If the national economy goes on a downward trend over the next year, Connecticut is not likely to have enough money to cover unemployment benefits from those making existing claims, or filing for the first time.
The warning came from the Connecticut Department of Labor for the incoming Lamont administration, which will take office in January.
Labor and business advocates, who help to advise the department when it comes to labor and unemployment issues, both agree that the Unemployment Trust Fund is approaching insolvency, but they disagree on how to solve the problem.
“It just hasn’t kept pace with the increase in wages,” said Sue Garten, with Greater Hartford Legal Aid, who points out that the taxes employers pay which fund benefits haven’t been adjusted since 1999.
“If it had been indexed to the increase in wages, it would be at about $23,000 now, so it needs to be raised to a healthy and sustainable level so that the unemployment trust fund can fulfill its mission of providing a stabilizing function when unemployment rises,” Garten said.
Unemployment benefits are paid by employers, and those employers argue that many of the people receiving benefits shouldn’t be eligible to begin with, because they have only met the lowest possible threshold of $600 in income for the year, a figure not adjusted since 1968. Other states range from $2,000 to $5,000.
“There need to be significant structural reforms if we’re going to find solvency in this program,” said Eric Gjede, vice president of government affairs for the Connecticut Business and Industry Association. CBIA, the group that represents large and small businesses in the state, wants to see that income threshold increased, to ensure the benefits are spent wisely.
If the state does not have enough money to cover unemployment benefits, then it must take out a loan from the federal government to cover those payments.
That’s something Gjede says would be terrible for employers because they would be left funding the issue for the state, when the state would not make changes to the program to keep it solvent.
“It’s absolutely devastating to the employer community because as the state takes the loan, it’s only businesses that are paying it back,” Gjede said. “The state doesn’t pay a single dollar for unemployment compensation in this state so it’s just businesses in this state keeping this trust fund alive, so that’s why want to be a big part of this solution.”
A spokeswoman for the Connecticut Department of Labor told NBC Connecticut that the department is looking at multiple ways to shore up the fund, which currently sits at about $600 million, but needs to be closer to $1.7 billion in order to be solvent, projections show.
The Employment Security Advisory Board, of which Sue Garten is a member, recommended increasing the taxable wage base on employers and changing the eligible income to $1,000 from $600.
Garten says the higher tax on employers would be the fairest option.
“It makes much more sense to make the systemic change now so then employers have to pay less later,” she said.
Connecticut lawmakers have been warned in recent years that they have to act soon. The General Assembly has to make any changes to unemployment benefits, and then Governor-Elect Ned Lamont would have to sign them into law.