Can COVID-19 Relief Funds Solve Unemployment Debt Crisis? |


While the pandemic has caused unprecedented change in many Connecticut businesses, the resulting long-term consequences and the huge drain on the state’s unemployment compensation trust fund are all too familiar.

Although it seems like an old story, Connecticut borrowed more than $ 1 billion from the federal government to maintain the solvency of the Unemployment Trust Fund during the 2008-09 recession.

The employers were solely responsible for repaying this debt. Because of the outstanding balance, the federal government increased the interest that businesses paid on the loan each year.

In addition, employers were required to pay special assessments each August to repay the interest on the loan. At one point, Connecticut businesses paid four times federal unemployment taxes collected from employers in neighboring states.

This increase in taxes and dues put financial pressure on many businesses, which prolonged the economic downturn and resulted in reduced hiring and growth in the state.

After six years of increasing taxes and contributions, the employers finally paid off the loan. Connecticut was one of the last states to pay off its debt.

New debts are looming

Realizing that increased federal taxes on business unemployment were holding back growth, several states transferred money from their general funds to help employers pay off their debts.

Connecticut, however, chose not to help it. Policymakers have also ignored calls for much needed reforms to the unemployment system to prevent future insolvency crises and their consequences for employers.

To date, 24 states have used portions of federal coronavirus relief funds to help pay unemployment benefits or repay the principal of their federal loans.

Here we are again. To date, Connecticut has borrowed more than $ 600 million from the federal government so the state can continue to provide benefits to hundreds of thousands of people.

Long after the public health emergency is over, Connecticut employers will repay this huge loan.

Many other states are taking action to prevent such a crisis. To date, 24 states have used a portion of their federal coronavirus relief funds to help pay unemployment benefits or repay the principal of their federal loans.

Federal relief funds

Connecticut hasn’t used a single dollar to fight unemployment, although more money was recently pledged in the American Rescue Plan Act and our own state tax revenues are exceeding expectations.

In addition, state policymakers borrowed from the fund during the recession, an unprecedented move, whether the intentions were laudable or not.

This is unfortunate because the use of these funds will benefit all businesses in all legislative districts of the state.

HB 5607, a bill that recently went to a public hearing in the General Assembly’s Appropriations Committee, aims to address this crucial issue.

ABCA’s Eric Gjede testified in a legislative public hearing on March 26 in support of legislation allocating federal COVID-19 relief funds to resolve the state’s unemployment fund loan debt.

While the proposal was put forward by a number of House Republicans, it appeared to garner bipartisan interest during the March 26 hearing. This could be good news for the business community, which still feels the pain of the restrictions and disruption of COVID-19.

Eric Gjede, of the ABCA, notes that Connecticut was one of the few states that never recovered all of the jobs lost during the 2008-2010 recession, with the burden on Connecticut employers to pay off federal debt. loan one of the factors of this failure.

“In the absence of federal relief funds, Connecticut businesses will be paying off this debt for many years, which will again hamper our ability to recover and create jobs,” Gjede told members of the Credit Committee.


While HB 5607 is essential in the short term, further reforms are needed to provide short term relief and stabilize the long term unemployment fund, including:

  • Proof HB 5377, which prevents the assessment of the employer’s state unemployment tax experience from being affected by COVID-19-related layoffs.
  • Opposite HB 6633 as it is currently written. This bill will significantly increase unemployment taxes for employers. The law project contains some reforms of minimum benefits but in no way constitutes a balanced approach to maintaining the solvency of the unemployment trust fund.

The ABCA has repeatedly expressed its willingness to have an honest conversation about whether the state is appropriately spending the funds provided by the business community on the unemployment safety net.

The goal of the business community is to create a healthy unemployment trust fund for workers who will find themselves unemployed in the future.

We can do this without crippling tax increases. HB 5607 will protect employers from debilitating long-term debt so they can return to restoring and rebuilding our state’s economy.

For more information, contact CBIA Eric Gjede (860.480.1784) | @egjede.

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