FOR IMMEDIATE RELEASE

Friday, November 17, 2023

SENS. OSTEN, COHEN WELCOME STATE ACTION ON UNEMPLOYMENT TAXES TO HELP CONNECTICUT BUSINESSES

HARTFORD – State Senators Cathy Osten (D-Sprague) and Christine Cohen (D-Guilford) today celebrated the news that recent actions by the Connecticut General Assembly to pay off federal unemployment loans have helped state businesses avoid $350 million in potential fees and charges over the next four years.

“The legislature has done something over the past few years that it wasn’t financially required to do – bail out Connecticut businesses that were going to see higher unemployment taxes and fees because of all the federal borrowing that was necessary to keep people financially afloat during and immediately after the COVID-19 pandemic. That’s normally a business responsibility,” Sen. Osten said. “Now Connecticut businesses are off the hook for what would have been a third of a billion dollars in increased costs over the next few years, and they can put that money instead toward things like new machinery and new hires. That’ll be great for our economy, and this investment really exemplifies the State of Connecticut’s commitment to our valued and growing local businesses. We supported them during the COVID pandemic, and now we’ve set the stage for them to continue growing!”

“As a small business owner myself, I know too well the burden of unemployment taxes,” said Sen. Cohen. “When the pandemic hit, difficult but necessary decisions were made in the interest of keeping our communities healthy. Unfortunately, through no fault of their own, small businesses were then going to be saddled with increased unemployment fees. Small businesses are the economic engine of our state and I vowed to work with my colleagues to ensure the increased unemployment insurance taxes weren’t on the backs of our state’s valued employees. I’m pleased that we have been able to be a strong partner to them and relieve this outstanding debt.”

In February 2023, the state Labor Department projected that – without any intervening action – Connecticut businesses would experience federal unemployment tax credit reductions (increased costs) totaling $350 million over the next four years, jumping from $30 million in lost credits this year to $170 million in lost credits by 2026.

But over the past two years, Connecticut has repaid the $1.2 billion Unemployment Trust Fund loan it secured which was used in part to cover pandemic unemployment benefits. That pandemic debt retirement has ensured that Connecticut businesses will avoid an increase in the federal unemployment taxes that they would have paid beginning January 1, 2024 if Connecticut hadn’t paid off the loan.

Since 2021, the Lamont administration and the Connecticut General Assembly directed $195 million from the American Rescue Plan Act (ARPA) into the Unemployment Trust Fund and other special assessments in order to mitigate the ongoing financial damage employers faced as a result of the pandemic. The Unemployment Trust Fund, which is administered by the state Department of Labor, is the account from which all unemployment benefits are paid and is funded solely through quarterly taxes on employers.

When the Unemployment Trust Fund doesn’t have enough money to pay unemployment benefits, states borrow money from the federal government. The federal government may then raise employer taxes for every year that they have outstanding loans; additionally, employers are required to pay an annual “special assessment” each September to cover the interest payments for that borrowing.

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