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CHAIRPERSONS: Senator John Fonfara, Representative Sean Scanlon

SENATORS: Cabrera, Cassano, Cohen, Formica, Hwang, Maroney, Martin, Moore, Needleman, Slap, Witkos

REPRESENTATIVES: Barry, Butler, Carney, Chafee, Cheeseman, Concepcion, Devlin, Doucette, Elliott, Farrar, Hall, Hampton, Hennessy, Kavros DeGraw, Klarides-Ditria, Lemar, Mastrofrancesco, Meskers, Miller, Mushinsky, Nuccio, Paolillo, Perillo, Perone, Phipps, Piscopo, Polletta, Sanchez, Santiago, Stafstrom, Wood K., Wood T., Yaccarino, Ziogas, Zullo, Zupkus

REP. SCANLON (98TH): Well, good morning, everybody, and happy St. Patrick's day. Welcome you to the March 17, 2021 Finance, Revenue and Bonding Public Hearing. I am Sean Scanlon, House Chair of the Committee. I don't know if my Co-Chair is on yet, but any remarks from the Ranking Members before we get started?

REP. CHEESEMAN (37TH): No. Happy St. Patrick's day to everyone. I'm good to go, thank you, Chairman Scanlon.

SENATOR MARTIN (31ST): Happy St. Patrick's day everybody, and I'm also ready to go, thank you.

REP. SCANLON (98TH): All right. First up this morning, we will have a presentation from staff from 2 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

the administration on the unemployment Bill that we are hearing today, and so I would invite Jonny Dach and his colleagues to begin their presentation.

JONNY DACH: Thank you very much, Mr. Chair. Good morning to the Committee, thank you very much for your long day on Monday, what I hope will be a shorter day today, and for inviting me, as well as Deputy Commissioner Daryle Dudzinski, from the Labor Department, and Commissioner David Lehman from DECD, as well as some very hardworking members of the DOL staff to come in and talk to you today about 6633. A proposal that we think can bring some much needed stability to the unemployment insurance trust fund in Connecticut and benefit employers, workers, and the economy as a whole.

With the Chair's permission, I'm going to share my screen and take us through a quick slide presentation on that Bill. Before I do, I want to say two things. First, that every number you're about to see is based on an extraordinary amount of research from the R&D overtaxed team at DOL, who has built a model using all 100,000 employers in their database to look at what the impacts of this Bill might be.

And, second, that although I'm going to run through a lot of numbers, they are, of course, subject to further discussion with the Committee with other stakeholders, who are interested in this Bill and are intended as the jumping off point for discussion rather than anything final.

I also want to say for the record, that I do have a green tie here, but the Committee was too efficient in its opening remarks for me to have time to change out from the red one to the green one after I was called out for my poor showing on St Patrick's day. So I apologize to the viewing public and the Committee Members for that. 3 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

I also think David Lehman was completing a quick piece of family business this morning, and should be joining us in the waiting room shortly, so if the team could keep an eye out for him.

Alright. So, before I jump into it, to a summary of the proposal itself, I want to put some quick facts about unemployment insurance on the table. First they're not small potatoes, unemployment insurance taxes nationally raised about $45 billion dollars, the equivalent to 1% to federal revenues. And here in Connecticut and on an annual basis, they raise about $700 million dollars, which would be more than 3% of general funds if we raised and appropriated them. From an employer's perspective, they tend to be between .5 and 1% of payroll, which is significant. But less significant than other payroll taxes, like the FICA social security and Medicare taxes that come in around 7.65%.

I talked about UI taxes, but there are actually three taxes. Two on the stateside; the core product is an experience rating, tax that ranges per employer from .5% to 5.4% based on how often their employees draw benefits. Second, at the state level, there's a solvency tax adjustment that can go as high as 1.4% although it should be in a good year at zero. It's been stuck at that 1.4% statutory maximum in Connecticut for as long as we can remember. And finally there's a federal portion usually .6% that is collected by the feds remitted for the administration of the fund. Usually quite small dollar, but one of the ways that the federal government recruits any loans they provide to the states. Critically, all of those taxes are collected against a taxable wage base. So the first several thousand dollars that an employer pays to an employee in each calendar year; $15,000 on the stateside, $7,000 on the federal side.

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Also critically, the program has to be funded, there's no such thing as a free lunch in UI. If you pay out of dollar in benefit, it means you're going to collect that dollar at some point from the employers and economy of Connecticut.

As currently structured, our UI system has, as I see it, three major problems on the revenue collection side. First and most obviously, the fund is broke. Second, and one of the reasons it's broke, is that the experience rating is inadequate to the job against the current taxable wage base. And finally, the rates tend to be regressive in a way that overly burdens small businesses and working families.

The good news is that even though there are three problems, we think 6633 has put forward what's really one solution, which is to broaden the taxable wage base while simultaneously lowering the rates, and also to enact some benefit reforms that have been endorsed previously by the Employment Security and Advisory Board at the US Department of Labor that has been chartered by the legislature.

Added in for good measure in 6633 are some recession recovery measures inspired by various tools that the state and federal governments brought to bear during the pandemic that will help the economy get back full employment faster.

So with that overview, I'm gonna -- I'm gonna run quickly through a little more information about the taxable wages base. Connecticut's taxable wage base has stagnated, it's been flat for 22 years. That means it's declined in real dollars by almost a third over that time, and it's been flatlined for the second longest period in the program history. The program history actually is interesting because, and I didn't know this until I started working on this project, social security and unemployment insurance we're actually both created in the Social Security Act of 1935. They were core to the 5 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

recession recovery platform put forward by FDR and the new dealers. And at the beginning, social security had a $3,000 dollar taxable wages base, but UI was unlimited. Every dollar that an employer paid was subject to the UI taxes.

The US Congress came in a couple years later and equalize them at $3,000 dollars of taxable wages base, which still covered about 95% of wages paid in the American economy. And they puttered along together at $3,000 dollars for a while before social security's was index to inflation. It reached $142,000 last year, while the UI taxable wages base was left post by the federal government and by us states to stagnate.

The social security taxable wages base, which goes up every year, actually went up by more on January 1st, stroke of midnight this year, than the social - - than the UI wage base has gone up on the federal level in its entire, nearly century long history. And what that means is that, instead of having 100 or 95% of wages subject to this tax, only 23% of wages in Connecticut are. It's a record low.

And the next two slides are just some quick graphical representations here of the rise over time of the social security wage base compared to the stagnant UI tax wage base, and second of the declining percentage of total wages, subject to the Connecticut suited tax over time. All of these slides are included in our testimony and available from the Committee staffer up on the website.

Finally, to lay the table, just a quick look at how Connecticut's UI taxable wage base compares to other states. You can see we're pretty much in the middle at $15,000 dollars, that's the median. The average is closer to 20.

A couple other takeaways from this slide. First, there's an asterisk next to the state, as there are 6 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

for 22 states. That means their UI taxable wage base went up last year. In most cases, because it's indexed to some measure of inflation.

Second, higher taxable wage basis or not a partisan idea 'cause I really think, and we'll see as we go through this, they're a win-win for employers, for workers, and for the economy. We are well below Alaska and Oregon, Republican and Democratic states leading the pack, and well ahead of Louisiana and California, who have fallen behind.

Finally, taxable wage base on this is critical, so it's not the entire story. So if you looked at this chart, you would think that Connecticut and Massachusetts had similar taxing regimes here. But Connecticut's tax rate on its $15,000 dollar taxable wage base tops out at 6.8%. That's the 5.4% maximum experience rating, plus the 1.4% maximum solvency tax. That means your maximum Connecticut tax liability is about a thousand bucks. Massachusetts, same $15,000 dollar taxable wage base but their tax rates topped out at 18.6%, almost three times higher than Connecticut's.

Exposing employers to the type of liability that we're going to suggest, or you all have suggested, in part, of 6633, but we think that your proposal does it in a smarter way by adjusting the base and dropping the rates rather than simply spiking the rates.

Quick double click on each of those three problems that I put on the table before. First, again, simple, the fund is just broke. And it's broke in a way that hurts businesses, workers and the economy. Here is a look around the country at the solvency of UI funds 11, 2020, obviously we'd be a lot worse on 11, 21. The units are important, but that red line means it's solvent in the eyes of the federal government, you can see that Connecticut was bottom of the barrel going into the recession even after 7 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

ten pretty good years, only halfway to solvency. And you can see here that that is not a historical anomaly, this is Connecticut solvency level over time, again, the red line is solvent. In the last half century we've been solvent for three years.

And that has real costs, it has cost on businesses, cost on workers, it has cost on the economy. In 2009, Connecticut borrowed $1.25 billion dollars from the federal government to repay UI benefits paid out during the great recession. We paid those back over six years. We paid them back with an extra $85 million dollars in interest, and we paid them off at the worst possible time as our businesses were struggling to recover, rather than by forward funding those benefits in good years.

Our FUTA taxes, that the taxes are businesses paid to the federal government, they went up higher, they went up faster, they stayed up longer than almost any other state in the country. That's bad, as I said, for business. It's bad for the employees; they would be bringing back if they weren't struggling under those taxes. And the insolvency of the fund is a more direct threat to workers in so far as it leads to items in statute that limit the benefits that they can receive like the annual maximum increase on maximum weekly benefit rate in 31-231A.

Second, and really core to the problem, although somewhat complicated. The experience rating is inadequate, we call this unemployment insurance, but it is really just not an insurance product anymore because only 58% of the revenues come in from the experience rate taxes. This is a histogram of the experience ratings in Connecticut, your tax brackets on the bottom from .5% to 5.4%. The black bars are the number of firms paying at that rate, the shaded bars are the numbers of firms weighted by their employee size. And the two interesting features of this chart are one, the two thirds of firms 8 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

representing a quarter of employees who are trapped at the artificial lower bound on the experience tax rating. They're paying .5% even though it should be lower, their employees are not high users and they should be paying something closer to zero. They're paying a backdoor solvency tax through this artificial minimum on the experience tax rating. Which is somewhat anomalous, most states have an experienced tax rating minimum of 0%.

Second are the firm's trapped at the artificial upper bound. They're paying 5.4%, they're paying that maximum thousand dollars of liability per employee. But they're not able to cover their costs that their employees are drawing out of the fund, and that means those costs are being shifted on to other firms and the economy at large.

Finally, the rates are against the small taxable wages base or regressive in ways that burden small businesses and low income families. They burden small businesses because small businesses tend to have lower salaries to be able to afford lower salaries than their larger competitors, but everyone is paying the same tax against the same $15,000 dollar base, regardless of whether they're paying a $20,000 dollar a year employee or $200,000 dollar a year employee. That means this occupies a significantly larger percentage of payroll for small businesses than for large ones, it puts them at an unfair competitive disadvantage.

And, second, even though the statutory incidence of this taxes on the employers, economists would tell you that some portion of it gets passed on to the employee. And it's gonna get passed on in the same measure a minimum wage worker and very high income earners

So, the average employer is paying a 3.4% experienced tax, plus a 1.4% solvency tax. They're paying about $720 dollars per worker, regardless of 9 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

what that worker makes. This is probably the largest compulsory regressive tax in America and it's something we just don't talk about. That minimum wage worker is contributing up to 3% of her salary compared to less than half a percent for a 98th percentile worker in Connecticut making $114,000 dollars a year.

Two other odd features. First, because we tax employers, we end up taxing some people twice. If you work two $15,000 dollar a year jobs, both of your employers are paying the same on your behalf twice over. And second, the benefit and the contribution bases are misaligned. The employers contributing the exact same amount for that minimum wage employee and the $114,000 dollar a year employee, but if a $140,000 dollar a year employee were laid off, he would collect $667 dollars a week, the statutory maximum. If the minimum wage employees laid off, despite having made exactly the same contributions, she's going to get only $231 dollars a week.

So 6633, the core change is to align that contribution and benefit base to erase that disparity between contributions and benefits that I just discussed. So it sets the taxable wage base at a higher rate based on the maximum weekly benefit rate, and indexes those things to preserve alignment over time. A similar idea was put forward at the federal level in president Obama's 2016 budget proposal.

The upside of expanding the base so significantly, is that you get to drop the rates really significantly. So 6633 takes the minimum experience rating down from .5% to 0%, so more businesses are paying less inflated tax rates. And it takes the maximum solvency tax rate from 1.4% down 2.5%.

Even at the broader base with those lower rates, most employers are gonna see a decrease in their 10 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

taxes. At the maximum solvency rate -- we ran these numbers for 2019. Had the maximum solvency rate, the broader base, the lower rates been in effect, taxes would have decreased for 68% of firms, representing 54% of employees. And the funds balance would have improved by about $63 million dollars in what we think is a fair and more equitable way.

Here, last chart on the court taxable wage based mechanic. On the left is the same chart we looked at before, on the right is what that chart would have looked like in a counterfactual 2019 with the higher base and the lower rates. You can see that a lot of those employers that were trapped at the .5% artificial minimum on the experience tax rating, are at zero or something much closer to zero. You can also see that many fewer employers are not able to pay in the full cost that their employees are driving out, it is something that much more closely resembles a marketable insurance product rather than a broad based economic assessment.

Two other legs to the stool in 6613. First are some benefit reforms that have been endorsed by previous iterations although not necessarily this iteration of the Employment Security Advisory Board at the Department of Labor, which is an eight Member body of labor and employer Representatives.

The first and the most important of those is to make all severance pay allocable. Right now certain employees can draw a severance benefit equal to 100% of their salary and a UI benefit in the same week, and this would defer those benefits for all workers until after their severance pay has been exhausted. But claimants, who are benefiting from both of those at the same time, are significantly higher wage claimants than the average in the UI pool, and enacting this change would save the fund about $50 million dollars a year, and would save the Department of Labor some work adjudicating which 11 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

severance pay should be allocated and which should not.

Second proposal is to temporarily freeze the maximum weekly benefit amount at $667 dollars and the third is to raise the minimum base period earnings from 600 to something in the 1000. Altogether, those would lead to benefit reductions of about $58 million dollars, neatly matching the roughly $63 million dollars that we would expect to see at the maximum solvency rating in increased contributions. These things more or less balance out.

Finally, there some recession recovery measures in 6633 inspired by the CARES Act, the American Rescue Plan and Bills pending before the Labor Committee, as well as some of our executive orders. The first would have sectors experience rate increases during economic shocks. The theory being that experience ratings exist to require companies to internalize the cost of their layoffs and discourage those layoffs. That makes sense in a good economy, it does not make sense when your restaurants have been closed by order of the government or when there's been another outside shock to your industry.

Second, it would reduce the maximum solvency tax rate during recessions and, finally, it would non- charge for the DOL shared work program during recessions, which is a program that keeps people connected to their employer, connected to the workforce during economic downturns in ways that helps their employers and employees themselves.

So that's our roadshow today. I think, Deputy Commissioner Dudzinski, and perhaps Commissioner Lehman, if he's joined us, have some quick remarks, and otherwise, we are available for questions. Thank you very much.

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REP. SCANLON (98TH): Thank you, Mr. Dach. Have -- we've been joined by Commissioner Lehman yet. I see him, so Commissionaire Lehman.

COMMR. DAVID LEHMAN: Yeah. Thank you, Representative Scanlon. Great to be here with the Committee, I just want to underscore maybe a few points and then I'll pass it over to DOL. First and foremost, that this is about fairness, and I realize that is a dangerous word at times when we're talking about tax reform, but really in short what we're trying to do is better align demands on the UI fund with the contributions. And we think that makes a lot of sense and, in particular, a lot of employers, in particular, smaller employers do benefit from this, but there are subsidies for lack of a better word, and there is a difference between contributions and draws to the fund that we think -- that we think this does address. You know, the reforms here, this can be done as Jonny just mentioned, in a way where substantially all of Connecticut businesses, in particular, those smaller businesses do benefit in getting this fund on -- footing -- Solvency footing is going to be really, really important in terms of the credibility and stability of our business environment, as well as benefiting our employees.

Third point is a taxable wages base, I mean, as those charts showed, it has been stagnant for too long, not even index with inflation. You know, this is a terribly regressive tax that needs to be addressed in our opinion, right now.

