these emergency loans.

Connecticut companies are already paying unemployment rates of 1.9 percent to 6.8 percent of taxable wages – the first $ 15,000 any employee makes annually – to support the state trust.

Companies with large numbers of seasonal workers and others who are routinely laid off for a variety of reasons typically pay higher rates. Those who traditionally have few layoffs – and whose workers are least likely to receive unemployment benefits – pay the lower rates.

Dudzinski did not comment on how the government would settle any debts that might arise in order to stabilize the sovereign wealth fund.

However, Eric Gjede, a labor, employment and tax specialist with the Connecticut Business and Industry Association, noted that some states raised government funds into their respective unemployment funds to protect their businesses from higher valuations during the last recession.

During the recession in the early 1990s, Connecticut raised money by selling Wall Street bonds to boost the unemployment rate while saving businesses higher costs.

A recent report from Pew Charitable Trusts found that eight states have transferred millions of dollars from the federal Coronavirus Relief Fund to their trusts to protect companies from higher ratings.

To date, Connecticut has used its $ 1.38 billion US Coronavirus Relief Fund grant to support COVID-19 testing, purchase protective equipment, and provide other forms of assistance to other health care providers and cities and towns to help cover pandemic-related costs.

No valuation increase since ’93

The state has not increased its base range of corporate rates since 1993. But it’s also been many years – and in some cases decades – since he revised other rules that determine the level of benefits laid-off workers can receive.

Whether or not Connecticut is using its resources to boost confidence in unemployment, the CBIA this week also urged state officials to reconsider many of these rules, arguing that reforms now could help stabilize the program over the long term .

This includes raising the minimum earnings limit in order to be entitled to benefits. Currently, any worker who earns $ 600 or more per year can become unemployed. Most states, Gjede said, set a limit of $ 3,000 or more.

Connecticut also does not require laid-off workers to exhaust their severance pay before they become unemployed in some cases.

And unemployment benefit is currently calculated based on the employee’s two highest-income quarters in the calendar year prior to payment. CBIA says it should reflect at least three-quarters, noting that seasonal workers who only work six months – and are usually unemployed the rest – currently use this rule and receive the same benefits as an employee who pays the same rate but who works for a whole year.

Gjede said these changes had been tabled by legislative committees in recent years, but none had voted in plenary or senate.

“We could be better positioned for the next time” [recession] if we just made a few of these simple changes, ”he added.

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