The Appropriations Committee unanimously passed a plan to spend $2.8 billion in federal COVID-relief funds, including paying down $310 million in unemployment funds borrowed from the federal government to pay the massive influx of unemployment claims during the pandemic.
Although the unemployment payoff is not as much as the $350 million proposed by Republicans it is much more than the $50 million proposed by Gov. Ned Lamont.
According to the governor’s figures, the state of Connecticut borrowed upwards of $894 million from the federal government to pay the state’s unemployment claims after government-ordered shut downs put hundreds of thousands out of work.
The borrowed federal money must be paid back through an extra charge on employers’ unemployment insurance payments, spurring concern that the increased costs could slow hiring in the coming years due to increased labor costs for businesses.
According to the Appropriations Committee, Connecticut’s unemployment borrowing totaled $725 million, so the spending proposal would pay back roughly 42 percent of the borrowed funds and result in lower costs for Connecticut businesses.
“With the new American Rescue Plan dollars, we could fully or partially repay the federal UI loans in order to prevent increased taxes on employers,” the spending outline says. “At least 24 states have used the Coronavirus Relief Funds to meet unemployment benefit obligations or pay down principal on federal UI loans.”
Ranking Republicans on the Appropriations Committee expressed reservations regarding the use of some of the funds related to tourism and workforce development but ultimately supported the plan.
“I would have gone more in the direction of additional funds to replace the unemployment trust funds spent during this pandemic,” ranking member Sen. Craig Miner, R-Litchfield, said. “It certainly does a lot more than the governor proposed.”
“I think overall it goes in the right direction,” ranking member Rep. Mike France, R-Ledyard, said.
Connecticut entered the pandemic with roughly half the unemployment trust funds necessary to withstand a typical recession.
Connecticut previously borrowed over $1 billion to support its unemployment trust fund following the 2008 recession. Employers saw their unemployment costs increase significantly between 2010 and 2015 in order to pay back the loan.
Gov. Lamont, legislative leaders and Connecticut business associations reached a bipartisan deal last month to reform Connecticut’s unemployment trust fund to ensure it is better funded in the future, which has already passed in the House of Representatives.
The reforms include raising the amount of money an individual must earn in order to qualify for unemployment, increasing the taxable wage base and deferring unemployment payments until after a severance package has been paid.
The deal would also not penalize businesses for layoffs incurred due to government ordered business closures during the pandemic.
The legislature voted earlier in the year to have oversight of the federal money, and the Lamont administration will have to negotiate with legislative leaders on a final spending package for the federal funds.
The unemployment payback would be the second largest commitment of federal COVID relief funds under the Appropriations Committee plan. The largest portion of the federal funds being used to pay down $1.6 billion of Connecticut’s budget deficit.
The Appropriations Committee’s allocation of federal funds toward the economy totals nearly $450 million, including $85 million toward tourism marketing, $20 million toward legal representation for tenants facing eviction, $20 million toward support of festivals and fairs, $7.5 million toward event venues such as the XL Center and $4 million toward food insecurity.
Other allocations include:
- $80 million toward criminal justice
- $10.8 million for early childhood services
- $69.5 million for higher education
- $19.5 million for K-12 education, including summer camps
- $50 million for local parks and beaches
- $40.4 million for mental health services
- $10.6 million for public health services
- $90 million toward private nonprofit service providers
- $143 million toward human services, including skilled nursing facilities
- $30 million toward government operations
- $130 million toward workforce development training