And then last point, is that this should be done with the benefits reform. There is some common sense benefit reform that we think needs to be done in addition to changing the tax wage base here. We think it just make sense, and again, this should be done. This is not, in my opinion, a zero sum game, this can be done in a way that works for employees and employers, in particular, in benefiting many, 13 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

many of the small businesses in and around the State of Connecticut. So we would urge this Committee and the legislature to act with urgency here, thank you.

REP. SCANLON (98TH): Thank you, Commissioner. All right. I have a few quick questions. We'll certainly open it up, I think we'll probably have others, but I guess for Mr. Dach. You know, the legislature has talked about UI changes before, why do you think this time is different?

JONNY DACH: Thank you, Chairman, and thank you again to the Committee for allowing me the dispensation to go through that longer proposal, and for hearing from Commissioner Lehman and I hope from Commissioner Dudzinski when you have a moment.

I think this time is different, first, because the proposal is different. Prior iterations of this proposal that have been worked out and proposed to the legislature have focused on a pretty modest increase in the taxable wage base that resulted in taxes going up for every employer in Connecticut. So it gathered more money for the fund, but it gathered it in the same regressive way. What this proposal does is take the taxable wage base high enough that we can actually cut taxes for most employers in the State of Connecticut.

Second, the moment is different, unemployment insurance, taxes, and benefits, has obviously been part of the national conversation over the last year. My hope it's it lent some urgency to this issue that otherwise might not have gotten prime Billing in a Finance Committee Hearing. And also the information at our fingertips is different, we know not only the Connecticut borrowed $1.25 billion dollars after 2009 and paid it back with interest, we know that, right now, today, we've borrowed about $645 million dollars from the federal government that we're going to have to repay with interest, as our economy is trying to recover. And we know that 14 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

had the roughly $80 million dollars in additional solvency to the fund that this would have brought in each year, had these reforms been enacted after 2009, that wouldn't be the case. We would have had enough money in our fund to start this recession without borrowing and to be able to borrow with interest-free loans from the federal government, instead of the interest that we're going to pay now as a penalty for not having been solvent going in.

So I think the proposal is different, the moment is different and we've got a group of legislators who are ready to meet that moment and some stakeholders, based on the conversations that the department and the DECD and I have had are ready to get around a table and talk about a common sense path forward that works for all of the stakeholders.

REP. SCANLON (98TH): I guess the second question I have is -- In the testimony, AFL-CIO had suggested that they thought that the base period was too dramatic of a shift, CBIA testified that they thought that it was not dramatic enough. Your level -- your Bill puts it up to 1200 although that still leaves us pretty low in the national rankings. Is there a reason why you did not decide to sort of -- If we're taking our taxable wage based to the middle of the spectrum, why did you decide to keep the base period still relatively low compared to other states?

JONNY DACH: Sure, thanks. Thanks for the question, so there are three benefit reforms here in this package. They're all included, I think, because they were what the previous generation of the Employment Security Advisory Board endorsed, and I wanted to reflect back the conversations that have been ongoing on this topic for a long time in the State of Connecticut to the best of our ability.

The most significant of those benefit reforms is the $50 million dollars of the $58 million dollars in 15 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

total savings that comes about from prevent it -- from deferring benefits to people who are drawing severance. And to me, that one just makes common sense. I don't think people have an expectation that they will be able to get more than their initial base salary, you know, in a week because they're drawing severance and UI at the same time. And indeed, for most employees in the economy, we already asked them to differ. It's only if you meet a certain condition that you can access both at the same time.

So that's where the money really is on the benefit reform savings. That one year freezing the legislation on the maximum weekly benefit rate increase is the type of reform that matters only to someone who's already making 67-$72,000 dollars a year. And so no one who's lost their job is well off, but if we have to restore solvency to the fund by tinkering with benefits for some of them, I think that's a reasonable place to start. Same philosophy, by the way, applies to the changes to the severance package where we know that employees who are using both severance and UI in the same week are significantly more well to do at least from a wage perspective, then people who are only drawing UI, not UI and severance while in the special category.

On the $600 dollars a week, you know, again, all of these numbers, I think, are flexible. My hope in 6633 is that we've put some dials up on the board and that the legislature and the stakeholders can work to turn those two to a mutually agreeable compromise together. You know, that is a reform that is not -- I think it gets more airtime than it deserves in some respects because the numbers that the Department of Labor ran show that it only reduces benefits paid out by the fund by about $1.25 million dollars each year net of contributions that increases the solvency of the fund by something like 16 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

$300,000 dollars per year, and so we should have a conversation about it. Connecticut is, as you say, really an outlier against national and regional partners in that number, but we're an outlier in a way that benefits the lowest income workers, and we're an outlier in a way that has redounded to our significant advantage over the course of this pandemic, and so far as someone who drew $15 dollars from us, drew 600 or 300 or $400 a week from the federal government. And the federal government is in conversations about whether to make those types of automatic enhanced benefits more permanent, and we should factor that into our ongoing considerations about whether or not turn that dial and what setting to put it at.

REP. SCANLON (98TH): All right, thank you, I see some other questions. So I'll pause there, but I will just say at the top, that if there was ever a time for historic reform, I think the time is now for our unemployment system. And I do appreciate the administration for putting this forward and certainly look forward to working with both you Labor and Business to try to get this right, because I do think that we are right for a form and the way in which we do that, I think [sneeze] -- if we -- God bless you Larry Butler. If we get around the table and come back to work on this Bill.

REP. SCANLON (98TH): So with that, I will turn it over to Representative Cheeseman, followed by Representative Meskers.

REP. CHEESEMAN (37TH): Thank you very much, Chair Scanlon, thank you for coming here today Jonny and Commissioner Lehman. A lot of my questions were around the questions posed by Representative Scanlon with regard to increasing that, you know, the mat -- you have to earn minimum over period because if that -- even with that $1200 dollar level at $600 dollars a week, that's 80 hours of work a year, which is minimal. 17 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

And again, you -- Jonny mentioned that that made you eligible for federal benefits, but I think absent from this discussion I'll be -- look forward to talking to the Labor Commissioner. I was contacted by a number of employers locally, who had part-time high school students working for them, who then became eligible for that additional payment. And when -- and in conversations with DOL, was told, “Well, they really weren't supposed to get that. ”

So I think as we're looking at this, you know labor reform -- No one doubts the need to pay people unemployment benefits where they are -- lost their jobs due to layoffs, whatever, but I am contacted again, and wearing my hat, my employers who have let people go with cause, and benefits are still played out -- paid out. So this is a conversation, obviously, with Department of Labor but also going on to the increase, you know, that I believe you go to 67,000 above the 15,000. That's a pretty significant jump, and I get your point that, you know, there been some free riders on the system in terms of, you know, the larger companies, but where did that figure come from?

JONNY DACH: So thank you for the question. I do want to acknowledge that my colleague from the Department of Labor Commissioner Daryle Dudzinski, so if you have questions for the Department of Labor or want to hear their thoughts on the proposal more generally, I would encourage you to pose them to him directly.

The number to answer -- to answer your question, at the end comes from our desire to align the contribution and the benefit base, so that is to say, you should -- you or your employer, on your behalf, should continue paying into the UI system up to the point in your salary where if you were paid more, you wouldn't draw anymore in benefits should you happen to be laid off. And in calendar year 18 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

2019, which was the year for which we had good data, and so the year for which we -- on which we based all of the extraordinary amount of sophisticated modeling done in Department of Labor. That would have corresponded to a weekly maximum benefit of $649 dollars and an annual salary, and so a proposed taxable wage base of 67,500.

The proposal in 6633 is to align those and then to keep them aligned in index to inflation over time to preserve the real power of the fund, you know, importantly, what that lets us do is reduce the rates significantly and distribute the costs to employers, who can bear them and to employers who are causing those costs on the fund. It would put us, you know, I don't -- I don't want to hide the ball here. It would put us at the top of the country in terms of the taxable wage base, it would still put us at half of the social security taxable wage base, so historically out of alignment with the UI and social security match and taxable wage base but at the top of the country.

It would put us at the top of the country, not by a huge amount, there are other states that are in the 50,000, and they're reflected in our testimony and on that chart that I breezed through earlier. You know, the higher we take it, the lower we can take the rates. I think once you overcome the sticker shock, there is an economic common sense behind it, but again, these are conversations that I'm hoping the Committee will lead with all of the interested stakeholders on the labor and the employer side to arrive at a number that feels right for Connecticut. And if that number is a lower maximum taxable wage base but a higher tax rates, you know, that's still progress in a good day in my book. I don't know if my colleagues from other department want to comment.

COMMR. DAVID LEHMAN: Well, I would just make one, because I think it's the right question, Representative Cheeseman, but, ultimately, I think, 19 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

as Jonny mentioned, we think the way -- the right way to think about this is not just what's the taxable wage base but it's taxable wages based times the tax rate. Right, we're looking for a certain amount of dollars, and, you know, we could lower it for sure, but then the tax rate is going to increase, and I'm sure there will be folks that have a fear that will raise the taxable wages base and then it just easier to raise taxes in the future, and we can talk about how to address those concerns, but I think the punch line is, we think there needs to be very significant increase versus the 15,000.

We're putting forth what we think is the right number based on the modeling that we've done but, you know, are we $5,000 dollar smart on that, no, we can -- we can debate that, but it is -- that part of it is going to be a function of, not just the taxable wage base, but the rate itself, and we can iterate around that.

REP. CHEESEMAN (37TH): I think my final question is, as, you know, as we move forward on this. And it's just gonna run out of my head, so I know where to find you later, and I know there will be questions for the -- oh, I know what it was. So I believe, and I can't remember whether it was in this presentation, or the one we -- you had for us earlier but looking at the different industries and the effect it would have, you know. What they're paying out would have, and if, you know, some do much better, but to my recollection, there were some of the smaller employers that may not do so well out of this, so I just -- addressing that because it's not all going to fall on those, you know, that higher level.

JONNY DACH: Yeah, I can come in the other -- the other -- my colleagues can comment as well, you know, we did run numbers. I skipped them in today's presentation in the interest of respecting the Committee's time on what the impacts of this change 20 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

would have been in 2019 at the sector level [crosstalk] codes that we used to classify employers in Connecticut. You can see some variance between the impact on the different sectors, I think that variance hides a lot of firms specific impacts because different employers, different experience ratings are going to drive, you know, really should be driving all of the difference and what they contribute to come back to, but what if your employees dry out of the fund? That's why we call this unemployment insurance.

But they're sectors that will go up there, there are sectors that will see modest increases in their tax liability because they're high users of the program and, in particular, sectors that tend to have seasonally adjusted work [crosstalk]

REP. SCANLON (98TH): Representative, I see Deputy Commissioner Dudzinski, he has had his hand up, so I'm assuming he wants to comment on this, and I'd like to let him join the conversation, you know.

REP. CHEESEMAN (37TH): Okay, thank you.

DARYLE DUDZINSKI: Thank you, Representative Scanlon, appreciate the opportunity. Commissionaire Westby was -- had competing arrangements, and he apologizes not being here. Again I'm Daryle Dudzinski, the Deputy Commissioner with the Connecticut Department Labor. Just want to take a moment and offer some of the perspective from the agency and explain this is historical problem. And it's one that does require a permanent solution for years to come.

Historically, in the early 90s, a law was passed to increase the taxable wage base from 7,100 to 15,000 per employee. This actually started in 1994 and phased through 1999. Coincidentally, 1999 was the last time that Connecticut UI Trust Fund was deemed solvent. Increasing employer contributions is not 21 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

ideal, but it has to be part of the solution. If we do nothing, as in the past two decades, then the cost to employers always comes when the state is trying to recover from a downward economic situation, such as a recession and now a pandemic. When you factor the additional automation and administration to calculate and collect interest on borrowed funds, the FUTA tax reduction, that goes right through to January 1st in the year declared by the IRS, the employers are always caught off guard with such liabilities.

So by implementing a plan, a new law to reach solvency fairly to all employers in Connecticut is needed now. In such plan to reach and maintain the UI trust fund solvency will allow Connecticut employers to account plan for such payroll contributions and not have to be concerned about a UI trust fund impact for future recessions and economic downturns. So really, as the saying goes, this plan 6633 allows the Connecticut employers to whether the economic storms ahead.

Representative Cheeseman, I hear your frustration when you talk with employers, we hear them too. And at the beginning of the pandemic, there was an enormous amount of claims non like any unemployment program received in the entire country. And as you probably know, we have a very, very difficult computer operation, multiple systems, a mainframe, cobalt language, all these perfect storm issues. In addition to that, we had to be in a moratorium on our automation for years because we are building a state of the art UI system, all-inclusive of the benefits appeals and the tax divisions, and we are on track to deliver that in June of 22. We are going to make the best automation available to our customers.

You raised a couple points. Yes, there was errors in some of the processing at the beginning of the pandemic would -- with tens to a hundred thousands 22 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

of applications pending. And our customers waiting up to six weeks was a horrible situation and, yes, there were high school kids that applied. Now, whether or not they stated that they were in school or not, we can't -- we don't discriminate based on age, but if they tell us they're able and available and attached to the labor market, for the most part, we have to understand that is their truth and that's their record. Now, we will go back, and we have and will address those issues, and we will recover those funds through the due process. And we hope to do that over the next few months as we wrap that portion up the other part.

For the employers that you indicated may have discharged someone for willful misconduct based on the law, there's a fair hearing process, multiple levels with the administrator, both employer and claimant participating. There's in Connecticut, as you know, we have due process.

The appeals division lower level, higher level, and then there's two levels of core. So there's absolutely a mechanism to be heard by the employer. And it's surprising to know that the employer sometimes doesn't want to participate on their own, for whatever reason. But when they do, and they have the accurate information to supply and support their reason for cause, based on law, they do prevail, and it is at a higher rate. And that's kind of the unknown. So it's very interesting for us to be able to provide you that information, and we've be pleased to do that under separate cover to Representative Cheeseman.

JONNY DACH: If I could respond also to Representative Cheeseman's question about the industry specific impacts, I think I got a little lost in my earlier answer on the depth of our data that DOL has provided and in looking at what the counterfactual 2019 would have looked like. At the 23 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

end of the day, the goal of 6633 is to get Connecticut back to solvency in its UI trust fund.

And that is something that will be good for every employer in the State of Connecticut. And I know it feels a bit like one of those desert oasis mirages because we've been insolvent for so long, but most states in the country are solvent. It's possible for us to get there, and if we get there and we sunset that 1.4%, under this proposal 5%, I mean, .5% solvency tax adjustment, we're saving a huge amount of money for every employer in the economy, and we're saving all of the money that they would be paying in interest when we have to borrow.

Secondly, I think it's good for all of the employers, because we talked about unemployment insurance benefits like they're good for the workers and, obviously, they are. But if you go back and look at the quotes from government officials at the time that the program was designed. The point was not only to benefit workers and create a social safety net for them, the point about insurance benefits in a recession is to keep demand up in the economy. You know, to keep demand up for businesses to smooth out the impacts of economic downturns, and that's what they do, you know, they're like a mask for recession, right, they don't just help you, they help everyone around you by keeping demand up for the businesses. And so everything we can do to make that system more sustainable and perhaps even more generous someday here in Connecticut, I think it's actually good, not just for the people getting the checks but for the small business owners who stores they go spend those checks. Yeah.

REP. CHEESEMAN (37TH): Thank you, and I know I'm well pass my five minutes, Chair Scanlon. So, and I'm welcome to conversations with DOL about those issues I raised. And you're right, I mean I -- You know, conversations with Majority Leader Rojas, I gather we were very close several years ago to some 24 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

real reform. This has to happen, we can't stay insolvent, the cost to our businesses and our state is far too high. So I welcome your willingness to engage on this and with any luck, we get something done. Thank you for your time, thank you for your answers. Thank you, Chairs.

REP. SCANLON (98TH): Thank you, Representative. Representative Meskers, followed by Representative Nuccio.

REP. MESKERS (150TH): Question, pardon my ignorance on one aspect of this. Within the restructure increase of the payroll tax for -- or for the tax for unemployment benefits, is that going to hit it as a pretax item on wages in terms of -- for the employees? Is it fit -- hit the same way payroll taxes do on a tax effective basis?

JONNY DACH: So, it hits like an employer side -- well, maybe even less. I was gonna say it hits like an employer side payroll tax, right, so this is money that gets deducted, you know, like the employer, not the employee half of the FICA contributions.

