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Connecticut business leaders push for spending American Rescue Plan dollars on unemployment insurance debt

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Hoping to avert the kind of tax hikes and special assessments that Connecticut businesses faced after the Great Recession, some business leaders and legislators are pushing for federal relief funds to be used to pay back unemployment debt incurred during the COVID-19 pandemic.

Chris DiPentima, president and CEO of the Connecticut Business & Industry Association, said employers are solely responsible for paying back the $700 million Connecticut has borrowed from the federal government after the state's unemployment compensation trust fund became insolvent. With unemployment benefits extended to September, he said debt is projected to exceed $1 billion.

DiPentima and others would rather see the state use some of the American Rescue Plan funding to pay back the debt, though they haven't called for a specific amount. In addition to money going to cities and towns and to schools, the state will be getting about $2.6 billion under the ARP.

According to a chart CBIA shared with information from the National Conference of State Legislatures, 24 states have spent some COVID-19 relief funds on unemployment benefits and debt.

"Absent federal relief dollars, businesses in Connecticut will be paying down this debt for years to come, just like we did in the last recession," DiPentima said Wednesday in a virtual news conference urging the Lamont administration and legislature to act. He noted that government-mandated shutdowns and pandemic restrictions have caused a lot of the unemployment.

"Imagine receiving a tax bill from the state because you were mandated to be closed," said Wendy Traub, chief financial officer for Hemlock Directional Boring in Torrington. She added, "Paying down our debt is a proactive, fiscally prudent move."

Andy Markowski, state director for the National Federation of Independent Business, said the unemployment fund debt is probably the No. 1 issue he's hearing about from employers now.

Gov. Ned Lamont's policy director, Jonny Dach, testified last month in support of a bill that would rebuild the unemployment compensation fund by ultimately shifting the tax burden to larger employers, a proposal CBIA and NFIB opposed.

Connecticut borrowed $1.25 billion from Washington during the Great Recession and repaid the debt over six years with $85 million in interest, Dach said last month.

Connecticut Restaurant Association Executive Director Scott Dolch said Wednesday that Connecticut was the second to last state to pay back its debt and the interest rate peaked at 2.1%.

Dolch and Max Restaurant Group partner Scott Smith talked about how hard restaurants have been hit in the pandemic, their need for stability moving forward and their reliance on public assistance to stay open.

House Minority Leader Vincent Candelora, R-Branford, said some might say we don't need to deal with the unemployment fund and businesses have gotten enough. But he noted that most Paycheck Protection Program funding was "supplanting the unemployment system rather than getting businesses back up and running," and there's no relief to pay for other operating expenses.

Rep. Kerry Wood, D-Rocky Hill, a commercial real estate agent, also supports putting federal relief funds toward the unemployment debt.

"I see firsthand that Connecticut is positioned for growth," she said, "but it's critical for myself and policymakers that we make our businesses and our economy a priority."


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