December 5, 2022

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Connecticut small businesses face tax increases to repay unemployment insurance debt from pandemic. They’re asking for help. – Hartford Courant

HARTFORD — Like other small-business owners in Connecticut, Keith Beaulieu of The Main Pub, a Manchester restaurant going back more than 40 years, faces tax increases to replenish the state unemployment insurance fund tapped to the max during the COVID-19 pandemic.

He joined other business owners and Republican lawmakers at the Capitol Tuesday, urging the Democratic-led General Assembly and Gov. Ned Lamont to use federal pandemic money to pay down unemployment insurance debt run up as joblessness soared after businesses were shut in 2020.

With just three weeks left to the legislative session, businesses and their allies are stepping up their lobbying. They say employers were forced through no fault of their own to shut businesses during the worst of the pandemic. Many restaurants never reopened.

“How many more will we lose unless Connecticut fixes the unemployment insurance trust problem?” Beaulieu said.

Max Reiss, a spokesman for Lamont, said Connecticut repaid half the money it borrowed to fund unemployment insurance and has covered interest payments for the life of a federal loan, in part due to a $155 million in federal pandemic aid last year.

“Allocating more than that $155 million to the UI fund wouldn’t help businesses before 2026, and most of the benefits would go to the state’s largest employers,” he said.

State Sen. Cathy Osten, co-chair of the Appropriations Committee, which did not include funding to help businesses pay unemployment insurance debt, said the issue is being negotiated between the legislature and Lamont.

Nearly 300,000 jobs disappeared in early 2020 after Lamont and state public health officials ordered businesses shut to limit the spread of COVID-19. At the peak of the employment crisis in early May 2020, the state Department of Labor worked through about 390,000 weekly unemployment insurance claims, or nearly 19% of Connecticut’s labor force.

Connecticut borrowed $888 million and $425 million has been repaid, with employers covering $300 million. Federal COVID-19 relief funds repaid $155 million, including interest. Employers are responsible for the remaining $463 million and say they face tax increases between now and 2026.

The tax increases are particularly painful as businesses cope with an inflationary spiral that’s driving up costs, “jeopardizing our profit,” said Wendy Traub, president of Hemlock Directional Boring in Torrington.

Employers will pay an increasing contribution to the unemployment trust fund of 0.3% to 1.7% of each employee’s first $7,000 in wages between 2023 and 2026, according to the governor’s office. It amounts to $21 to $119 per employee in each of the the four years.

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Employers frame the issue as an economic development spur by helping them invest in other business operations rather than higher unemployment insurance costs.

“It took six years of higher unemployment taxes on employers to pay off federal loans following the 2008-2010 recession and we can’t hold that debt over small businesses again,’’ said Chris DiPentima, president of the Connecticut Business & Industry Association.

Earlier Tuesday, Lamont struck an upbeat note as he spoke to the CBIA, which is lobbying against several pieces of legislation seen by business as hostile to job creation and economic growth.

“I think Connecticut is in the strongest position we’ve been in probably a generation to 25 years,” he said in a video speech as he quarantined after testing positive for COVID-19. The governor cited budget surpluses that have helped pay down state pension liability and other debts and relocations to Connecticut of several large corporations.

He warned that the state will “go through some choppy waters,” pointing to the announcement Tuesday by the U.S. Bureau of Labor Statistics that inflation was 8.5% in the past year, a record high in more than four decades.

The CBIA opposes legislation that would allow striking workers to receive unemployment benefits and forbid businesses to require workers to attend attend or participate in meetings about the employers’ views on political or religious matters.

Stephen Singer can be reached at [email protected]