It may -- that may actually not be a great analogy because it caps out so early in the year for most employees, right. If you're a $60,000 dollar a year employee, your employer is done paying this on your behalf sometime in the first quarter, and so it may not show up on employer balance sheets in exactly the same way, but if the thrust of the question is, you know, does this -- have sort of after tax implications for employees, you know, it will not show up on their filings. It should not show up on their pay stubs, you know, and, ultimately, to the extent that we can reduce taxes on small and low wage employers, we hope this is money that would get passed on to their employees in the form of future rases.

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REP. MESKERS (150TH): Okay, and if we were to turn around and agree to all of the proposals at this point in time, what's the projection for both full solvency or 100% funding, I mean, what's the glide path?

JONNY DACH: So the net effect of the changes proposed in 6633 is about $80 million dollars in increased fund solvency per year, and I -- when I say that I shouldn't -- I should put a relatively significant asterisks next to it because I'm extrapolating off the model that we ran for 2019. It is hard to predict the future, it is hard to predict what demands on the fund will be, it is hard to predict what economic performance and therefore contributions will look like, but think of it as roughly $80 million dollars in additional funds solvency each year, $16 million dollars at the outset from the sort of maximum revenue under the new proposed broader base lower rates. Although that's a revenue stream, we hope, would cycle out once we get back to solvency, and then a net effect of about $20 million dollars from the benefit reform changes, again, mostly from the changes on the severance side of the House.

Those reduced benefit payments by about $60 million dollars, they also reduce employer contributions because those payments are factored into the employers experience rating. And so the net effect of those benefit reforms on an annual basis to the trust fund is about $20 million dollars, so you stack that 60, plus the 20 on top of one another, you get about $80 million dollars.

REP. MESKERS (150TH): So we'd be looking at about eight to ten or 12 years to get to where we want to get to?

JONNY DACH: That is right, you know, Governor of Lamont has been outspoken publicly that the US Congress should take the loans that they've 26 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

currently provided to Connecticut and to other states in this unprecedented economic downturn and turn them into grants, so that our business community does not have to pay them back as they are struggling to recover. There are also states around the country that have used some of their CRF dollars to plus up their unemployment insurance funds. Those tend to be states that received significantly more money per capita than Connecticut.

As folks on this Committee may know, Connecticut got the short end of the stick in so far, as there was - - we got $1.4 billion dollars in CRF money, the minimum was 1.2 billion, so if you're Wyoming you got six times as much money per capita as the state of Connecticut. You had more of that money to use to shore up your unemployment insurance trust fund, but we in other states now have a lot more money available to us. We are in the very early stages of working with the legislature, pursuant to the act that was passed yesterday, or at least passed in the House yesterday to figure out how that money will be spent, but there's at least a possibility that some of it could be put towards improving the solvency of the unemployment insurance trust fund.

I think the only way where that would make good economic sense, is if we first fixed the leaks in the unemployment insurance trust fund bucket, and that's what 6633 tries to do.

REP. MESKERS (150TH): Okay, thank you very much.

REP. SCANLON (98TH): Representative Nuccio, followed by Representative Wood, Kerry Wood. Kerry Wood.

REP. NUCCIO (53RD): Good morning, everybody. Happy St. Patrick's day. How is everyone? Mr. Dach Thank you very much for your presentation. I'm hoping you can share that with the Committee because this is -- I'm a finance person, so I love looking at all the 27 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

numbers and all that, and it kind of helps me understand it, so -- and good morning, Commissioner Lehman. I don't know what you want on my screen, you disappeared there, but good morning.

So I had a few questions regarding some of the proposals here. I love the idea of getting rid of the severance allocation because, again, I agree with you, I don't think it necessarily make sense. My questions really come in around the freezing the minimum weekly benefit amount for one year, and then raising the minimum base periods for earnings.

First question is, are those able to be increased over time, or are we looking at this as a freeze in this legislation, and then there's no room to move that?

JONNY DACH: Thanks for the question. Thanks for the interest in the underlying data. The slides that I ran through at the top are attached to our written testimony, so you should be able to find them after the fact if you have questions, if you want to get deeper into the data.

REP. NUCCIO (53RD): You're gonna regret what you -- you're gonna regret what you just gonna say.

JONNY DACH: No, no. As the two Commissioners on the line will tell you, I'm willing to talk, and as some of your colleagues have already experienced, I'm willing to talk about this in extremely tedious detail and to bring in the real experts at DOL to help us crunch the numbers, not only the numbers already at our disposal, but also numbers that we can pull together to answer any questions you may have that we haven't thought of. So that's a -- that's a very open invitation, and you'd have to take it quite far before I had cause to regret it. [laughter] The DOL staff may have -- may have caused to regret it sooner.

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REP. NUCCIO (53RD): You and I, we're going to get along really well. [laughter]

JONNY DACH: But back to your actual question, excuse me for the detour. The legislation 6633, as drafted, is a one year freeze on the maximum weekly benefit rate. So it's currently 667, it is under existing law, it is supposed to keep pace with inflation but there's a circuit breaker at $18 dollars a year that was put in, I think, in the late 80s or early 90s, in an effort to keep the fund solvent. That has meant that the maximum weekly benefit rate declines in real terms over time.

This would make a decline little faster, it's not something I wake up excited about, but as I said, a little earlier, it's imperative that we bring solvency to the fund. And if one of the ways that we do that is by temporarily freezing the rate of increase and the benefits that are available to the highest wage claimants, people who, you know, have an individual household salary somewhere in the high 60s, low 70s. Now that's something that the Employment Security Advisory Board has unanimously endorsed in the past, and something that makes good sense to me.

The second benefit, or the third benefit reform after severance and the maximum weekly benefit rate freeze that would take the 600 up to 1,600. As drafted in 6633, that is not indexed to inflation. As I said, I think there's sort of a lot of milk that's been spilled over this concept historically that may not be commensurate with the financial impact on the fund, but it would certainly be, within, you know, the subject conversation with the Committee and the stakeholders, whatever that number is could be indexed to inflation over time. You know, if it were me, I'd be pushing a state constitutional amendment to index basically every number in the CGS to inflation. It's just crazy that we lock ourselves in on these things in 1994, 29 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

and then close our eyes to the declining power in real terms of the taxable wage base over time.

REP. NUCCIO (53RD): Okay, thank you for that, so I just want to put out a couple of things. One, the maximum weekly benefit amount, I know you're referencing like their higher wage earners, to begin with. I'm -- I think I would be okay with the one year freeze, as long as it we continue to look at it going forward, because even though they may be on the higher wage earners, when you lose your job, you're zero wages. So going from what you were making at $67,000 dollars a year to $600 a week is detrimental to somebody who has household expenses that are equivalent or in that same range, so I wouldn't -- I wouldn't necessarily kind of say that they make more money to begin with, so they shouldn't get what the maximum benefit is.

But the second part. The $1,600 dollar base as a Representative Cheeseman said, that's representative of such a low number, and I think it's significantly lower than all of the states around us as you had mentioned and throughout the country --

THOMAS SPINELLA: 30 seconds. 30 seconds.

REP. NUCCIO (53RD): -- that does equate to like only a few weeks of somebody working. So I'm interested to see what our ramp up is going to be to that, and what we think is going to be a fair amount.

And with my last 30 seconds here, the piece that really concerns me right now is the experience rating. That's what I'm hearing from all of my small businesses is that experience writing part is going to kill them, and it's the COVID related experience rating. So I'm wondering what the appetite is for finding a way to zero out impacts that were related from COVID and that they were mandated to close, rather than they wouldn't have 30 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

closed on their own, so that's a really big concern of mine.

And I know we don't have any time left, so I don't know if anybody else wants to jump up and ask that same question. [laughter]

JONNY DACH: Am I allowed to answer it? Or it is a five minute exhaustion preclude that -- I apologize to the Represent for filibustering so much for five minutes with my first answer.

REP. SCANLON (98TH): If you can give a quick answer Mr. Dach, so we can move on to the next questioners is -- but that would be great.

JONNY DACH: Right, I'll just very quickly address the experience rating concern that you're hearing from some of your employers in your district or around the state. We have an executive order 7W that non charges for COVID related claims. There are Bills pending, bipartisan Bills pending in the Labor Committee that would codify that based on language provided by the department, and that made good sense to us when Daryle and I drafted D07W a year ago, it continues to make good sense to us that we would cut employers a break as they struggled to climb out of this unprecedented recession rather than hold them accountable for something that was in absolutely no way their responsibility. So I think we'll be able to work together on a bipartisan basis to get that done for COVID. And hopefully, to take that same spirit into future recessions, either as part of this Bill, or through the conversations happening in the Labor Committee.

REP. NUCCIO (53RD): Okay. Thank you very much for your time, and I won't hold it against you that you don't have the green tie on. [laughter]

31 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

REP. SCANLON (98TH): Representative Kerry Wood, followed by Representative Terrie Wood.

REP. WOOD (29TH): Thank you, Mr. Chairman. Hello, Jonny. Thank you so much for this presentation, I look forward to diving in to the slides, they -- you did go by pretty quickly, but I appreciate it. I'm sure you already looked into this, but I just want to ask the question. With the federal stimulus dollars that is coming to Connecticut, is there any chance to pay off some of the interest bearing loans and leverage those dollars to get zero interest loans?

JONNY DACH: Yeah, you know, I don't want to get too far out over my skis here, this is not a conversation that I've had with the Governor, it's not a conversation that Governor has had with the Legislature, but I will say states around the country have done that with their CRF dollars. You know, right now we've borrowed 635 million bucks, it goes up every week. I don't know that we would be able to pay off all of that, but perhaps we can as you say, at least address the interest on the principle. I think there'd be the best business case for doing that would be after enacting some of these reforms that we were confident we were pouring money into a bucket that had been patched up, not one that was gonna continue to learn.

REP. WOOD (29TH): Right. Okay, great. I'd love if you look into that, and then are we gonna hear any negatives from like the small and medium sized business owners based on any of these reforms?

JONNY DACH: So I -- You'll have an opportunity to hear from CBIA later today, so you can put that question to them. I'd also -- I'd defer to Commissioner Lehman, who is more in touch with that community. I think you will hear concerns over the high taxable wage base, you know, again there's 32 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

sticker shock there, we would be the highest in the country.

We would also be well below where we would be, had it kept pace with inflation since it was created in 1935, and I think if you can sit back as all of us are willing to do and look at the numbers and get under the hood of what it means to raise the base, while simultaneously reducing the rate. You know, if we can get around the table and talk about it, I think a lot of those concerns will go away, but I think you'll -- I think you'll hear them as matters of first impression. But, Commissioner Lehman.

COMMR. DAVID LEHMAN: Yeah, I would just say, once people get beyond the optics, Representative, I think some business owners will really get behind this and understand it and endorse it. There are gonna be other, perhaps, some that are hurt because of their own experience rating and the lack of a cap that are paying more. So we're not gonna be able to please everyone, but I believe, the vast majority of the folks that do dig in here, will be supportive of this in the small to medium sized businesses.

JONNY DACH: And we looked at this again, as I referenced in my conversation with Representative Cheeseman at a sector level, you know, and like the restaurants, as an industry, will save something like 35% on UI taxes as a result of this proposal. That's not because they're getting a windfall, that's because they are overpaying. Right now, they are having costs transferred to them by higher users, higher income employers, and this would set them back somewhere closer to where they really should be.

And so I think, you know, as employers like that and others get under the hood, they'll realize that there are benefits to them, there are benefits to their workers, there are benefits to the economy, and even those employers who might end up paying a 33 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

little more in the short term, my hope, will see the benefit of putting the UI find on a sustainable forward funded system that gets them out of this game of paying interest, and just returns the entire operation to an insurance product, you know, that is funded according to demand in a way that I think just reads as more natural to all members of the business community than the current subsidy in different -- of your use and ability to pay.

You know, this is really -- this is a poll tax, this is a flat tax. Businesses and employers, employees pay it without regard to their wealth, or their expenditures or their income, it's just the same for everyone. And knowing that hasn't made much sense to almost anyone in America for the better part of a hundred years.

REP. WOOD (29TH): Thank you, Mr. Chairman.

REP. SCANLON (98TH): Representative Terrie Wood.

REP. WOOD (141ST): Great. Thank you very much, Mr. Chairman, thank you Jonny Dach. This was very enlightening presentation, I too look forward to digging into the numbers. It is absolutely something we have to fix, I hear it often from small businesses, so again, I really appreciate this being brought forward.

Two questions, and they're not specifically related to this Bill, but no, they are related to this Bill, but not specific to the Bill. On the comment about the federal delegation to fight for turning the loan into a grant, how likely is that, and what conversations have taken place? So I'm not sure, is that the Commissioner, the Deputy Commissioner that would answer that, or?

JONNY DACH: I think, you know, I can -- I -- Governor Lamont has spoken about it publicly. I can't characterize whatever private conversations he 34 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

might have had with members of our delegation. There has been federal legislation in the prior stimulus acts to defer the onset -- Daryle, fact check me on this. Differ the onset or at least the payment obligations associated with some of the interest on our loans. And my guess is that the National Association of State Workforce agencies, of which our DOL is a part, is also carefully tracking who's borrowed, who's been able to repay, what the consequences are, and I would expect our business associations who very much felt the impact of increased FUTA contributions in the wake of the great recession, as I said earlier, for years, to be lobbying up in Congress on this as well. It just makes, you know -- everyone wants a payroll tax cut, this is one that makes sense, but Daryle.

REP. WOOD (141ST): Sorry.

DARYLE DUDZINSKI: Yes, thank you, thank you, Jonny.

REP. WOOD (141ST): Total sense. Yeah. I didn't mean to cut you off. I was only agreeing.

JONNY DACH: This is your -- this is your time, Representative.

REP. WOOD (141ST): No, I know. But yeah, I should have let you finish. I'm sorry.

DARYLE DUDZINSKI: Hello, Representative Wood.

REP. WOOD (141ST): Yes, hi.

DARYLE DUDZINSKI: Commissioner Westby has been advocating for Congress to turn the loans into a grant in which it does not have to be repaid. We are also, as an agency, we're part of the National Association of State Workforce Agencies, NASWA for short. And all collectively, the states, even states not borrowing, agree that this is the best for the country; and there's about 20 states that 35 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

are borrowing. And it would be an absolute wonderful concept to create us back to where we were before the pandemic, make us whole so that we're on a fair game level in getting out of this pandemic and moving the economy forward.

So we're advocating, and through Commissioner Westby and the Governor, we are requesting and we'll see where this goes, we know our voice is heard because in the last plan signed by President Biden on March 11th, it extended the interest free through September 6th, so we're very pleased with that, that was a big hurdle. So it seems to be piece by piece, but we will continue to advocate for a grant versus a repayment of a loan for our state, our employers in Connecticut.

REP. WOOD (141ST): Wonderful. Thank you, and my second question is to the Deputy Commissioner, again, related to this Bill, but not specific to the Bill. You mentioned the upgrades in the infrastructure.

Why is it taking so long to accomplish that, and how -- are you working with DAS? If you could just talk very briefly to that? Maybe it's something we should have offline for those of us interested in learning how you're building this out to be more efficient.

JONNY DACH: Because I keep asking them pesky research questions that are distracting the task at hand.

REP. WOOD (141ST): Awesome [laughter]

DARYLE DUDZINSKI: it's a great question and I -- the agency would welcome an opportunity to explain and offer our direction as we move forward and, hopefully, in the spirit of collaboration with the legislature, in addition to that, we do plan shortly after the turn of the year, to provide a lot of 36 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

information about the new program as you are our stakeholders as well, and so we want to make sure that you understand what we're doing and what we're going to be implementing in June of 22. Why does it take so long? I never compare a state UI program against another state UI program, but if you -- in research, some states, that actually takes more than 20 years to implement a new system at over $100 million dollars.

Connecticut has the greatest subject matter experts with the unemployment insurance. We -- we're not -- we don't have it -- we don't have a great bench because we're lean. However, the experts that we have are doing a fantastic job. When we analyze which direction to go in for our state was -- we were planning to build our own system, and we realized that we didn't have the funding to go the full length and we didn't have the time. It would have probably taken us between seven and 10 years to implement. When we made the decision [crosstalk]

THOMAS SPINELLA: 30 seconds 30 seconds.

