(HARTFORD, CT) – Governor Ned Lamont and Connecticut Labor Commissioner Danté Bartolomeo today announced that the State of Connecticut has repaid the $1.2 billion Trust Fund loan that was used to cover nearly $11 billion in pandemic unemployment payments. The pandemic debt retirement ensures that Connecticut employers will avoid an increase in the federal unemployment taxes they pay beginning January 1, 2024.
Over the past two years, Governor Lamont and the Connecticut General Assembly directed $195 million from the American Rescue Plan Act (ARPA) into the Unemployment Trust Fund and special assessments to mitigate the ongoing financial damage employers faced as a result of the pandemic.
“Connecticut’s private sector has recovered more than 100% of the jobs it lost during the pandemic,” Governor Lamont said. “Building in stability and predictability for employers helps ensure continued growth and hiring. I want to thank Commissioner Bartolomeo and her team for charting a course through very complex state and federal rules to get us here. Their work saved employers millions of dollars.”
“Even after the public health crisis began to ease, employers still faced years of fiscal uncertainty due to pandemic borrowing,” Commissioner Bartolomeo said. “I applaud Governor Lamont and the legislature for directing ARPA dollars to shield employers from higher taxes and additional fees. These initiatives, and a clear path towards Trust Fund solvency, have allowed us to retire our pandemic-era debt, protect the business community, and prioritize continued economic opportunity for the workforce.”
The Unemployment Trust Fund, administered by the Connecticut Department of Labor, is the designated account from which all unemployment benefits are paid. It is funded solely through employer quarterly taxes. When the Trust Fund has insufficient funding to pay unemployment benefits, states borrow from the federal government. The federal government may raise employer taxes for every year they hold the debt; additionally, employers are required to pay an annual special assessment each September to cover the interest payments for the borrowing.
For tax year 2021, employers paid a minimum federal unemployment tax rate of $42 per full-time employee per year. For tax year 2022, the federal tax rate per full-time employee rose to $63 per year, an increase that the General Assembly mitigated through legislative action that reduced employer state taxes by more than the federal increase. If Connecticut still carried a loan balance on November 10, 2023, the federal tax increase on employers would have brought the minimum rate to $84 per full-time employee per year. Since the loan balance on November 10, 2023, is zero, the minimum federal tax rate for employers drops back to $42 per full-time employee per year for tax year 2023.
While Connecticut will borrow from the federal government for the Trust Fund over the next couple of years, Trust Fund solvency will be achieved in the future through a series of reforms proposed by Governor Lamont and unanimously enacted by the legislature in 2021 and 2022. Solvency, currently calculated at $1.7 billion in Connecticut, represents the Trust Fund balance that would prevent the need for borrowing should the state sustain recessionary unemployment levels for one year and receive zero Fund revenue. Updated 2024 Trust Fund solvency calculations are expected in December.