This year, state legislators focused on a variety of issues and took actions that will help improve our economy by not hurting the business community ”“ the main source of good-paying jobs for Connecticut residents. One of the key issues was unemployment compensation.
The Connecticut Unemployment Trust Fund collects taxes from businesses to pay unemployment benefits to workers separated from their jobs. The recession left more than 100,000 residents out of work, causing such a sharp rise in unemployment that claims depleted the fund and forced the state to borrow money from the federal government. Private sector employers are now responsible for replenishing the fund and paying back principal and interest on the federal loans being used to pay weekly unemployment benefits.
Cutting or modifying benefits is not an option when the state receives federal stimulus monies, so Connecticut had two alternatives ”“ do nothing or raise unemployment taxes on businesses already struggling to survive the recession.
The Rell administration, legislators on the General Assembly”™s Labor Committee, legislative leaders and the business community worked on a variety of proposals to determine how best to regain fund solvency without hurting Connecticut employers or the unemployed. If the legislature took no action, employers”™ costs would increase by $5 million in additional interest charges over three years. If the legislature adopted the least costly change, increasing the fund solvency tax by 0.2 percent, employers would pay an additional $30 million in unemployment taxes in the first year alone.
Thirty-four other states are facing similar unemployment system problems, and many, including Connecticut have asked the federal government to waive interest on federal unemployment loans in 2011 to minimize the impact on businesses. The federal government has until the end of the year to take action on state requests to forgive interest payments. With the possibility that the federal government will take these steps and the ongoing concerns about steep tax increase for businesses, legislators did the right thing. They listened to the business community and acted prudently by not increasing unemployment taxes during the last few weeks of the legislative session.
CBIA understands that modifications are needed to the state”™s unemployment system and we are working diligently to inform the state”™s employers of the current situation and the options that exist for restoring fund solvency. CBIA and other business groups will continue to work with the administration and legislators to find a solution that works for everyone.
Bonnie Stewart is vice president of government affairs at the Connecticut Business & Industry Association in Hartford.