DARYLE DUDZINSKI: -- we joined a consortium, and we are working with Mississippian Main, who have this product. This product is also in Missouri, Wyoming and, hopefully, will be in New York as well. So we're building together and we started in the fall of 2016, we are on target to implement within five years, and it was supposed to go in May of this year. The pandemic set us back 13 months but we're on parallel paths, we're doing all the CARES act, the AARP new planning. All of the requirements discussions here with legislature, and on a parallel path we are going to implement ReEmploy Connecticut, our brand of our UI system in June of 22. But hopefully, that answers your question.

REP. WOOD (141ST): Only that I want to learn more so, but I appreciate the time, and thank you, Mr. Chair, and thank you, Deputy Commissioner. 37 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

REP. SCANLON (98TH): Thank you, and thank you all this morning again. A lot of food for thought here, really important conversation to have, and look forward to working with my Co-Chair and our Ranking Members to try to get a good Bill done this year on this and bring some needed reform to this system, so thank you all.

JONNY DACH: Thank you for having, us and really thank you all very much for your commitment to this issue and, again, thank you to the experts at the department in the UI tax and research teams for all the numbers that you saw today. We look forward to following up with anyone interested.

REP. SCANLON (98TH): Tom, who do we have next?

THOMAS SPINELLA: We have Elizabeth Fraser if she is ready to go.

ELIZABETH FRASER: I'm ready to go. Thank you. Good morning, Representative Scanlon, Senator Martin, Representative Cheeseman, and Members of the Finance, Revenue and Bonding Committee. My name is Liz Fraser. I'm the policy director for the Connecticut Association for Human Services, CAHS advances multi-generational policy and program solutions, which promote family economic wellbeing and foster equitably resource communities. And I'm here to express our support for SB 178, a Bill concerning an increase to the applicable percentage of the earned income tax credit, EITC.

This proposal will restore the EITC, which stands now, at a 23% match of the eligible federal credit up to the originally legislated 30% match of the federal credit. And while we support this increase, a larger increased to 50% would further help the EITC eligible families who are most impacted by the COVID pandemic.

38 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

One of our cause programs is the volunteer income tax assistance program, VITA, a program where lower income people can access free tax preparation. Through this program, and the 600 volunteer, prepares cause works with other 17,000 taxpayers a year, and the majority of these clients are eligible for the EITC. The EITC just puts money directly into the pockets of very low income working families in Connecticut, and they will receive -- and will relieve financial stress, which has been substantially increased with a pandemic.

Many eligible for this credit are essential workers who worked right through the COVID crisis in grocery stores, gas stations, childcare centers, and long term care facilities. An investment in raising the EITC to 30% will raise the average tax credit per family from $513 dollars to about $669 dollars per family based on family size, 50% would increase it to $1,026 dollars.

The EITC increases as family income increases but caps out at about $22,000 dollars in income, and then decreases slowly until it maxes out about an income of $56,000 dollars for a family of four.

But juxtaposed to this, the 2020 ALICE report talking about asset limited income constraint and employed people in our state and families, it reports that a survival budget, just survival, is over $90,000 dollars in Connecticut. And being asset limited, they have very little savings. The EITC is crucial to the ability of ALICE families to afford basic necessities like food, rent and childcare.

With limited assets, ALICE families have little in savings for emergency, and the EITC can provide the ability to have an emergency fund. And research indicates that the income provided by these credits increases family savings, reduces debt, and improves financial wellbeing. 39 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

Additionally, most of the money that goes to these families goes right back into local community businesses to pay for diapers, doctor bills, food, rent, car repair, so it helps local businesses as well going right back into the economy, as well as helping people. The EITC, just a few notes, is one of the most effective tools to reduce family poverty or help low income families be less poor.

Our EITC has also targeted low income families who pay a disproportionate rate of taxes as compared to wealthier families. So, increasing the Connecticut EITC will further mitigate this inequity, and in my testimony that I've delivered, there is a graph on that.

And to sum up, we strongly believe that the Connecticut EITC, is one of the most effective programs to reduce poverty, create a little bit more opportunity for families in our state. We support this, which would give additional relief and increase the financial security of over 200,000 very low income families in Connecticut.

THOMAS SPINELLA: 30 seconds. 30 seconds.

ELIZABETH FRASER: Thanks, all done.

REP. SCANLON (98TH): Perfect timing. Thank you, Ms. Fraser. Any questions from the Committee? Seeing none, thank you for your testimony today.

ELIZABETH FRASER: Thank you very much.

THOMAS SPINELLA: Yup. Next up, we have Randy Collins.

RANDALL COLLINS JR.: Happy St. Patrick's day everybody. My name is Randy Collins, advocacy manager for the Connecticut Conference of Municipalities. I'm here today to oppose House Bill 40 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

6631, AN ACT CONCERNING THE WAIVER OF INTEREST ON DELINQUENT PROPERTY TAXES.

6631 would allow municipal tax collectors to waive for good cause, all or part of interest accrued to a delinquent filing property taxes. This Bill would create a significant confusion among towns and cities, and honestly, put our local tax collectors in an untenable position requiring them to have to pick what is good cause, and having them pick winners and losers.

Are -- right now, our processes and procedures are uniform across the board, and requiring that when payments or late interest begins to accrue at one and a half percent per month, not compounding just on the principal. Towns aren't looking to collect interest in the idea of getting more revenue, but it is the method up -- the means that we have to ensure prompt payment of property taxes, which is the sole source of revenue for our towns and cities. The idea that we can start to pick this person can get it and that person can't, it's just, it's not a good road to go down.

I think CCM also has concerns that when we're looking at, you know, at a time of a pandemic that we're in, a lot of people are having a hard time. That we're seeing this provision in this, you know, something to help delinquent taxpayers at the local level. But are we seeing the same thing where we're gonna allow the Commissioner of Revenue Services to waive interest or penalties and fees on state taxes that are delinquent, why is this being solely asked upon our municipalities?

We understand the property tax is regressive. We've long argued that we need comprehensive reform. But we don't think that this -- this Bill doesn't reduce our costs of doing businesses, cost of doing business simply shift the burden onto the payers that are meeting the obligations and paying on time. 41 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

Thank you very much. I'm happy to take any questions.

REP. SCANLON (98TH): Thank you, Mr. Collins. I would just say the intent of this Bill is not to give tax collectors the ability to pick winners and losers, it's simply giving them the ability to use their good judgment to determine whether or not anybody that is a taxpayer, should be granted some sort of leniency due to a circumstance that they make their case to that tax collector rather than what happened now, which is that they come to make their case and the tax collector simply says, “I'm sorry the state statute has tied our hands, I wish I could help, but.”

So I guess, my question to you would be, are there circumstances in which specifically CCM would support something like this if those circumstances were delineated here in this report? I'll give you an example, Mr. Collins, I had a constituent two years ago, whose -- him and his wife, they're in their 80s, they like to pay their property tax by check. They don't have it deducted like my wife and I do through our mortgage, they had mailed a check to the town. Somebody had come to their mailbox, taken that check out of their check -- their mailbox, used it to somehow repurpose the check to give themselves some money. This was investigated by the Guilford police, the police actually arrested this person. But because of the fact that there was a crime and because it took some time for them to figure that out, and they had lost money, they were living on a fixed income, the tax collector said, “Listen I've talked to the police, I certainly understand the situation, but my hands are literally tied.”

Is that a scenario in which perhaps a victim of a crime or somebody was to get COVID, are there 42 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

examples where CCM would support specific kinds of leniency versus a more broad based leniency?

RANDALL COLLINS JR.: I certainly think, I mean, in that circumstance, I mean, obviously, it's through no fault of their own, and I know that there have been occasions in the past when the government declared a weather emergency and people could not get -- there were no -- roads were closed and they could not get to Town Hall to file -- to pay their taxes, that, you know, circumstances were extended. So I would never say, hey, it's an all or nothing. You know I -- but again to -- but it does create an issue of you have, as you said, you have a local tax collector, many of which are still elected. That would have to say, okay, and you're saying met circumstance, yes, certainly, that seems very reasonable and that's a hard -- You know, the hard deadline is difficult because you can always find that case and say, hey, this fits into that. But then the next one comes up, “Hey, you know, I'm just having a little hard time and I was waiting for a payment from a contractor and it didn't come in for a couple days.” And that tax collector then gives them a break, and if they're elected, could you not say the same, oh well, you gave that guy a break, did he contributes to your campaign? Did he contribute at the local level? And what about this person over here, why did you not provide them a similar, you know, a similar leniency?

It just creates a very hard situation where, again, you get -- that collector would still then have to pick who I'm going to give that good cause to and who I'm not. And that's where we just said, it ends up going to be a slippery slope, I mean again, you can find that case where, yes, absolutely something needs to be done. I mean, is there's -- And I don't know what that process would be, but I don't know how -- and it'd be very -- I think it'd be very difficult to delineate in state led -- state statute what it -- that would be. 43 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

We'd be happy to work with you, work with the collectors on this, but the uniformity of the process is one of the strengths of it, and sometimes it has -- it's a double edged sword, but --

REP. SCANLON (98TH): And I certainly understand that, Mr. Collins I -- and I certainly understand that being elected and having to tell people no or yes is a tough predicament, myself and my colleagues on this call, unfortunately, have to do that every day. And I would trust that a tax collector would be capable of doing that as well.

I guess, my charge to you, and you just offered it, so thank you, would be to work with myself and this committee, the tax collectors and your member towns to try to see if there are specific examples in which it wouldn't be so broad perhaps, that they would just have carte blanche decision making power, but if there was specific examples, whether it's a crime or illness or whether to your point that we could come to a mutually agreed upon definition of what those extenuating circumstances are, and look forward to working with you on that.

RANDALL COLLINS JR.: Thank you.

REP. SCANLON (98TH): So thank you. I see, Representative Nuccio, had her hand up, but I'm going to defer to the Ranking Member, Senator Martin, first, out of respect to his position.

SENATOR MARTIN (31ST): Thank you Mr. Chair, very - -- just very quickly. Mr. Collins, what's the current interest rate that a -- if you're late for your property tax payments, what is the current rate?

RANDALL COLLINS JR.: The interest accrues at one- and-a-half percent per month, so totals out to 18% annually. But that is only on the principle, it's 44 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

not compounding. So it's -- you have a one-and-a- half percent applied on a monthly basis.

SENATOR MARTIN (31ST): Yeah, I remember, I don't recall if it was last session or the session before, but I know when I was on the Banking Committee, we had similar legislation that, you know, we felt that there was -- 18% was kind of high and almost usury to a point and, you know, there was a lot of pushback from the municipalities regarding changing that or reducing it back to 12%. I think back 2000 -- you know, early mid two hundreds, I think 2000s, you know, 2005, 2006. Would you guys be enter -- would you entertain us reducing the amount from 18% down to 12%?

RANDALL COLLINS JR.: As I said, I mean, historically, we have always opposed it. I would -- this is not something that has come up with our membership this year, and I certainly would have -- would like to discuss it with them before I put this out there, but again, we're always willing to see, are the rates enough to comply prompt payment?

Again, that is -- that's the key aspect that we're looking for. I do believe that our interest rates are lower than what the state currently charges, I have to confirm that. But, as I said, it's one-and- a-half percent per month on the principle, so it doesn't compound. So it -- You know, I mean, we want -- again, we're not looking at this as a means to create and generate additional revenue, but we want it to be substantial enough that it prompts, you know, the payment because if it goes too far, all of a sudden those delinquent taxpayers now they're coming up on a second tax Bill and now they haven't paid the first one, are they gonna fall be even further behind?

And then the methodology -- yeah, and then liens are placed and eventually then go to tax sales. That's not what we want, but we understand, I mean, it's a 45 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

regressive nature of a property tax structure that's hard. I mean, we saw this year with the -- how many businesses, how many restaurants saying I -- “Because of the pandemic, we were ordered to shut our business down, but our property taxes are still due.” You know, and if a town, even if they could waive that interest or waive those taxes, we're now going to ship that on to other retail businesses, homeowners that are unemployed by being wholly dependent on one tax system by the, you know, basically dependent on the property tax. It doesn't allow us really, a lot of flexibility.

It's not, hey, we can ease up on our property tax collection because we're collecting it on our sales tax or local income taxes, I mean, this is the revenue system that we have. And a lot of those towns, you know, there's 99 exemptions already built into it, so it does place an enormous burden on our local property taxpayers, and it's something that, you know, we've consistently talked about revenue diversification, reducing exemptions, not expanding exemptions. I mean, probably 20 different Bills out there that would grant new property tax exemptions. That's what's placing the burden and making it as regressive as it is. I think we have to look at it comprehensively rather than just is it the interest, but the system in general.

SENATOR MARTIN (31ST): Thank you. Just one last question, what's the average collection rate for the municipalities?

RANDALL COLLINS JR.: I believe our average collection rate is over 95% statewide, but I know that there's a number of tax collectors, I believe, that are signed up to testify, and they would probably -- they would have better number -- specific numbers on that.

SENATOR MARTIN (31ST): Thank you, Mr. --

46 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

RANDALL COLLINS JR.: But I can look and get it back to you.

SENATOR MARTIN (31ST): Thank you. Thank you, Mr. Chair.

REP. SCANLON (98TH): Thanks, Senator. Representative Nuccio.

REP. NUCCIO (53RD): It's hard to get down to that mute button sometimes. Good morning, how are you?

RANDALL COLLINS JR.: Living the dream.

REP. NUCCIO (53RD): [laughter] You and me both. Quick question for you, hearing what you're saying right now, I'm on the town council of my town and I talk to my tax assessor all the time and I understand what you're saying. So, I guess, my one question to you is, do you necessarily have a problem with the legislation as written, or is it just a matter of administration? And if we were to say, would this be better if it was something that could be appealed directly at the state level rather than the town level, would that alleviate your concern?

RANDALL COLLINS JR.: I'm not sure the process by which you would be appealed to the state level, we certainly look at that. I mean, I would -- I'm not sure the administrative procedure or where that would go but I'd be happy to discuss that and then to see if that is a solution. Again, putting it on, you know, at the -- strictly at the local level could place, you know, really undue burden on local officials of having to say yes or to say no to their constituents, I mean, it is -- You know, you're talking livelihoods, you're talking people's homes, I mean, it's -- no one wants to apply interest.

You know, as I said, our goal is we want -- we'd love to be able to reduce the property tax across 47 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

the board, you know, make it easier for people to pay, easier for our businesses and our, you know, homeowners, businesses to meet that burden. But as I said, we have a system with 1,200 mandates, most of them unfunded or underfunded, you know, property tax system has 99 exemptions, 40 local option exemptions. Each one of those local options, how can I not, you know -- you know, an option to provide a tax credit for this group or these seniors or veterans, I mean, and there's a lot of pressure to do this, and again it just shifts the burden to other taxpayers, so.

Again, I really think it's at some point, how do we reform the property tax system in general, so that it reduces the regressive nature of it, and it's more workable for, as I said, all of our taxpayers? Rather than is it just the interest or is it, you know, a single exemption. But that's, you know, it's an impediment to economic development it's an impediment to homeownership so, I said, well, we are a CCM willing to work, this is a cause we've fought for many years in it -- but it's hard when it's the only revenue stream we have.

REP. NUCCIO (53RD): Right, and I understand that. I understand the whole regresiveness [sic] of the property tax and everything else, I think it would be worth it for us to kind of look and see if this was something that we could find a way to maybe administer at the state level because it would take the decision out of the hands of the local level, but I appreciate your testimony today, thank you very much.

RANDALL COLLINS JR.: Thank you.

REP. SCANLON (98TH): Thank you, Mr. Collins. Next up Tom, yep.

THOMAS SPINELLA: Scott Drozd. I don't know if he's ready. Yup, here he comes, you're muted, sir. 48 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

SCOTT DROZD: Sorry, thank you for your patience, can you all hear me? Alright, great, well, thank you all today to the Finance, Revenue Bonding Committee, my name is Scott Drozd, and I'm the CEO at FCP Euro. We're an online provider of replacement parts for European cars, the company was established in 1986, and it's a second generation business that had made the transition from brick and mortar to present day a global online retailer.

I want to talk about the Invest CT fund today, and the investment we received back in 2018 from Stonehenge. At that time, we were 46 million in revenue and about 88 employees, and we were having such a tremendous difficulty finding sources of capital, credit markets were incredibly tight, the banks just couldn't give us any leverage or lending capacity.

