Unemployment Debt crisis threatens jobs and economic recovery |

A coalition of small business groups warned this week that the state’s unemployment debt crisis is threatening Connecticut’s jobs and economic recovery.

Connecticut has borrowed $700 million from the federal government to pay pandemic-related unemployment compensation claims, with the total borrowing expected to exceed $1 billion.

Employers are required to repay these loans, just as they did after the 2008-2010 recession, when the state also borrowed $1 billion after the Unemployment Compensation Fund was insolvent.

At an April 7 press conference, the CBIA, Connecticut NFIB, Connecticut Restaurant Association, Connecticut Food Association, and Greater New Haven Chamber of Commerce urged the Lamont administration and the legislature to act quickly to resolve the problem.

They were joined by three small business leaders: Wendy Traub, chief financial officer of Torrington-based Hemlock Directional Boring; Kathy Saint, president and CEO of Schwerdtle, Inc. in Bridgeport; and Scott Smith, partner of Max Restaurant Group.

House Republican Leader Vincent Candelora (R-North Branford) and State Rep. Kerry Wood (D-Rocky Hill), who co-chairs the Legislature Insurance and Real Estate Committee and the Democratic Blue Dog Caucus moderate, also spoke at the press conference.

Federal relief funds

CBIA Chairman and CEO Chris DiPentima urged the administration and legislature to follow the lead of 24 states that are using federal coronavirus relief funds to help meet health obligations. unemployment benefits or to repay loans.

“This is a looming crisis and without federal relief funds, Connecticut businesses will be paying off this debt for many years to come, threatening the state’s job recovery and economic recovery,” he said. -he declares.

“We can’t afford what happened after the 2008-2010 recession, with employers in Connecticut paying four times the unemployment premiums of those in neighboring states, a financial strain that prolonged the economic downturn and hurt job recovery and economic growth.”

Connecticut only recovered 58% of the 292,400 jobs lost last March and April due to COVID-related shutdowns and restrictions. The state’s unemployment rate is 8.5%, the highest in New England and well above the US rate of 6.2%.

Traub said his family business shut down for eight months due to COVID-19 restrictions, leveraging the federal Payroll Protection Program to retain employees.

“With the PPP money running out and revenue shrinking and lagging, every dollar will matter to us for at least a few years,” she said.

Saint said his company paid more than $40,000 in special contributions to the state unemployment trust after the last recession, money desperately needed elsewhere.

“It’s a machine we needed. It’s a different person,” she said. “Every penny counted, and we got rid of it in many ways.”

“Devastating Impact”

Andrew Markowski, state director of the NFIB in Connecticut, warned that another round of tax hikes and special assessments would have a devastating impact on struggling small businesses in the state.

“The COVID-19 pandemic has hit small businesses harder than large ones, and while a recovery here in Connecticut has begun slowly, it’s uneven and fragile,” Markowski said.

“Without a major injection of cash, small business owners will face devastating tax hikes, special assessments and surtaxes as they were after 2009.

“By committing federal funds to our state’s unemployment trust fund, lawmakers can avoid imposing higher costs on job creators at a time when they can least afford it.”

Connecticut Restaurant Association executive director Scott Dolch said Connecticut was one of the last states to repay federal loans after the 2008-2010 recession, as employers were burdened by six years of higher taxes and special contributions.

“Connecticut’s restaurant industry was one of the earliest and most directly impacted sectors of our economy when COVID hit, and what restaurants need more than ever is stability and predictability,” he said.

“Our industry is made up almost entirely of small businesses, and their owners remember what happened after the Great Recession, when they had to pay the bill for borrowing from this fund.

“This can’t happen again – Connecticut needs to fix this problem using available federal dollars, not asking more from struggling businesses like ours.”

Smith of Max Restaurant Group said “this would be the absolute worst time to allow a major issue like the unemployment trust to go unresolved.”

Legislative support

Candelora said he hopes the press conference will shine a light on the issue and generate greater bipartisan momentum for the use of federal funds, adding that the legislature must support state job creators, especially small businesses.

“As a growing sense of hope for the vaccine signals a return to normality, members of the General Assembly cannot lose sight of the fact that the pandemic has pushed many Connecticut businesses to the brink. – and, unfortunately, some beyond,” he said.

“The legislator must of course do everything possible to support the job creators of our State in their recovery. Focusing on the unemployment trust fund seems a logical place to start, not only because there is some bipartisan interest, but because history tells us that the multi-year burden to which the world of Business would be faced with repaying the state’s accumulated unemployment debt could slow our economic recovery to an uncomfortable crawl.

“I urge the Governor and all of my colleagues in the Legislature to turn their attention to this issue today to alleviate some of the pressures businesses will face in the future.”

Wood said the state must prioritize job recovery and economic growth and adopt the practices of other states that are using federal COVID relief funds to ease the burden on businesses.

“Our pandemic recovery should be about investing in our economy and doing everything we can to encourage growth,” she said.

“This includes using money from the American Rescue Plan Act to help businesses in our state with unemployment debt.”

Governor “without commitment”

Governor Ned Lamont, who in December said he opposed the idea, did not make a commitment when reporters asked him this week to use federal relief funds to protect small businesses of Connecticut and the state’s jobs and economic recovery.

“I would think about it,” he said. “Working with our federal delegation, it would be great to turn a lot of the loans to the 50 states into a grant. You have 50 governments, all of which need to borrow because the unemployment rate has gone up so much; we’ll all have to increase the unemployment trust tax rate to reimburse this surtax.

“If this became a grant, it would be incredibly beneficial for everyone. Failing that, we will look at some of our other funding and see if we should put some of it into the trust fund to mitigate the possibility of raising these funds .rate over time to make up for the shortfall.

U.S. Representative Joe Courtney (D-CT 2) told CT NewsJunkie that Congress intends federal relief funds to be flexible, saying there’s a case to be made for using those dollars to repay the state unemployment debt.

“To the extent that COVID has driven up unemployment, which it obviously has … that may be a permitted use,” he said.

For more information, contact the CFIA Eric Gjede (860.480.1784) | @egjede.