Businesses, Lawmakers Look To Use Federal Funds For Bankrupt Unemployment Trust Fund

Some are pushing to use American Rescue Plan funds to help pay back the millions of dollars Connecticut borrowed to pay unemployment claims.

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Employers both big and small are concerned that they will have to start paying more into Connecticut’s Unemployment Trust Fund to pay back the $700 million borrowed to pay claims. 

“Absent federal relief dollars, businesses in Connecticut will be paying down this debt for many years to come,” Chris Dipentima, president and CEO of the Connecticut Business and Industry Association, said.

Dipentima said it took Connecticut businesses five years to pay off the $1 billion it borrowed during the Great Recession. 

“To date 24 states have used portions of their corona relief funds to either help pay for unemployment benefits or pay down the principal on the federal loans,” Dipentima said during a virtual press conference Wednesday. 

Employers in Connecticut are still hurting after the government forced some of them to shut down for months. Many like Max Restaurant Group are working to get the last part of their business back up and running. 

“It would be the absolute worst time to allow a major issue such as the unemployment trust to go unresolved,” Scott Smith, vice president and chief operating officer of Max Restaurant Group, said. 

Smith said it’s not fair for the government to ask businesses to pay additional money for a problem they did not create. 

“Failure to address this crisis threatens job recovery and the state’s recovery,” Smith said. 

Katherine Saint, president and CEO of Schwerdtle, Inc. in Bridgeport, said they paid well over $40,000 in additional unemployment taxes following the great recession. 

“That’s a machine that we needed, that’s another person. It had a big impact at a point in time when we were very fragile,” Saint said.  

Wendy Traub, chief financial officer of Torrington-based Hemlock Directional Boring, said they were shut down for eight months by the pandemic. 

“With the PPP money running out and diminished and lagging revenue, every dollar is going to matter to us for at least a few years,” Traub said.  

“Some people might retort and say we don’t need to deal with the unemployment fund, businesses have gotten enough, but what happened with that PPP loan 80% of that went off to keep employees hired,” House Republican Leader Vincent Candelora said. 

Candelora said the PPP loans helped retain employees but it didn’t help get the business back up and operating. 

He said that’s why he thinks the state should use some of the American Rescue Plan funds to help pay down the $700 million the state borrowed from the federal government to pay historically high unemployment claims. 

“We are already going to see a sluggish recovery from an economic perspective regardless of the vaccine rollout because these benefits are just too rich,” Candelora said.

Rep. Kerry Wood D-Rocky Hill, who is a commercial real estate agent, said she thinks Connecticut is on the verge of an economic recovery. 

“I believe now is the time to build on this momentum and prioritize our state's businesses and we can do so by using the dollars from the american recovery plan to pay down our unemployment trust fund debt,” Wood said. 

Gov. Ned Lamont was cool to the idea of using federal coronavirus relief funds back in December 2020. 

“It seems like a pretty dumb idea to me,” Lamont said when Republicans first proposed it. 

Wednesday at an unrelated press conference he was non-committal to using American Rescue Act funds to pay down debt to the Unemployment Trust Fund. 

“I prefer putting it into economic development and education, but we’ll see what Washington does,” Lamont said. 

U.S. Rep. Joe Courtney said they wrote the American Rescue Plan to be flexible. 

“The two sort of areas that were prohibitive were: no reduction of broad-based taxes and no paying down of pension plans,” Courtney said. 

Courtney says there’s an argument to be made to use these funds to pay down unemployment debt. 

“To the extent that COVID caused unemployment to go up, which it obviously did and one of the sort of ancillary effects of it would be to raise unemployment premiums as we get the economy more stabilized, that that may be a permitted use,” he said.

Candelora said it will be part of budget discussions moving forward.

“While the governor doesn’t support this notion we certainly can continue this conversation as the budget conversations roll out,” he said.

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