So we were on the ropes of, you know, fast growing business, in 5,007 times, but obviously, fast growing business still trying to remain profitable, it was very, very tough to get financing. Through the Invest CT program, we were able to not only keep the 80 employees that we had but over the next, you know, to present day we grew the company by 92 employees. So we now have 180 employees here and we're on track for 160 million in revenue for 2021. I don't think this would have been possible without the funding from Invest CT that grew out from 46 million to 116 million.

So I'm, you know, I'm talking on behalf today, I can't stress enough how important this type of funding is, this alternative lending for businesses that don't have access to type credit markets. And I've got to imagine that there are hundreds or maybe thousands of other businesses in our -- you know, like ours, like FCP Euro in the State of Connecticut looking for funding, and, you know, on behalf of our 49 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

company, I support and encourage an extension of the Invest CT Fund program.

REP. SCANLON (98TH): Thank you. Thank you very much for your testimony. I don't see any questions, so we're gonna move on to the next witness. Thank you. Oh, sorry. Representative Wood, what is your question?

REP. WOOD (141ST): No, not a question, just thank you. I love it when people come in that we don't usually hear from. I mean, I love hearing for everybody, but I really appreciated, Scott, your testimony as a business owner who's thriving and built a great business, it's the American dream, thank you.

SCOTT DROZD: Thank you very much. Appreciate that

REP. WOOD (141ST): Really appreciate it. Thank you, Mr. Chair.

REP. SCANLON (98TH): You're welcome. Representative, Cheeseman.

REP. CHEESEMAN (37TH): Very quick question, thank you for coming here today, Scott, where had you attempted to get financing before Invest CT had been able to provide you the funds that allowed you to grow your company?

SCOTT DROZD: Yeah, I mean, we were -- for the most part, we were undercapitalized and privately held to just our own cash flow. We were just doing small senior lending facility from Webster Bank local banks, but really, the trick is that transition from a small business to a lower middle market, needs a different level of financing in capital and really that's where -- I do think the lower middle market, hundred million to 500 million is where most of the economic growth in the state is gonna come from. And traditional senior lending is very difficult 50 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

with the leverage ratios and some of the credit markets to take those businesses from ten, 20, 30 million to a hundred, 200, 300 million.

So, you know, we tried from senior lending and they just they couldn't do it. You know, especially after the kind of the Dodd-Frank Act, they just, you know, there's some strict regulations, and, you know, the alternative funding through the -- through the -- this program gave us that critical capital that we wouldn't have been able to do without it. So, you know, it was just -- it was senior -- it was small senior living facilities, but they couldn't get -- they couldn’t stretch to give us what we needed to grow the business.

REP. CHEESEMAN (37TH): And my understanding is that these new jobs that you create, 75% of them have to be in the State of Connecticut, there are metrics in terms of job creation, am I correct on that?

SCOTT DROZD: That is correct, I think it's higher than 75% but we, you know, we kept 90 -- 95% of the jobs that we grew from 80 to 190 are, you know, are in this, you know, within the State of Connecticut. And just to -- you know, also to look a little to the future, you know, by 2025 we're gonna be 750 million, with over 650 jobs in Connecticut, and again that -- it's not just the trajectory of us getting to 160 million today but it's the capital that's it's putting on-- putting us on that trajectory to get to six, 700 jobs over the next five years, so it's a -- it was really, really instrumental to our growth and the growth of our employee base here.

REP. CHEESEMAN (37TH): And these are skilled jobs, paying good salaries and wages?

SCOTT DROZD: These are all skilled jobs paying on average salary about 65,000 and up, so yeah, all skilled jobs. 51 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

REP. CHEESEMAN (37TH): Right, thank you, thank you for your time. Thank you, Mr. Chairman.

REP. SCANLON (98TH): Thank you, Representative. Next up, Tom.

THOMAS SPINELLA: Yep, Jim Koplik. Koplik, sorry, Koplik.

JIM KOPLIK: Yeah, no problem, no problem. Can everybody see me?

REP. SCANLON (98TH): Yes, go ahead, Jim.

JIM KOPLIK: Okay, great. Thank you. First of all, Senator Fonfara, Representative Scanlon, Senator Martin, Representative Cheeseman, and Members of the Finance, Revenue and Planning Committee, thank you very much. I'm Jim Koplik of Stamford, Connecticut, President of Live Nation Connecticut in upstate New York, and we own and operate the Oakdale theatre in Wallingford and the XFINITY theater in Hartford. We also promote a lot of shows that most of the other venues -- concert venues in the state.

I'm happy to appear in front of you to support the equitable admissions tax treatment of the XFINITY theater in Hartford. We draw over 350,000 people a year annually to which events, and we consider an important cultural and entertainment attraction for the state.

I also want to look at this Bill as a rescue Bill, we seem to be the only concert venue in the state that plays 10% admission stacks, everybody else is either at zero or at 5%. And it results in the loss of concert events to other venues in the state, and also more so to surrounding states in Massachusetts, New York, and Rhode island, which have no admissions tax or sales tax put on the tickets that people buy. It's discriminatory, in my opinion, to the people 52 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

that go to the XFINITY theater. And we are hoping to level the playing field and get down from 10% to 5%. Which all for-profit venues pay in the state of Connecticut.

Do want to mention two other things. Number one, we've been out of business for over a year now. So any relief would be most appreciated. I -- and in this point, we're not sure when we're going to be back in business. I don't know of any other businesses in the State of Connecticut that actually have really closed down. We've lost most of our employees on furlough or laid off, so we do need to get back to business.

Secondly, I know that OPM has said that they are against this Bill because of the loss of state taxes, which I understand mathematically but what they're not taking into account is if we lose the show to another state, it's a much bigger loss. Doing quick math, if we have our average show at XFINITY gross is $400,000 dollars, 5% is $20,000 dollars tax, but we also -- if it goes to Rhode island, Massachusetts or New York, that show will -- that artists will not pay 7% income tax, which on $400,000 dollars would be $28,000 dollars, plus we each pay about another $25,000 dollars in additional sales tax on food, beverage, parking, and t-shirts and whatever else. So we, essentially, are looking at a tax loss for every show that appears -- that doesn't appear in Connecticut due to this unusual 10% tax versus what is 5%, which I could sell to the artist, but I just can't sell 10% because most artists are really looking to have their ticket prices more uniform, and 10% makes it much less uniform.

THOMAS SPINELLA: 30 seconds, sir. 30 Seconds-

JIM KOPLIK: I'm done, how's that?

53 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

REP. SCANLON (98TH): That's great. Hey, Mr. Koplik, good to see you. I really enjoyed meeting you a couple weeks ago and talking about this, you've got a long history in the business, and it was a fascinating conversation. Just a few quick questions for you.

Number one, you know, we're sitting here, it's March 17, people are feeling pretty good about where things are at. I, for one, miss live music a lot and, as I mentioned to you when we met, I have some really fond memories of going to some amazing concerts at what I will always refer to as the meadows. Even though the name is maybe changed, but what are you hearing from artists, I know you're very connected to people. Are they going to tour this summer? Are you expecting to be able to have shows there with social distancing and masks? Give us a little sense of what the concert outlook is looking like.

JIM KOPLIK: Most artists are against the idea of social distancing. They don't like the feel of getting on stage and seeing people six feet apart from each other, the -- they're used to playing venues where the audience is much more tribal and together. So the amount of artists that will play under social distancing rules is very limited, some will but most -- Ringo Starr just was our opening show at the new Amphitheatre in Bridgeport, and I got a call from Ringo's people a couple of days ago asking about social distancing. And I said, as of now, we're still socially distance, and he canceled the date on us, and that was going to be our opening show. I think most artists feel that way but I've been working with Commissionaire Lehman, and he's been very helpful and hopefully we'll hear soon some rules that might improve the opportunity to get contracts in Connecticut.

REP. SCANLON (98TH): Okay, and then again without, you know, having you name drop people we had sort of 54 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

talked about, and it was fascinating to me number one, that these artists pay you the night of the show, right? Is that accurate?

JIM KOPLIK: What ends up doing is it's the night of the show -- and I'll use Dave Matthews Band as an example because Dave Matthews Band played XFINITY almost every single year. In 2020 he was skipping the XFINITY theater. He does do the same ticket prices all over the place, wherever he plays the country, our 10% tax really does raise the price dramatically, and he was not going to play XFINITY in 2020, and I expect he won't play XFINITY in 2021.

REP. SCANLON (98TH): And again, but you were saying when we met that that 5%, whether it's him, Foo Fighters, any of the biggest bands in the world, makes a big difference of whether they come here or not, right?

JIM KOPLIK: Yes, very much so. They would much rather go to a state where there is no tax. They don't want the customer paying the tax, or they don't want the taxes taken out of their fee, which sometimes, we've done also, instead of charging the customer we've taken out of their fee, which means they make less money. So either way, we're Connecticut, we're not a major market and I built -- 50 years I've been doing shows in Connecticut, well, really 49. One year, now I've been in the vaccination business right now 'cause both of our venues are vaccination sites. So I always say 49 years I've been in the concert business, one year I'm now in the vaccination business.

But I think we're gonna end up seeing less shows, and when OPM does the math, they're doing the math as is if the show exists but they're not taking into account if the show doesn't exist, and they're also not taking into account the loss of revenue if the show doesn't exist on the food, the beverage and the parking and everything like that, so the math 55 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

actually works in favor of the state by dropping the tax from 10% to 5%.

REP. SCANLON (98TH): I completely agree. Thank you Mr. Koplik. I know Senator Fonfara had a question as well.

SENATOR FONFARA (1ST): I don't have a question, Mr. Chairman. Good to see you Jim. I was just trying to recover from your statement that OPM would oppose something that we wanted to do as opposed to just what they wanted to do so, but I'm feeling better about it now, so thanks very much.

JIM KOPLIK: Okay, good to see you.

SENATOR FONFARA (1ST): Good to see you too.

REP. SCANLON (98TH): Senator Martin.

SENATOR MARTIN (31ST): Thank you, Mr. Chair, and good comment, Mr. Senator Fonfara. Jim, just a couple of questions. Regarding COVID, and I know you lost almost all your shows if not all, but the - - and your -- you know, you lost a lot of your employees to other businesses, but you -- have you received any grant money and be helped from the state regarding this period of time here?

JIM KOPLIK: We have received no grant money or loan money, either from the federal government or from the state government.

SENATOR MARTIN (31ST): And regarding your taxes you're -- currently, you pay 10% and don't you also pay an additional on top of that 10% to 2% or a top of that, to municipalities.

JIM KOPLIK: Yes, we pay 2% to the city of Hartford.

SENATOR MARTIN (31ST): And lastly, I know you're constantly or always in competition with the tribes 56 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

for artists and so forth, are they paying taxes regarding the -- go ahead

JIM KOPLIK: There is no admissions tax at Foxwoods or Mohegan Sun.

SENATOR MARTIN (31ST): So that 10%, 2%, it's not applicable to them?

JIM KOPLIK: No it's not, and, you know, frankly, Dave Matthews moved out to Mohegan Sun this year. I don't want to speak against the tribes, but I'm just stating the fact that Dave Matthews is now playing in 2021 at Mohegan Sun, so therefore, it's good example of losing the show, and therefore the state losing the opportunity to even get 5%.

SENATOR MARTIN (31ST): So we reduce this to 10% -- from 10% down to 5%, we're actually sort of giving you a fighting chance to be competitive to attract the artist?

JIM KOPLIK: Yes, and as I said, the math will actually work out that the state will make more money if we get the show at 5% because of all the additional taxes, and that doesn't include the hotel tax that isn't -- that all the artists stay in hotels, gas tax, the gas tax that the customer might pay going to the show and back, and there's a lot of outside taxes and I'm not including in my number, so there's even a greater advantage.

SENATOR MARTIN (31ST): Mr. Koplik, thank you so much, appreciate your response. Mr. Chair, thank you.

SENATOR FONFARA (1ST): Thank you, Senator Martin, Representative Cheeseman.

REP. CHEESEMAN (37TH): Thank you, Senator Fonfara. Quick just sort of comment question. Jim, have you applied for the under the Shuttered Stages, such 57 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

Shuttered Venues grant that the feds have just recently authorized under the American Recovery Plan, because that would seem to be suited for a venue like yours?

JIM KOPLIK: It would be. The problem is that we're owned by a company that's too large to apply for that. That's the problem we've had.

REP. CHEESEMAN (37TH): That's all -- yeah. Thank you. I have more than -- and, secondly, just commiserating, you know, my day job I run a children's museum and I often say as I'm talking to my fellow executive directors, the one thing that makes me feel better from a schadenfreudian point of view is that I'm not a operating or performing arts venue, so you have my sympathies and certainly anything we can do to assist going forward to make you more competitive and like us, Chair Scanlon, I really miss live music. So the sooner we get you going again, the better.

Thank you, Senator Fonfara, and I -- yeah, your comments about OPM were spot on, we should do dynamic scoring on all of this, we shouldn't look at something as just a loss of revenue. We should look at the revenue that will result when we make these changes that are gonna keep the state whole and better off, so thank you, thank you for your time. Thank you, Chair Fonfara.

SENATOR FONFARA (1ST): I think that's an unusual request that we would ask people to think. I know that's something that we're used to but maybe one of these days. The one and only, Representative Jack Hennessy. Jack, you have the floor.

REP. HENNESSY (127TH): Thank you, Senator Fonfara, good morning. Just to comment, I just wanted to thank you, Jim, for coming to testify today. As a Representative from Bridgeport, I want to also thank you for your patience and endurance in coming to 58 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

Bridgeport. I hope that we can finally pass, get rid of this egregious tax, and I hope we can open up and have life performance this summer. Thank you, thank you, Jim. Representative.

JIM KOPLIK: Thank you.

SENATOR FONFARA (1ST): Representative Nuccio.

REP. NUCCIO (53RD): Thank you, Chairman, how are you? I don't think I seen you yet this morning.

SENATOR FONFARA (1ST): Well, hopefully, we won't do 15 hours today.

REP. NUCCIO (53RD): Oh, that would be nice, Mr. Koplik. First, let me have a little fan girl moment and just thank you for making my entire life and my children's life very memorable through live music, we had a lot of 2020 concerts that we were planning to go to that all got canceled and held on to our tickets because, you know, there's truly no other way to experience music. And I loved going back all the way Hartford Civic Center and that, and seeing Jim Koplik, a lot of my tickets on my wall, you know, this is a moment for me here. So first, I just want to thank you.

JIM KOPLIK: Thank you.

REP. NUCCIO (53RD): No, thank you really.

JIM KOPLIK: This feeling is great here is really not real. It's my father that really did everything, I just go.

REP. NUCCIO (53RD): It -- you know, it's all right, it's a family tradition. Yeah. I'm good with you. [laughter]

JIM KOPLIK: Really me. [laughter]

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REP. NUCCIO (53RD): So you had mentioned something that couple people have touched on, and I think it's worthy of digging into. I really have two questions that maybe you can help me with, and one of them is if you can provide any kind of history on why these just these couple of venues were chosen to receive a higher -- a higher tax rate, and the second is, I think you bring up a very good point, I'm an accountant by nature, so the ROI on this is very interesting to me. If you have any kind of indication of how many shows you think you may be able to increase in bring because of this drop in rates, decrease in tax because it does seem pretty punitive and I can understand the performers pushing back on it, especially when they can go to the casinos with no tax or, you know, we're a small state so jumping the line to Massachusetts or Rhode island, isn't very difficult to overpass Connecticut.

JIM KOPLIK: The interesting thing is that in this pandemic era, ticket pricing has become even more important to the artist and they're trying to keep the ticket prices as low as possible because of the unemployment issues that we have going forward. So I would estimate that we would gain probably five shows annually at XFINITY if we did, and I think that would be a total increase in taxes, even though we're dropping the admissions tax by 5%, I think we would end up gaining over $50,000 dollars in tax per show, so that probably is quarter million dollar bonus to the state of Connecticut by dropping a tax.

