OFFICE OF FISCAL ANALYSIS

Legislative Office Building, Room 5200

Hartford, CT 06106 (860) 240-0200

http: //www. cga. ct. gov/ofa

sSB-258

AN ACT CONCERNING AN INCREASE IN THE MAXIMUM ALLOWABLE UNEMPLOYMENT COMPENSATION TRUST FUND BALANCE.

OFA Fiscal Note

State Impact:

Agency Affected

Fund-Effect

FY 13 $

FY 14 $

Future Years

Labor Dept.

UCF - None

None

None

See Below

Note: UCF=Unemployment Compensation Fund

Municipal Impact: None

Explanation

The bill phases in a change in the method of calculating the unemployment compensation trust fund balance tax rate and increases the amount that can be retained in the fund by increasing the fund's current goal. This increases the future long-term solvency of the fund in the event of future recessions and may avert future borrowing.

Additionally, the bill satisfies one of the requirements the state would need to meet in order to qualify for potential future interest-free borrowing from the federal government in the event of a future insolvency in the fund. There is no fiscal impact to the state and municipalities, as they do not pay unemployment taxes, but rather reimburse the Unemployment Compensation fund for any claims made by former employees.

The bill has no impact on the immediate insolvency of the fund, which is estimated at $754,981,923 as of March 23, 2012. i

The Out Years

The annualized ongoing fiscal impact identified above would continue into the future subject to inflation.

i Pursuant to the American Recovery and Reinvestment Act of 2009, the moratorium on interest free borrowing by the states from the federal government to maintain the solvency of the unemployment compensation trust fund ended December 31, 2010. The state began incurring interest on outstanding loans on January 1, 2011; interest costs for 2012 are expected to be $25-$30 million and are payable by September 30, 2012. The bill has no impact on these anticipated interest payments.