Unemployment Insurance Trust Fund has less than half its target goal
Concerns about the financial health of Connecticut”™s Unemployment Insurance Trust Fund may be somewhat overblown ”” but not by much.
So says Eric Gjede, vice president for government affairs at the Connecticut Business and Industry Association. A member of Connecticut”™s Employment Security Advisory Board, Gjede has seen the UI numbers and, while they aren”™t good, he said the picture isn”™t quite as gloomy as had been reported.
“ ”˜Insolvent”™ is maybe a subjective definition,” Gjede said, referring to the circulation of a transition memo written by the Department of Labor to Gov.-elect Ned Lamont.
“The UI Trust Fund, out of which the UI benefits are paid, is not solvent,” the memo declared. “The current system of imbalanced Unemployment Insurance tax benefit payouts is not sustainable.”
“We”™ve got about $700 million in there,” Gjede said. “It”™s not like there”™s absolutely no money in the Trust Fund ”” there”™s plenty for its day-to-day. And the balance has been going up as our economy has improved ”” it was around $400 million a year ago.”
Nevertheless, he conceded, “It”™s nowhere close to where we”™d like it to be.” The UI”™s target goal is $1.7 billion, a figure based on the amount in benefits that would be needed to be paid out “if people became unemployed all at once,” Gjede said.
Some 25,000 unemployment benefits, totaling about $9 million, are sent out each week. The DOL memo warned that the state might have to borrow from the federal government to meet its obligations, as it did in 2009. The department similarly said the UI was “insolvent and needs an influx of funding” in a July memo to Gov. Dannel Malloy.
One of the factors contributing to the shortfall ”” the trust fund is subsidized by the state”™s employers ”” is that the UI simply isn”™t seen as a priority by state lawmakers, Gjede said.
“Every year the CBIA goes to (Hartford) to see about making some changes, but nothing happens,” he said. “Since it”™s funded entirely by employers, it”™s not really on the minds of lawmakers except when there”™s a recession. That”™s when businesses get hit hard, and it gets (lawmakers”™) attention. But usually it”™s not part of the budget that they need to balance.”
Another problem, Gjede said, is that Connecticut employees only need to earn $600 in a year to qualify for unemployment benefits ”” something he said hasn”™t changed since 1968.
“At $10.10 an hour, you can make $600 a year baby-sitting over a couple of weekends,” he said. The CBIA recommends raising that threshold to $3,000 a year, he continued, “which represents a reasonable level. If you adjust that $600 for inflation, you”™re up around $5,000.”
While the CBIA applauds the legislature”™s and Lamont”™s efforts regarding such matters as raising the minimum wage and providing paid family medical leave, Gjede said the UI should remain a priority as well.
“Hopefully (Lamont) can find a way to help make and keep businesses solvent without increasing taxes,” he said.