I -- as was mentioned earlier, I respect OPM, but they are looking strictly at the numbers, they're not looking at the business. And the businesses if we lose a show, not only do they not get their five or 10%, but we don't get the other tax money that comes along with that. And we do lose money, and as I said, we lost we lost Dave Matthews to the casino. And there were other bands that are going to start either skipping Connecticut, we're not New York, 60 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

we're not Boston, so think it's easy to skip Connecticut. And they'll play places where their ticket prices are lower because of the pandemic and the number of people unemployed. I feel it myself, I lost most of my staff to unemployment.

REP. NUCCIO (53RD): And that's gonna hurt long run, so do you have any of the history on why these -- just these two -- these couple of venues had a higher tax rate. Is there anything there that can kind of give us a little bit of the why this happened?

JIM KOPLIK: Everybody used to -- well, all for- profit venues used to be a 10%. A couple of years Ago, I worked hard to try to get Oakdale and XFINITY, which I represent, down to 5%. I was successful at Oakdale, but it was not successful at XFINITY. I don't know what happened in Committee, I don't really have the answer to why it didn't happen. That's why I'm just coming back to try to get XFINITY down to what everybody else's -- every other for-profit.

Most venues in the state of Connecticut are not for- profit, so there's no admissions tax at all, so we - - that's my problem to deal with, that's not, you know, anything else. So we're really competing against very few venues when it comes to an admissions tax at all, so lowering it to 5% really helps us.

REP. NUCCIO (53RD): Well, I look forward to working with you to try to make that happened because I, as a pretty avid concert goer for most of my life, I understand the impact of all of the people that are coming and the revenue that's generated. So I do think, you know, from an ROI perspective, if we were really to blow this out, that we would see an increase. So I hope to be able to work with this Committee to look at that, and thank you again, sir. Happy St. Patrick's day. 61 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

JIM KOPLIK: Thank you, thank you so much.

SENATOR FONFARA (1ST): Representative Meskers.

REP. MESKERS (150TH): Senator Fonfara. I guess I'll start with a happy St. Patrick's day from behalf of my grandmother Mary McGill and --

SENATOR FONFARA (1ST): You've got every base covered my friend.

REP. MESKERS (150TH): I know, and my grandfather will wish you happy St. Joseph's Day, which is two days forward. My grandpa Luigi Beduko. We're working all the basis as we speak. Jim, you know, you came in to speak to us. I hope we get to a happy solution and medium on this, and there are two parts to that I'd love if we go forward to get that financial impact in terms of what it means for you, and what we can do on bookings.

You know, ultimately, it's funny. I would take this -- and I wouldn't want to be more aggressive in the short term because what I want is to maximize the revenue. I think Senator Fonfara, and all of us sat through some heart wrenching conversations over the last couple of days about various financial needs of the state. But I think you're right on dynamic scoring, we're right on looking at the revenue stream, you know, the interesting thing where I would look is it's also marginal tax rate. So if we go to 5% and you get a 70% occupancy at this -- at the concert venue. Then the question is, do we look at and say, okay, we've made 10 million or five million, or whatever in tax revenue from your business. If we begin to set a base rate to encourage you to go to an 80 or 90 or 100% occupancy to book more revenue. And we get more dollars, but with a sliding scale just so I can -- I want to maximize your occupancy and maximize the take for the state, so, you know, a flat tax incentivizes -- 62 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

I wouldn't want to make a flat fixed tax, but if I could get incremental dollars, every time you booked a seat, I -- and you could be at -- you can get 40 more gigs or 30 more gigs, I'd be looking at the last two gigs you booked or venues and say, maybe we could take a slightly lower tax rate, because we are really hitting it out of -- hitting it out of the park, no pun intended.

And I think that's the issue we have to look at is how do we maximize your level of activity and maximize ultimately the tax revenue we need for the state to solve all the pressing needs. So I think first we want to talk about if we get here on this, we definitely want reports back that it was efficacious that we got the bookings that the overall revenue increase for the state, in terms of sales tax, in terms of number of venues.

And then, how we can continue to make this, you know -- I want everybody doing this activity in the state, I want the concerts here, and I want the tax revenue here, and that's more my concern. So I'm happy to try to see what we can do here, and thank you.

JIM KOPLIK: I appreciate it. I enjoy your background at Greenwich Avenue, I'm down there a lot. I guess, you're from Greenwich, obviously

REP. MESKERS (150TH): On the shoreline, basically, from Port Chester, up to the Stamford border. I cover the entire town.

JIM KOPLIK: Well, our new Bridgeport venue, which is behind me, on my background, will be certainly drawing from Fairfield and Westchester county. We're gonna be bringing a lot of out of state money into Connecticut with the Bridgeport venue.

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REP. MESKERS (150TH): We'll see if a 63 year old ends up booking you're -- going to your show but I'm willing to --

JIM KOPLIK: But don't worry, there's a 71 year old booking at it. I'll be bringing a show, if you want, I guarantee you.

REP. MESKERS (150TH): Good to hear, thanks.

SENATOR FONFARA (1ST): Thank you, Representative Meskers. Jim, you like my background? I think you can see XFINITY if you look hard enough in the back there.

JIM KOPLIK: Yes, it's -- yes, Senator Fonfara, and it's empty like it's been the last year. [laughter]

SENATOR FONFARA (1ST): Yeah, let's pray that that changes soon. Representative Mushinsky.

REP. MUSHINSKY (85TH): Thank you, Mr. Chairman. Mr. Koplik, I'm glad we were able to help you in the Finance Committee to help the Wallingford facility at Oakdale. And I wanted to thank you for being a vaccination host. For opening your theater, you know, you're not doing shows now, but for opening your theory for mass vaccination, that's very, very helpful to the community. And I hope we can -- Finance Committee can take care of your other theater in Hartford this year.

JIM KOPLIK: Well, I must tell you, I always thought I brought happiness to Connecticut when I would stand outside my theater when people were walking out after a great concert. But I didn't realize that I didn't really bring the ultimate happiness. Standing outside of Oakdale when people get their vaccinations, they're even happier than going to a concert, so it's a pleasure to go to Oakdale and see what's going on. We're giving -- between Oakdale, 64 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

XFINITY, we're giving 14,000 vaccinations a week right now.

SENATOR FONFARA (1ST): I guess, Representative Mushinsky, has completed her interrogation. Jim, truth be told, for the members -- the Committee Members, the reason we didn't -- I hope you'll take this in the spirit that it's intended, the reason we didn't do the other venue is because, if I said this at the time, is because, how would we make it through the session without your entertainment coming before us every year. We would miss that.

JIM KOPLIK: I miss you. I miss you. I miss you, you know, I think last time I said I'm gonna keep coming every year, even if I'm in a wheelchair. [laughter] I never thought it would be Zoom call, so.

SENATOR FONFARA (1ST): Nor did we. But we always appreciate -- well, we're gonna endeavor to persevere, as they say, to help you. I think you have bipartisan support on this Committee, you've impacted a lot of lives positively, you're doing even that today, as you said, but we appreciate -- You know, quality life is important, and too often we criticize our state for not having as much of that as we would like to but you certainly try to level that -- level at off, and we're grateful.

JIM KOPLIK: Thank you.

SENATOR FONFARA (1ST): I see no other hands at this point, so you are released, thank you, Jim.

JIM KOPLIK: Thank you so much.

SENATOR FONFARA (1ST): Take care.

JIM KOPLIK: Have a great day. You too.

SENATOR FONFARA (1ST): You too. 65 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

THOMAS SPINELLA: Next up, we have Susan Garten

SENATOR FONFARA (1ST): Ms. Garten.

SUSAN GARTEN: Good morning, Senator Fonfara, Representative Scanlon, Senator Martin, and Representative Cheeseman, and I hope to see you and all the members of the Finance Committee at concerts in the very near future. It will be great for all of us.

So I'm Sue Garten, I'm a managing attorney at Greater Hartford Legal Aid, and I'm testifying today in support of HB 6633, which is a long overdue reform of the unemployment insurance system.

As a longtime legal services attorney, I often represent low income workers who've lost their jobs through no fault of their own, and who depend on unemployment insurance to pay for basic necessities for their families. I'm also a member of the Employment Security Advisory Board, which was created by the legislature to advise the Labor Commissioner on policy matters related to UI. And some of the benefits proposals that are contained in 6633 originated with the Employment Security Advisory Board.

So as you've heard, unemployment insurance is an essential component of economic security for families and economic stability for Connecticut. It can keep people out of poverty, and it is a powerful tool for economic stimulus. Every $1 dollar spent on unemployment benefits, generates as much as $2 dollars in economic activity, but as you heard through Jonny Dach's proposal and the Commissioner, the unemployment financing system just hasn't kept pace with wage growth, and Connecticut has therefore been forced to borrow significant sums from the federal government to pay claims when the unemployment trust fund was depleted. 66 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

But I want to emphasize strongly that the trust fund deficiency is not because unemployment insurance benefits are too generous. On the contrary, the average weekly benefit is only $292 dollars, which is less than a third of the state's average weekly wage of $1,074 dollars. Originally, unemployment benefits, were intended to replace half of the workers' wages, we're nowhere close to that now. And benefits are paid to fewer than half of all jobless workers, so the recipiency rate is quite low.

I've been really gratified by the Committee Members, questions and support for unemployment trust reform, this is something we've been grappling with at the Advisory Board for more than a decade. And as Jonny said, the Board is half worker representatives, half business representatives, we came up with a balanced proposal that included increases in taxable wage base, and most of the business representatives, with one exception endorse that.

So this Bill before you HB 6633, properly focuses --

THOMAS SPINELLA: 30 seconds. 30 seconds, okay.

SUSAN GARTEN: The only suggestion we would make is that the minimum weekly benefit be increased from $15 dollars to 25 rather than $40 dollars in order to leverage additional federal supplemental on insurance payments, like the $300 dollars per week that are -- have been recently provided by the American Rescue Plan of 2021. Thank you, and we hope you will support 6633.

SENATOR FONFARA (1ST): Thank you, Ms. Garten. You have one question, or at least at this time. Representative Santiago. Good to see you, Madam.

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REP. SANTIAGO (84TH): Good to see you, and happy St. Patrick's day. Everybody's Irish on St. Patrick's day.

SENATOR FONFARA (1ST): Agreed. Please proceed.

REP. SANTIAGO (84TH): Can you still see me? Okay. Can you still hear me?

SENATOR FONFARA (1ST): You are. We hear you, yes.

REP. SANTIAGO (84TH): Okay, I wanted to ask the question because the money that is put in by the employer and when someone goes out and then is unemployed and collects unemployment, and you said that the average was, what? $290 dollars or something like that. Do you see more of those recipients going out and applying for social service agencies? Do you have statistics on now that they are collecting -- having to go and apply for energy assistance, for example, food stamps and other benefits, do you see a rise in that, or do you have statistics on that? Thank you.

SUSAN GARTEN: Yes, the workers who we represent, who are the low wage workers, and so they get a lower benefit, weekly benefit rate, some are even lower than $292 dollars, some of them do qualify for the first time for SNAP, for HUSKY. So, and probably for energy assistance, and I believe the Department of Social Services does have data to show the increases, the correlating increases.

REP. SANTIAGO (84TH): And one of the things that I also see is that once they're unemployed, a lot of people do lose their health insurance, so you will see a spike in people applying for insurance through either access health or HUSKY. And that also includes like I said, in other services, so do -- I thank you for your information, and thank you for coming here today to testify. So I'm going to see 68 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

if I can get that information, and thank you, Senator Fonfara for letting me speak.

SENATOR FONFARA (1ST): You're welcome all the time, you know that Representative Santiago, you are a trooper, a longtime Member of this Committee. Representative Cheeseman.

REP. CHEESEMAN (37TH): Thank you, Senator Fonfara, thank you for coming here attorney Garten. Just quick question about the makeup of the board that advised on this on, you said you were a member, can you just give me a snapshot of the number and what backgrounds the Members serving on the board have?

SUSAN GARTEN: Sure. The labor side, there are some vacancies now, there's generally a representative of the AFL, and right now it's Dave Roche from the Carpenters union, and I think we have two vacancies, there used to be a retired Member of the Department of Labor. And on the business side, there's a Representative of Electric Boat. Eric Gjede from the CBIA is a Representative. Henry Secarian who is a retired employment attorney, attorney for employers, and there used to be a small business representative from the construction industry, I believe that position is also vacant, and there is a neutral arbitrator because sometimes we have disputes.

REP. CHEESEMAN (37TH): I can't imagine that. Who determines the -- who chooses the people to serve on the board? Is this in the purview of the Governor is this legislative? Is it combined? How is -- how are the Members chosen?

SUSAN GARTEN: It's legislatively determined. The speakers, the majority leader, the speaker of the House and minority leader and the Governor each have selected appointments that they can make.

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REP. CHEESEMAN (37TH): All right, thank you, thank you for your help, and thank you for coming today. Thank you, Senator Fonfara.

SENATOR FONFARA (1ST): Thank you, Madam. Representative Farrar.

REP. FARRAR (20TH): Thank you, Senator. Thanks Susan for being here, just a quick question on -- actually, two quick questions. You had mentioned in your testimony, which is something that I often just want to follow up on because I think there can be questions about it around which workers really receive the benefits? So when you spoke to that, it's paid to fewer than half of jobless workers, can you explain why that is?

SUSAN GARTEN: Sure, unemployment benefits are only available to people who are able and available to work full-time, so it -- those rules have a disproportionate effect, particularly, on female workers who have the larger share of childcare responsibilities, may only be able to work part- time. So if they lose their job, even if their wages are important for the assessments of the family, they are not eligible for unemployment benefits because they're not available for full-time work.

There are other rules that disproportionately impact lower income workers, for example, if someone has -- can't get to work and loses their job because of a transportation issue, they don't have the funds to fix their car. They don't qualify for unemployment benefits because loss of personal transportation disqualifies them. And, similarly, if they lose childcare, same thing, they don't qualify for benefits.

REP. FARRAR (20TH): Thank you for clarifying that 'cause I think to your point it's helpful to kind of 70 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

understand some of the barriers that are there in who can access those benefits.

And just a quick question, you mentioned that kind of the end of your testimony, so was this proposal put together before the American Rescues Act, and to follow up on that, I heard one suggestion based on that American Rescues Plan, excuse me, but are there others that you're aware of that we should consider long term?

SUSAN GARTEN: So the benefits adjustments in this proposal, the severance, not -- making severance pay allocable and the freeze on the maximum benefit and increasing the minimum wage base. Those were -- those predate the most recent iteration of the American Rescue Plan. Those go back to 2014 when the Employment Security Advisory Board recommended those, there was a much less -- a systemic and fundamental change to the taxable wage base that was endorsed by the board at that time to get us on the path to solvency. But that was never introduced here, I think 6633 is much better way to do it because it not only gets us on the path to solvency, but it also creates equity within the distribution of the tax burden in the business community.

I mean, that said, my interest is that every time that trust fund is insolvent, it increases pressure, political pressure really for benefits cuts, and that is absolutely the worst thing to do in times of economic difficulty, both for individuals, families in the economy.

REP. FARRAR (20TH): Thanks, Susan. Thank you, Chairman.

SUSAN GARTEN: Thank you.

SENATOR FONFARA (1ST): Thank you. I think you have exhausted the interest at least at this time Ms. Garten, so, in terms of questions. So, Tom. 71 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

THOMAS SPINELLA: Yup. We have Abby Jewett and Deborah Bierbaum going together.

SENATOR FONFARA (1ST): Hi, Abby, good to see you.

ABBY JEWETT: Very nice to see you as well. Hello, Representative Fonfara, Representative Scanlon, Representative Cheeseman, Senator Martin and Members of the Finance, Revenue and Bonding Committee. Thank you for giving me the opportunity to testify today, my name is Abby Jewett. I'm the regional vice president for AT&T Connecticut for external affairs.

Joining me today is Deborah Bierbaum, assistant vice president for tax policy, and she's gonna assist me in answering any questions you may have. Here today to testify in support of House Bill 6629, AN ACT CONCERNING THE COLLECTION AND REMITTANCE OF THE E 9-1-1 FEE BY MARKETPLACE FACILITATORS.

House BILL 6629 updates Connecticut tax code to capture the E 9-1-1 fee for telecommunication services sold through marketplace facilitator. This proposal ensures that anyone who can access the state's E 9-1-1 system is contributing to it through the fee collected.

