GOP gubernatorial candidate Bob Stefanowski in 2018. Mark Pazniokas / CtMirror.org

Republican gubernatorial challenger Bob Stefanowski unveiled a $640 million relief plan Tuesday that would spare businesses from repaying hundreds of millions of dollars owed to Connecticut’s unemployment trust.

Stefanowski’s plan also would expand research-and-development tax credits, bolster relief for sole proprietorships and certain other small businesses, and repeal new taxes on restaurant food and on large commercial trucks. 

But Gov. Ned Lamont’s campaign responded the plan would strip nearly $500 million from state reserves and weaken government’s readiness to withstand the next economic downturn.

“Connecticut is ranked at the bottom of states to do business,” Stefanowski said. “CNBC just gave Connecticut’s economy an F. Small business owners are struggling with rampant inflation. … The governor is completely out of touch with people’s pain.”

The Madison businessman noted Connecticut just closed the 2021-22 fiscal year on June 30 with an unprecedented $4.3 billion surplus — equal to one-fifth of the last budget’s entire General Fund.

Lamont and the legislature agreed to dedicate most of that fiscal cushion, $4.1 billion, to whittle down the state’s massive, long-term pension debt — a $40 billion problem created by decades of poor savings between the late 1930s and 2010. The remaining $200 million would be used to increase the state’s emergency budget reserve from $3.1 billion to $3.3 billion, keeping it at 15% of the new fiscal year’s General Fund — the maximum allowed by law.

But Stefanowski said businesses, small companies in particular, need help now.

The single-largest component of his relief plan involves depositing $400 million of Connecticut’s budget reserves into the state’s unemployment trust.

That program has borrowed nearly $1 billion from the federal government to help cover jobless benefits since the coronavirus pandemic first struck Connecticut in March 2020. More than 290,000 people received weekly benefits during the worst of the outbreak in the spring and early summer of 2020.

Connecticut has repaid much of that debt but still owes nearly $200 million. But even after that is covered, the state fund needs another $1.4 billion to meet the federal solvency standard for unemployment trusts. That represents the estimated cost of one year of jobless benefits. Because Connecticut hasn’t met that standard for years, it cannot borrow interest-free when its fund is depleted. 

Businesses are assessed to replenish the unemployment fund, including covering its debts as well as helping to elevate the balance toward the solvency threshold.

The Connecticut Business and Industry Association has called repeatedly for a portion of state government’s budget windfall to be dedicated to shore up the trust and stave off higher assessments on businesses in future years.

Besides the one-time deposit into the unemployment trust, Stefanowski also proposed four ongoing tax cuts to assist businesses:

• Repealing the new highway use fee aimed at most large commercial trucks starting Jan. 1. This fee, which would not apply to dairy vehicles, is expected to generate about $90 million per year.

• Repealing the 1% sales tax surcharge on restaurant food and other prepared meals that Lamont and legislators approved in 2019. This costs consumers about $65 million per year.

• Restoring research and development business tax credits to pre-2019 levels, which would save companies about $28 million per year.

• And reversing a 2019 hike in the state tax on sole proprietorships, limited liability corporations and certain other smaller businesses. This would cost Connecticut about $53 million per year.

Stefanowski also renewed his challenge Tuesday to Lamont and the legislature to suspend the tax on diesel fuel for the rest of the calendar year. This would cost the state roughly $60 million. The per-gallon diesel tax rose on July 1 from 40.1 cents to 49.2 cents.

Lamont campaign spokesman Jake Lewis noted Stefanowski did not explain in his plan how he would pay for the ongoing relief.

“Bob’s plan not only lacks details but, like most things Bob sells, it lacks honesty as well,” Lewis said. “Under Gov. Lamont, we have seen 18 straight months of job growth, thousands of new businesses registering in record numbers, and the largest tax cuts for working families in state history.”

Lamont and the legislature’s Democratic majority approved a $660 million tax relief plan earlier this year. But while Democrats note it’s one of the largest in state history, Stefanowski and other Republicans counter it was far too modest, given a national inflation rate that has reached a 40-year high.

“Now that Gov. Lamont has put Connecticut on a strong and sustainable fiscal course,” Lewis added, “Bob Stefanowski appears determined to drag our economy back to the endless cycle of budget deficits and fiscal malfeasance.”

Stefanowski responded that his plan would stimulate job growth and the state’s economy.

“Based on Gov. Lamont’s failure to support small businesses, and the 739,000 people they employ, it doesn’t surprise me that he’s unhappy that my plan starts with cutting millions of dollars in taxes he raised that hurt Connecticut’s economy and entrepreneurs,” Stefanowski said. Every tax dollar you give back to a small business owner gets reinvested right here and will help grow a strong, healthy local economy.” 

Avatar photo

Keith M. PhaneufState Budget Reporter

Keith has spent most of his 31 years as a reporter specializing in state government finances, analyzing such topics as income tax equity, waste in government and the complex funding systems behind Connecticut’s transportation and social services networks. He has been the state finances reporter at CT Mirror since it launched in 2010. Prior to joining CT Mirror Keith was State Capitol bureau chief for The Journal Inquirer of Manchester, a reporter for the Day of New London, and a former contributing writer to The New York Times. Keith is a graduate of and a former journalism instructor at the University of Connecticut.