OFFICE OF FISCAL ANALYSIS

Legislative Office Building, Room 5200

Hartford, CT 06106 (860) 240-0200

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

sHB-6461

AN ACT CONCERNING UNEMPLOYMENT COMPENSATION.


OFA Fiscal Note

State Impact:

Agency Affected

Fund-Effect

FY 18 $

FY 19 $

Labor Dept.1

UCF - Savings

Up to 113.8 million

Up to 151.7 million

Labor Dept.

Employment Security Administration Fund - Cost

Up to 2.1 million

None

State Comptroller - Fringe Benefits

Various - Savings

Potential

Potential

Note: UCF=Unemployment Compensation Fund; Various=Various

Municipal Impact:

Municipalities

Effect

FY 18 $

FY 19 $

Various Municipalities

Savings

Potential

Potential

Explanation

The bill makes various unemployment benefits-related changes which result in an estimated savings to the Unemployment Compensation Fund (UCF) of up to $113.8 million in FY 18 and up to $151.7 million in FY 19, as well as a one-time cost of up to $2.1 million to the Department of Labor's (DOL) Employment Security Administration Fund (ESAF) in FY 18.

Modifying the unemployment benefit calculation based on average wages over three quarters for all workers results in an estimated annualized savings of up to $70 million to the UCF.2

Increasing, from $600 to $2,000, the minimum base period earnings required to qualify for unemployment benefits results in an estimated annualized savings of up to $1.2 million to the UCF. Based on unemployment claims data from 2016, it is estimated that this change would disqualify up to 3,000 claimants that are currently eligible.

Freezing the maximum unemployment benefit at the current value of $616 until the average high cost multiple (ACHM) of the UCF is at least 0.7 results in an estimated annualized savings of $21.5 million. This estimate assumes the ACHM will remain below 0.7 through at least 2025.

Expanding the circumstances under which a claimant is prohibited from receiving unemployment benefits concurrently with severance pay results in an estimated annualized savings of up to $59 million. This is based on the number of dismissal pay issues adjudicated by the DOL in 2016.

It is anticipated that implementing the benefits changes under the bill's provisions would also result in a one-time cost up to $2.1 million in FY 18 ($1.1 million for salary and $1.0 million for fringe costs) to the ESAF associated with business plan development, implementation/testing, and information technology programming.3

To the extent the bill's provisions result in lower unemployment benefits paid to claimants, there is a potential savings to the state and municipalities as reimbursing employers.4

The Out Years

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

Sources:

Labor Department Unemployment Division Statistics

1 The fringe benefit costs for employees funded out of other appropriated funds are budgeted within the fringe benefit account of those funds, as opposed to the fringe benefit accounts within the Office of the State Comptroller. The estimated active employee fringe benefit cost associated with most personnel changes for other appropriated fund employees is 86.67% of payroll in FY 18 and FY 19.

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

3 It should be noted that the ESAF is federally funded; however, receipt of funding is contingent upon federal approval. To the extent that federal funding is not approved, this cost would be borne by the agency's General Fund budget.

4 Reimbursing employers are billed by DOL for the actual amount of benefits paid to former employees collecting unemployment; this option is only available to the state, municipalities, Native American tribes, and non-profits.