April 21, 2021

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Business groups push for federal aid to relieve unemployment insurance fund debt

A coalition of business organizations warned the state Wednesday not to balance mounting unemployment insurance fund debt on the backs of employers and urged lawmakers to utilize federal COVID-19 relief funds to bridge the gap instead.

Officials with the Connecticut Business & Industry Association, Connecticut chapter of the National Federation of Independent Business, Connecticut Restaurant Association, he Connecticut Food Association, and Greater New Haven Chamber of Commerce said the state faces a predicament similar to the recession of the late 2000s, when Connecticut, struggling to meet its unemployment benefits obligations, turned to higher taxes and special assessments.

Those measures hammered small businesses and stalled growth for six years, they said, and now, with the state Unemployment Compensation Trust Fund insolvent, policymakers have a chance to avoid making the same mistake twice.

“We cannot afford what happened after the 2008-2010 recession, with Connecticut employers paying four times the unemployment taxes of those in neighboring states,” said CBIA President Chris DiPentima.

Scott Dolch, who heads the Connecticut Restaurant Association, echoed that point.

“Our industry is made up almost entirely of small businesses, and their owners remember what happened after the Great Recession, when they had to foot the bill for borrowing related to this fund,” Dolch said. “That can’t happen again. Connecticut needs to address this problem by using available federal dollars, not asking any more of struggling businesses like ours.”

DiPentima said the state took on $700 million in federal loans after the unemployment trust fund became insolvent, and with interest factored in, the total amount to be repaid will likely exceed $1 billion.

Connecticut should follow the example of 24 other states, including Maine and New Hampshire, in tapping federal aid to pay down its unemployment debt, he said.

Area business leaders have been optimistic but cautious about the state’s gradual economic recovery over the past several months, which they worry could be easily reversed by an increased post-pandemic tax burden.

According to the U.S. Bureau of Labor Statistics, Connecticut has brought back 58% of the 292,400 jobs it lost during March and April of 2020, when shutdown orders were at their most severe.

Calling the recovery “fragile,” NFIB state director Andrew Markowski said it would be unwise to saddle small business owners with further expenses.

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

 

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