OFFICE OF FISCAL ANALYSIS

Legislative Office Building, Room 5200

Hartford, CT 06106 (860) 240-0200

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

sHB-5367

AN ACT CONCERNING THE TOTAL UNEMPLOYMENT BENEFIT RATE AND AN ONLINE EMPLOYMENT EXCHANGE.

OFA Fiscal Note

State Impact:

Agency Affected

Fund-Effect

FY 17 $

FY 18 $

Labor Dept.

UCF - Savings

Up to 107.8 million

Up to 143.2 million

Labor Dept.

UCF - Cost

112,320

224,640

Labor Dept.

UCF - Cost

Potential Significant

None

Note: UCF=Unemployment Compensation Fund

Municipal Impact: None

Explanation

The bill makes various unemployment benefits-related changes which result in an estimated savings to the Unemployment Compensation Fund (UCF) of up to $107.8 million in FY 17 and up to $143.2 million in FY 18, as well as an estimated cost to the UCF of $112,320 in FY 17 and $224,640 in FY 18 and a one-time potentially significant cost in FY 17.

Increasing, from $600 to $2,000, the minimum base period earnings required to qualify for unemployment benefits is estimated to result in an annualized savings of up to $5.6 million to the UCF. Based on unemployment claims data from 2015, it is estimated that this change would disqualify up to 9,300 claimants that are currently eligible.1

Modifying the unemployment benefit calculation based on average wages over four quarters results in an estimated annualized savings of approximately $136 million to the UCF. Based on unemployment claims data from 2015, it is estimated that this change would decrease the weekly benefit received by approximately 130,000 claimants. 2

Freezing the maximum unemployment benefit rate at the current value of $598 through 2018 results in an annual savings of $1.6 million to the UCF in 2017 and 2018. This estimate assumes an average annual increase of $5, which is the approximate amount of increase in recent years.

Requiring unemployment benefit recipients to post a resume online is anticipated to result in an increased cost to the Labor Department associated with additional adjudication hearings for claimants who are out of compliance with the requirement. Specifically, it is anticipated that additional personnel would be necessary to accommodate the workload at an annualized cost of approximately $224,640 ($120,000 for salary and $104,640 for fringe costs).

It is anticipated that implementing the benefits changes under the bill's provisions would also result in a significant one-time cost to the UCF associated with system programming and other information technology changes.

The Out Years

The annualized ongoing fiscal impact identified above would continue into the future subject to inflation, with the exception of the freezing of the maximum unemployment benefit rate which expires in 2018.

Sources:

Labor Department Unemployment Division Statistics

1 It is possible that some of these claimants would be eligible for unemployment benefits under an alternate wage calculation. Thus, the savings estimate represents a maximum impact to the UCF.

2 The increase in minimum base period earnings requirement and four-quarter calculation method do not apply to construction workers.