How to improve Gov. Lamont's unemployment deal
Gov. Ned Lamont sees himself as a deal maker.
“I’ve been doing deals all my life,” the governor told our editorial board via a Zoom meeting back in January. “And I usually get deals done.”
To his credit, the governor pulled off a pretty good one in bringing together labor union leaders, the Connecticut Business and Industry Association, and leaders of both political parties to sign off on an agreement to reform the state’s unemployment compensation system.
If adopted by the General Assembly, the reforms will restore solvency to a shaky Unemployment Compensation Trust Fund that has been insolvent for 48 of the past 50 years.
Financed with taxes assessed to employers, the trust fund took a particularly hard hit as a result of the Great Recession that peaked in the state in 2008 and 2009. Connecticut borrowed $1.25 billion in federal funds to keep unemployment checks coming during that recession, a debt that took six years to pay off, with $85 million in interest. According to the CBIA, at one point Connecticut employers were paying four times the unemployment taxes of other states to cover the debt.
Business unemployment insurance payments jumped from $42 to $192 per employee between 2010 and 2015, according to the Connecticut Office of Legislative Research.
The reforms announced by the administration, which would begin in 2024, should bring greater stability.
The annual minimum-base earnings for qualifying for unemployment benefits will increase from $600 to $1,600 and be indexed to inflation. The figure had not changed since 1968.
The maximum weekly benefit would be frozen for at least four years.
Unemployment insurance benefits would not kick in until a claimant’s severance payments are exhausted.
While those savings will come via reduced benefits for laid-off workers, employers would be taxed on the first $25,000 in wages, up from the current $15,000, and also indexed to inflation.
But employers would see lowered penalties when they lay off workers. Just as filing a claim for car insurance usually results in the car owner paying higher insurance rates, businesses laying off employees pay a higher tax rate. This deal would smooth out those penalties.
Add it all together and the administration estimates it will reduce unemployment-related taxes on 73% of Connecticut businesses.
It is worth noting that Rep. Holly Cheeseman, R-East Lyme, as ranking member of the Finance Committee, lent bipartisan support to the agreement.
“We have a path to creating a solvent Unemployment Insurance Trust Fund for the first time in decades,” she said.
Government officials, workers, and employers have a shared interest in making sure the unemployment compensation system is solvent. Lamont was on target in calling the unemployment insurance program “Connecticut’s most important tool for keeping our families out of poverty and our economy in motion during a recession.”
Where we think the General Assembly needs to move further than the governor proposes is helping employers address the new unemployment debt they face as a result of the pandemic-caused recession and the massive, mandated layoffs that resulted from the public health crisis.
The state had to borrow $894 million from the federal government to pay surging unemployment claims. Lamont has recommended allocating $50 million in federal relief funding to offset some of that borrowing, essentially covering the interest, but leaving Connecticut businesses with the rest.
With the state receiving $2.6 billion in federal help for economic recovery, the legislature should set aside more funding to address that unemployment related debt, leaving more cash for businesses to invest and to create jobs, helping fuel an economic recovery.
That debate aside, the package of reforms recently announced will improve and steady the state’s unemployment system and should be adopted by the legislature.
The Day editorial board meets regularly with political, business and community leaders and convenes weekly to formulate editorial viewpoints. It is composed of President and Publisher Tim Dwyer, Editorial Page Editor Paul Choiniere, Managing Editor Izaskun E. Larrañeta, staff writer Erica Moser and retired deputy managing editor Lisa McGinley. However, only the publisher and editorial page editor are responsible for developing the editorial opinions. The board operates independently from the Day newsroom.
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