You have my written comments, so I'm not going to read those for you today, but just want to give you some general background. The 9-1-1 fee is collected through your Bill for traditional wireline voice over IP, wireless and prepaid wireless. And those funds go to fund services for your peace apps, training for dispatchers and the like.

In 2012, we realized that there was a group of people who are eligible to use the 9-1-1 system through their phone that we're not paying into the system because they were a prepaid wireless customer. There was no relationship between the 72 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

carriers and prepaid wireless, and majority of the time that they were buying directly from a retailer, even through a CVS or BestBuy. And so we passed a law here in Connecticut that created a system where the 9-1-1 fee was collected at point of sale through the retailer. They collect and remit it in the same manner that they do in the sales tax.

And then in 2018 after the Wayfair decision what -- which allowed the state to start collecting online sales tax, we updated that law to include sales tax remittance through a marketplace facilitator. And a marketplace facilitator is --

THOMAS SPINELLA: 30 seconds.

ABBY JEWETT: -- is an Amazon company as an example where they aggregate sellers and help facilitate that sale. When we updated that law for collection of sales tax, there was an oversight where there wasn't put in place the ability to collect the 9-1-1 fee. So what this law does is it closes that gap and sets up mechanism for marketplace facilitators to collect and remit the 9-1-1 fee in the same manner in which they do the sales tax. And so we appreciate your consideration of this proposal, and the fact that it allows anyone who can access the 9- 1-1 fee to pay into that system. Happy to answer any questions you may have. I think you're on mute Senator.

SENATOR FONFARA (1ST): Thank you. I'm trying to do seven things at once here. Representative Cheeseman.

REP. CHEESEMAN (37TH): Thank you, thank you for coming here today, Abby. So, basically, in short, this ensures there are no free riders on that 9-1-1 system. That if you have a device, whether you bought it from Amazon, or you went into Verizon, you are now contributing -- and how much is that -- how 73 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

much is the typical fee? Is it based on usage? How would this be determined?

ABBY JEWETT: So the rate is set by PURA. The Department of Statewide Emergency Telecommunication sends their budget to PURA, and then PURA calculates what that rate would be currently for the fiscal year 2020, 2021 at 61 cents, I mean 68 cents, excuse me, and if you have -- if you're paying it through your traditional telephone bill, that's a monthly fee. If you're a prepaid customer, you pay for it at point of sale, so you pay for it when you purchase the original phone and then when you replenish your minutes, every time you replenish Your minutes.

So if you replenish them every two months, you're paying it once every two months, if you -- if you replenish it twice a month, you're paying it twice a month.

REP. CHEESEMAN (37TH): So basically, if you're one of these people who falls in that category, you're paying it based on usage?

ABBY JEWETT: Yes, for prepaid.

REP. CHEESEMAN (37TH): For prepaid, exactly. All right, thank you. Thank you for your testimony. Thank you, Chair Fonfara.

SENATOR FONFARA (1ST): Thank you, Senator Martin.

SENATOR MARTIN (31ST): Thank you, Mr. Chair. Thank you, Ms. Jewett, for testifying here today. So we're basically with this piece of legislation, we're really leveling the playing field.

And I do have a question regarding ongoing discussions, are there nationally with eBay and I guess the Amazon regarding this matter?

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ABBY JEWETT: Deborah, you want to answer that?

DEBORAH BIERBAUM: Sure. Senator, the National Conference of State Legislators, task -- executive task force on state local taxation had a working group forum to bring together all the stakeholders, legislators from across the country, as well as the communications providers and the traditional marketplace facilitator, and through that process, we developed a model Bill, which for the most part, Connecticut's marketplace facilitators follows that.

In that effort, they had a footnote to say states should consider if they have other fees what that -- they should extend it, and so through that process the 9-1-1 was raised. Last year, we spent the year working through the council on state taxation with Amazon and the other facilitators to come to agreement on the language. And with this, the marketplace facilitators we're okay, as long as they were given till July 1st, 2022, to change their system to be able to collect this fee. Unlike the telecom companies, they're not used to as many fees on their system, so they have to build that system.

SENATOR MARTIN (31ST): Okay. Thank you so much, Mr. Deborah, and Ms. Jewett, thank you. Thank you, Mr. Chairman.

SENATOR FONFARA (1ST): Thank you, sir. Abby, I see no one else. I don't know if Ms. Bierbaum wanted to speak and beyond just taking questions, but.

DEBORAH BIERBAUM: No. I think Abby covered everything, and I'll take leave.

SENATOR FONFARA (1ST): Thank you very much. Tom.

THOMAS SPINELLA: Yep. Fred Carstensen. Fred Carstensen, if he's available.

SENATOR FONFARA (1ST): No Fred. 75 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

THOMAS SPINELLA: Nope. He's in here. But let me see if he's-- Okay, we can skip if he's not available to Jim Perras.

SENATOR FONFARA (1ST): How about Jim?

JIM PERRAS: Jim is here.

SENATOR FONFARA (1ST): There he is.

JIM PERRAS: Hello, everybody. Everyone can see and hear me fine?

SENATOR FONFARA (1ST): We do, sir.

JIM PERRAS: Great. Good morning, Chairpersons. Fonfara and Scanlon, Ranking Members Cheeseman and Martin, and distinguished Members of the Finance and Revenue and Bonding Committee, my name is Jim Perras, and I'm the Homebuilders and Remodelers Association of Connecticut, CEO.

Would be HBRA of Connecticut is a professional trade association with nearly 900 business members statewide employing tens of thousands of Connecticut residents.

Thank you for the opportunity to provide testimony and support of House Bill 6630. If passed, HB 6630 would simply fix section 12-494 of Connecticut general statutes to reflect the legislative intent more accurately. They clearly expressed intent of the 2019 convenience tax adopted by public act 19- 117 was their -- excuse me, was to deter wealthier residents from selling their homes and leaving the state to spend the growing tide of outward migration.

Unfortunately, the Bill was written a little too broadly and has negatively impacted small business builders that pose no such flight risk. 76 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

FRED CARSTENSEN: I'm gonna put you in breakout sessions 'cause the Chairman of the Committee --

JIM PERRAS: On July 1st, 2020, Connecticut increased the convenience tax rate applied to sellers of real property from 1.25% to 2.25% on the portion of the sale that exceeds 2.5 million in accordance with public act 19-117.

Under this law, a seller who stays in Connecticut for three years after the sale, the home can begin to recoup the difference via the -- a tax credit equal to one third of the convenience tax paid over a span of three years. In order to recoup the entire difference, the seller would have to remain in Connecticut for a total of six years after the sale of the home. Unfortunately, as currently written, the Connecticut general statute 12-494 also taxes small business builders who sell newly constructed homes but unlike a homeowner who sells their home, builders cannot avail themselves of the tax credit.

The HBRA of Connecticut believes it was not the intent of the legislature to burden the sale of new construction sold by small business builders who do not pose a clear and present flight risk and appreciates the fix that House Bill 6630 offers.

Repealing the tax will free up more capital giving small businesses builders greater ease to flow from one project to another. And will help them to better keep up with the rising demand. Repealing the tax would also make it more competitive with surrounding states that are also buying for wealthier transplants fleeing New York and elsewhere for suburbia.

Recent data has shown that many of those leaving the city are highly mobile professionals and small to mid-sized business owners who are bringing 77 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

significant economic activity with them. Connecticut should do everything they can to attract these individuals to help reverse the trend of outward migration and grow the economy. Thank you for the opportunity to submit. And I'm happy to answer any questions.

SENATOR FONFARA (1ST): Thank you, Jim. Representative Cheeseman.

REP. CHEESEMAN (37TH): Thank you, thank you, Mr. Chair. Thank you, Jim, for being here today. So typically, how many homes would this -- does this affect every year? Do you have a figure?

JIM PERRAS: Oh well, I can say this, Representative Cheeseman. That in 2020 the sales of new construction over 2.5 million equal just under 220 million in revenue, which means small business would have been able to keep an invest just under 2.2 million. I would contrast that with the existing home sales in 2020 at the 2.5 million price point, which equal just under 1.7 billion, which would have been a revenue loss of 16.9 million if included in this Bill which, of course, they are not.

REP. CHEESEMAN (37TH): Right.

JIM PERRAS: So clearly the lion share of the revenue gained from the existing conveyance comes from the sale of existing homes.

REP. CHEESEMAN (37TH): Right, and you mentioned our neighboring states. Does New York have a comparable tax on these high value homes or Massachusetts or New Jersey to your knowledge?

JIM PERRAS: So, yeah, obviously, the convenience tax as it's currently written in the State of Connecticut, you know, impacts the entire state, but I would say that the Fairfield county area would probably be where it is most significantly felt, and 78 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

if we were to compare the inconvenience tax to that of our neighbors to the west, New York, it would be for two to three million, or for the cost of -- or a sale of a home of 2.2 -- two to three million. It would be a convenience tax of 1.25% for a sale of a home valued at three to five million, it would be 1.5% and then, when you go from five to ten it would increase it two-and-a-quarter percent.

REP. CHEESEMAN (37TH): Right, so, you know, the genesis of this aside, New York would still be -- even if to stay the same, significantly lower than we are.

JIM PERRAS: That's correct.

REP. CHEESEMAN (37TH): Okay, thank you, thank you, Mr. Chair, thank you for your answers, Jim.

SENATOR FONFARA (1ST): Thank you. Representative Wood. You are on -- there you are.

REP. WOOD (141ST): Thank you. I know. My question -- I had actually just lowered my hand, my question is more philosophical than would be directed at this Bill, so I'm gonna withhold it for another discussion, thank you.

SENATOR FONFARA (1ST): There will be opportunity. I'm sure, Representative Wood. I think that is it, Jim. Thank you very much.

JIM PERRAS: Senator, if I could just add one more thing if, if I could. I, you know, I noticed that the one piece of testimony submitted today in opposition to this legislation was from OPM, and I would simply argue similar to what was argued by those that are promoting concert venues that the -- that the benefits of reducing the conveyance tax for these small businesses would allow for a, you know, more frequent turnover of development projects and a 79 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

quicker turnaround and therefore certainly, more tax revenue to the state and local municipalities.

SENATOR FONFARA (1ST): Thank you, sir. Tom.

THOMAS SPINELLA: Yep, next up, we have William Donlin, followed by Fred Carstensen, back to Fred after.

WILLIAM DONLIN: Good morning.

SENATOR FONFARA (1ST): Donlin. Happy St. Patrick's day my friend. If anyone is Irish today or every day it's Bill Donlin, no question.

WILLIAM DONLIN: Nice to see you, Senator, can you hear me?

SENATOR FONFARA (1ST): Hear you fine. Thank you.

WILLIAM DONLIN: Okay. Happy St. Patrick's to you all. Senator Fonfara, Senator Martin, Representative Scanlon, Representative Cheeseman, Representative Hennessy. My name is William Donlin, I'm the collector of revenue for the town of Cheshire. Past president of the Connecticut tax Collectors Association and, most importantly, retired tax collector from the city of Hartford.

I'm here today in opposition to Raised Bill No. 6631, which will allow municipal tax collectors to waive all are part of the interest due payable on the local property taxes owed on certain tax -- by certain taxpayers.

Connecticut's tax collectors mission in part is to promote uniformity and practice and application of statutory procedures. Tax collectors must adhere strictly to procedures set out by the general assembly. Proposed legislation eliminates uniformity and pits one tax collector against another. 80 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

One purpose of the uniform 18% interest is to encourage taxpayers to pay on time. The current interest rate is comparable to interest in private services, incentivizes timely payments by imposing a fiscal burden for a late payment. This compensates municipalities for the loss of -- that occurs when taxes are not paid in a timely manner. The probe proposed legislation provides no guidance on for good cause. This is subjective term, entirely independent upon the circumstances of each taxpayer and each tax collector.

A taxpayer an extraordinary situation will ask the tax collector do something about the interest when a grace period has expired. This proposal places burden upon a taxpayer to show cause, and waiving the interest, what constitutes could cause the tax collector must be -- must not be responsible for that decision. Tax collectors have no authority over policies, rates or programs, we do not decide who's responsible to pay for how much.

Instead, our function is purely administrational. We collect taxes, we do not make policy, we do not pass judgment.

Allowing this level of discretion over revenue item is open to abuse, 44% or 74 municipal tax collectors are elected. Elected tax collectors may feel pressure to waive interest due on delinquent taxes to retain support for voters. Appointed tax collectors may be tempered to waive interest to artificially --

THOMAS SPINELLA: 30 seconds, sir. 30 seconds.

WILLIAM DONLIN: Okay. Revenue -- interest is revenue, and when we start tinkering with the interest, we're also affecting revenue to our municipalities. I'm here to answer any questions. And I heard some things to OPM, so if I can 81 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

start, Senator Martin asked what the collection rate was throughout the state. Based on the OPM fiscal indicators, the average collection rate is 98.7%. The medium is 98.9, the highest collection rate in a state of Connecticut is Torrington but only under special act because they're allowed to sell the list. So number two would be 99.9 -- 99.8, that would be the town of Cheshire. The 169th municipality has a collection rate of 95.3, so overall tax collections are very, very good throughout the State of Connecticut.

SENATOR FONFARA (1ST): Thank you, Bill. Senator Martin.

SENATOR MARTIN (31ST): Thank you, Mr. Chair. Thank you for testifying Mr. Donlin. I do appreciate the information you just hand it -- you've just provided Committee here. And I'm going to go back to my time on the Banking Committee as Ranking Member and the piece of legislation where we're trying to reduce the 18% down to a reasonable amount, and I believe the discussion that took place back there was how did this ever get up to 18% because, in our opinion, this is almost to a point of usury. And with the -- from what we learned was the interest rate was increased to that amount because interest rates back whenever it wasn't, forgive me, I don't know the year, but I'm going to say somewhere in the early 1980s, because at that time, the municipalities were charging maybe six, 7% but interest rates had got skyrocketed to 18 to 21%. And they felt that, gee, in order for, you know, we had to stay current with those rates in order to collect, you know, past due taxes, so.

Let's fast forward, here we are, we've been almost in a period of time where interest rates are -- they're ultra-low. And -- but yet here we are at 18% charging people who are struggling to make these tax payments. But we're taking -- it seems like we're taking advantage of them at 18%, so I don't 82 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

think it's unrealistic for us to try to look for some type of assistance here, and particularly with if it's not the intent of the municipality to make money, but we should be trying to help our taxpayers, particularly, in these COVID times and then just in general.

You know, so we raised them back in the 80s, I believe 12 and then from -- in 2012 we raised them up to 12%, I believe, and now we -- we've gone past that and raised up to 18% but with that, I just feel that we need to help and to see a pushback from municipalities. I just feel that you guys aren't doing what you've -- what should be right here, trying to help the taxpayers. And I do understand the wanting to keep those collection rates high, without a doubt, but I don't think reducing it from 18 to 12 is -- it will impact those numbers at all. Thank you, Mr. Chair.

WILLIAM DONLIN: May I respond?

SENATOR FONFARA (1ST): Please, Bill.

WILLIAM DONLIN: As I recall, the discussions that we had before banking we're dealing with more of a local option. It was having different interest rates or allowing municipalities have different rates. Most recently, before banking, there is a piece about lean assignment where they wanted to reduce the interest rate to 6% once the liens have been assigned.

Tax collectors are not against a reduction in the industry if they'll statewide and all municipalities -- that -- and it will start a local option, that it was state statute. We do take exception when legislation is introduced that allows municipality to have a different -- have a local option and have a different interest rates. That's when we testify.

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I think the question being asked is what is the right interest rate; that's not for a tax collector to decide. We don't set policies, we merely collect based on what the statutes are. That's a discussion to be had with CCM, cost, I'm sure the big city mayors would probably weigh in on this. Simply because again, interest as a lark -- is as a part of the component of the revenue, we collect current year tax, prior year tax, and interest in liens. That makes up the revenue portion of a budget in -- and from the -- it goes from an almost 98% of the operating budget comes from property taxes down to 41% depending on where we are throughout the state.

But the tax collectors have never gone out and said that we're opposed to reducing the interest rate. We only oppose it when they start singling out of class, for example, testimony that I gave before banking that reduces the interest rate to 6% when a lien is decided.

THOMAS SPINELLA: 30 seconds for the question and answer. 30 seconds.

SENATOR FONFARA (1ST): You're on mute, Senator.

SENATOR MARTIN (31ST): Oh, thank you, Mr. Chair. So what I'm hearing then, is if we did drop the interest rate from 18 down to 12 and say that -- but did it uniformly across the whole -- all the municipalities, you guys would really be opposed to that?

WILLIAM DONLIN: I would say that the tax collectors would not be opposed to that if it was state law for all -- if that was for all municipalities.

SENATOR MARTIN (31ST): As long as when kept an equal to everybody, thank you.

WILLIAM DONLIN: That's correct. [crosstalk]

84 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

SENATOR MARTIN (31ST): Thank you, Mr. Donlin, again. And thank you, Mr. Chair.

SENATOR FONFARA (1ST): Bill, when the -- I know Senator -- Representative Meskers has a question, but just quickly on this point. When the interest rate has been lower than 18%, has that compliance percentage been lower as well?

WILLIAM DONLIN: I don't know how to gauge that, Senator. I was working for the city of Harford when it went from, I think, it was either 15 or 18. It was in the 80s, I do remember that. But it wasn't - - it was a reflection of what was going on in the market at the time interest -- you had CDs where people were having, you know, ten and 12% interest varying accounts and the interest was less, so people were paying because they were able to keep the money in the bank.

The economy has changed. This last year has taught us a great deal. We struggle every day. We virtually have gone without interest twice in this - - in the past year from April, when the executive orders were written that allowed taxpayers and extended grace period, and then the Governor did an extension of those again. So municipalities have been living with a different interest in the past year. Does it help with my collections? My collections are still a struggle because of what's going on. We have, so April 1st before they make their final January payment. So I still have roughly $5 million dollars still outstanding that's not normally open at this point in the year. I'm hoping that that money is going to come in, or before April 1st.

I'll have a better and -- I'll have a better picture after the first week of April, what we look like. But we did take a hit last year in the town of Cheshire. And everybody did statewide.

85 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

SENATOR FONFARA (1ST): Thank you, Bill. Representative Meskers.

REP. MESKERS (150TH): Thank you, Senator Fonfara. Mr. Donlin, again, happy St. Patrick's. [laughter] Get my holidays right. So I'm hearing two things. One, you don't want this in your court as a tax collector, or the tax collectors generically don't want that discretionary decision there. So you're suggesting back to the legislature that either we fixed the rate. And I didn't want to open up a can of worms and then the question is, or do we put it to the Finance Committee of the towns? But it would seem to me that you don't want to be the arbitrary decision and be deciding tax policy or interest rates on uncollected funds, basically.

WILLIAM DONLIN: That's correct. I have a suggestion. Under 7-148, scope of municipal powers, municipalities have the authority to, you know, look at it, occlude, establish a procedure for the withholding of approved building applications when taxes or water sewer are delinquent. This might be a place that you might want to put something where municipality may be able to look at interest or something there because the --

REP. MESKERS (150TH): Setting a minimum rate or giving some guidance, yeah.

WILLIAM DONLIN: Right, so the municipality grants the municipalities authority, but then they have to set their own ordinance. That would be totally acceptable on my part because I'm thinking out of the equation.

REP. MESKERS (150TH): Okay. I appreciate that.

WILLIAM DONLIN: And again, we're looking for fairness. So we're looking for everybody to be treated the same, the problem is once that first interest waive takes place, now everything is on 86 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

Zoom so taxpayers are going to be home, sees that somebody's going to be getting a -- something they don't have. The line is going to be out the door, because there is gonna -- everybody's gonna have a circumstance that means -- that they want [crosstalk]

REP. MESKERS (150TH): Your concern is the subjectivity of it, I understand, okay.

WILLIAM DONLIN: Absolutely.

REP. MESKERS (150TH): But to have -- to Senator Martin's position and/or our position or thoughts, you know, 18% in the current environment when your deposits are at 1% and maybe you can get three to 5% if you buy some long dated CD and/or 2%, I think the question becomes no one is -- there is no time value to not paying your bill, and if so, if there's an error, 18% seems to be an extraordinarily injurious interest rate to accrue versus where market -- the markets are. So I think we do need to look at some -- doing something, but thank you.

WILLIAM DONLIN: That's fair.

SENATOR FONFARA (1ST): Thank you, sir. I thinking that there's a possibility Bill of marrying those two concepts where we would set a maximum but enable Finance Committees or the town to go lower, if they so chose. Not the tax collector, I hear you loud and clear on that.

THOMAS SPINELLA: Next up -- .

SENATOR FONFARA (1ST): I think that's it, Bill, thank you very much.

WILLIAM DONLIN: Thank you. Happy St. Patrick Day buddy. Thank you.

SENATOR FONFARA (1ST): Same to you. Tom. 87 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

THOMAS SPINELLA: Yep. Fred Carstensen, followed by Jim Perras housing. Fred Carstensen.

SENATOR FONFARA (1ST): Professor Carstensen.

FRED CARSTENSEN: Thank you, everybody, for the opportunity to share this. Good morning, Senator Fonfara, Representative Scanlon, and Senator Martin, Representative Cheeseman. I want to make two comments on the testimony I've heard this morning because it's very relevant to your general work. What we just heard was how extraordinarily well our communities are doing, for the most part, collecting their property tax. I hope, at some point you like -- you look at DRS because on my analysis it is under collecting sales tax between 220 and 250 million dollars annually. And that's not based on anything from DRS, that's based on an analysis of federal data on the tax base and the amount of money that ought to be collected given our rates. And that's the decline from what it was ten years ago, in spite of raising the rates. There's something fundamentally, going wrong, as far as I can tell, and it really deserves real -- really careful -- and we're talking very serious money, a quarter billion dollars annually on the loss of collections.

SENATOR FONFARA (1ST): Second, sorry, I'm going to jump in here and just say that you're under a clock, have three minutes, and so --

FRED CARSTENSEN: That's fine.

SENATOR FONFARA (1ST): -- I encourage to focus on your idea.

FRED CARSTENSEN: No, everything is directly relevant to this because I've heard it before on the importance of dynamic scoring, and specifically, REMI analysis. REMI analysis is the basis that is for analysis for 30 years in the state. It is 88 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

dynamic analysis and OPM has made this mistake before, the most dramatic one was on the hospital tax, which cost the state, on our analysis, dynamic analysis, 10,000 jobs and reduced state revenue substantially because of the foregoing economic activity by failing to take the federal reimbursement.

I'm testifying in favor of HR [sic] 6632, which is the Invest Connecticut. We've done analysis, we just finished it, it's in my testimony. Collectively, the two programs that we look at, which is the old program, the second insurance investment fund. And then the newer Investment CT because the rules were changed, $600 million dollars in state revenue, 12,500 jobs created or retained -- and retained, rate of return over 200% on the older second investment fund, over 700% on the new one. Last point really critical -- Well, summary $320 million dollars of investments in 133 companies, and you heard from one of them earlier today on how valuable that has been. This is a really critical thing is the DECT 2019 annual report, we have a very different number, they say $1 dollar or six for every dollar and credit, we found over $2 dollars on exactly that same program, but that's not the program that's on the table today, the program that's on the table today is Invest CT. You've changed the --

THOMAS SPINELLA: Professor, 30 seconds.

FRED CARSTENSEN: All right, and that's the last point. Is our analysis shows that the rate of return is over 700%, that is to say, more than $7 dollars in state revenue for every dollar spent and credits, that is not in the 2019 DECD annual report, that is the wrong basis on which to evaluate the legislation that's before you today, it's very important. And we need it -- we need it, especially of course because Connecticut is in a very deep economical -- we never recovered after 2008 either 89 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

in jobs or in real output and the current forecasts, from Klepper Smith and from ourselves from data core and CCA is on current trends, we will not recover until 2030, and that's simply getting back to where we were in 2008.

THOMAS SPINELLA: Three minute, sir. Three minutes.

SENATOR FONFARA (1ST): Thank you, Fred, very much. We appreciate all the work you do on behalf of our state. And, Representative Cheeseman, has a question for you.

REP. CHEESEMAN (37TH): Yes, thank you, thank you, Mr. Chair, thank you for being here today Fred, thank you for sharing your feelings on this. so I've seen your testimony obviously, and then you can submit this offline, I'd be interested to see, you know, you said DECD looked at the old program and you show very different results. You know, to drill a bit deeper into where -- how you derive those very different results 'cause certainly talking to the Invest CT folks, their analysis of the ROI is much closer to yours than what we hear from DECD and OPM, so I just, you know, if you want to elaborate on this here, or, you know, offline because I'm interested in where that --

FRED CARSTENSEN: No, at this point. I mean, we can have -- I actually want to have a discussion with DECD on how they got to their number on the old program. But the Invest CT, they haven't done the analysis and that's the one that you're looking at because you've changed the rules and you changed the rules in some very constructive ways. You've not just renamed it, but you also changed the way in which they earn the tax credits. And we just completed the analysis, it was just sent into DECD literally a week ago. And we look at the cumulative impact and on the Invest CTs discreetly were there four registered funds for which we did the analysis collectively for all four funds, the rate of return 90 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

is over $7 dollars of revenue to the state for every dollar of credits. And that's the relevant basis for the decision today.

But yes, we are absolutely going to explore it because supposedly we're using the same model. We both use REMI, and so I want to get together and I want to see how, you know, we're getting different perspectives on what the rates of return are, but I also would want DECD to look at invest CT specifically because of the different rules and a much higher rate of return that we have found.

REP. CHEESEMAN (37TH): And my understanding was yours, that the old -- the old model didn't work very well, there were not those performance based metrics that are now embedded in the program, that much stricter rules as to the money, and I think you only had to listen to the prior testimony from Scott Drozd, Euro. To, you know, that the level of funding they're looking at is not traditionally available, you know, through the ordinary system but gives that opportunity, and then the growth, he certainly seen in this company has been impressive. Obviously one example, does not cover everything, but again, in my conversations with them there, you know, the bad investments quote unquote are minority, and they're seeing much more growth along the lines of what we heard about earlier. So thank you for coming today, as I say, I'd love to follow up on this, as you [crosstalk]

FRED CARSTENSEN: And we're the analysis that we have -- that they have now submitted that we provide it, looks at every single investment across all -- both programs, 133 companies, and about 233, I think, discrete investments because they often make sequential investments because when a company is successful they say great and will provide additional funding to get even more growth. So we look absolutely universally every single investment that they've made and that's all in our analysis. 91 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

THOMAS SPINELLA: Senator, you're on mute. Senator Fonfara.

SENATOR FONFARA (1ST): Thank you, Representative Cheeseman. I think that's it. Fred, thanks very much for your testimony today.

FRED CARSTENSEN: Thank you so much for having me today, and I did submit a revised written statement because I wanted to include the note about the DECD 2019 annual report because that was used in some of the testimony, and it's just not relevant to the legislation that is before you today, so I revise that slightly incentive about half hour ago. [laughter]

SENATOR FONFARA (1ST): We will look at it. Thank you, sir.

FRED CARSTENSEN: Thank you so much. Have a great day. I got to go teach a class.

SENATOR FONFARA (1ST): Great. Thank you very much. Tom.

THOMAS SPINELLA: Next up, we have Per Hellsund.

PER HELLSUND: Hello. Thanks for allowing me to testify on behalf of Ironwood Capital. My background is as a serial entrepreneur. I built -- I'm on my third company here in Connecticut, really focused on the biotech sector. The last company was a company in Wallingford that was acquired by a public company called Biotech ME. They're still there, they're thriving. I think they're going to do $40 million dollars in revenue, they're projected to $40 million dollars in revenue next year, and that company was started from essentially from scratch.

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Currently, I'm running a biotech company in New Haven that's developing a cancer therapeutic. And I want to say that the biotech sector in general is thriving, and I think it's a really good fit for Connecticut. Unlike manufacturing, I think there's a lot of potential and a great future for biotech in Connecticut in general. And if you look at the bio techs that are thriving, these are all startup companies. So they all started small and they're growing. We're not seeing an influx of bio -- big biopharma companies or big pharma companies, for example.

So, you know, my point is that with the startup biotech companies there's two things that we need, one is talent, and I feel there's a really good talent pool in Connecticut. I haven't had difficulty recruiting a skilled workforce, but the other thing we need is capital. Biotech companies require a lot of capital, and they require capital for a lot of years because there's a long, long development process. And there's, you know, there is a lot of capital around but there's a lot of competition as well, and particularly, in the early stages it's most difficult to attract capital. So having resources like Ironwood is very helpful in getting companies like mine off the ground.

And, you know, I don't have any of the statistics or the numbers, you folks have that, but to me, it seems like it's a good place for the state to invest some money, particularly, in the technology sector and I would say, particularly in biotech. And I'm a little bit biased but, you know, we are seeing a lot of success stories, you know, Alexion, unfortunately did move, but look at Biohaven, look at [inaudible]. There's a number of companies going public, you know, we're looking to go public toward the end of this year, early next year. As well, we have a therapeutic now that's going into the clinic next month. We just got the thumbs up from --

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THOMAS SPINELLA: 30 seconds, sir. 30 seconds.

PER HELLSUND: Yeah. So that that's really what I what I wanted to say, we can open it up for questions.

SENATOR FONFARA (1ST): Thank you, Mr. Hellsund. And before Representative Cheeseman. I'd like to ask you to -- not for this forum, it's not the appropriate forum, time wise. But I think what you do and those that I'm sure your cohorts that are inventors are, as you say, serial entrepreneurs. That is a major part in my opinion of making Connecticut realize its rightful place in this knowledge economy. And I think, I believe, in my work on this, that the chicken and the egg is how do we attract -- how do we keep startups here? How do we track more here? But not having the venture capital that other places have.

And many people that graduate from UCONN with an idea at Yale, Trinity, whatever, they often leave whether it's Silicon Valley or Boston, or what have you. And I think a forum where you and others that you could recommend that could come here to speak to us about how we fix this broken system, in my opinion, of not having enough capital to keep more businesses here that are starting up, and to attract more, would be very helpful, and I hope that you would be open to such a discussion.

PER HELLSUND: Yeah, absolutely. I'd be happy to. I believe in Connecticut. And I believe there's a big opportunity, particularly, in biotech but other technology areas, and willing to do what I can to help make that a success.

SENATOR FONFARA (1ST): And I do -- I do think that the conversation should -- as important as bio is that it extends beyond that to, you know, other technologies and whatnot that our state again has great talent for but not -- there are some pieces 94 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

that are missing, that I think you -- could help us with.

PER HELLSUND: Yeah, I agree totally, and I think technology in general is well suited to Connecticut. You know, they're not -- many of them are not businesses that are particularly sensitive to cost of doing business. For example, on like, you know, company manufacturing, we just, you know, for example with -- for us it's all about talent and in capital and getting leverage from that.

SENATOR FONFARA (1ST): We'll be in touch, thank you. Representative Cheeseman.

REP. CHEESEMAN (37TH): Thank you, Mr. Chair, and when I mentioned -- when I heard the speaker talk about having great talent here, I know one of your concerns is that we don't have the talent pool, so I was reassuring to hear that he's finding the workers he needs. So, can you just give us an example of where -- what this funds have allowed you to do in terms of growing your workforce because obviously, this is important to us.

PER HELLSUND: Yeah, so we started this company in 2017 January from -- essentially from scratch, we raised some venture capital from, you know, investors that I've worked with, but at that time, you know, Ironwood came in with additional capital that, you know, provided, as you know, extra runway and the ability to, you know, to hire, you know, hire more employees. So we started out, we leased some space, it's 10,000 square foot facility at Science Park, and now we have, I think 24 employees and at least a half a dozen, you know, consultants, many of them, you know, many of them local.

So that, you know, that incremental capital, you know, I don't know the exact number, but the incremental capital enables us to hire, you know, hire more people. I mean, that's essentially where 95 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

most of our money goes, you know, there's some overhead associated with equipment and those kinds of things, but it's -- the majority of it goes toward paying the, you know, the human resources.

REP. CHEESEMAN (37TH): Okay, and it obviously was this investment capital that enabled you to grow the company, make these hires, that you couldn't have access through traditional quote on quote banking.

PER HELLSUND: Yeah, exactly, and, you know ,the way this -- these businesses work is you start out and, you know, it's a series of de-risking step, so obviously day one, the risk is the highest. You get some money, you hire some employees, and you make incremental progress on the technology, and that incremental progress, you know, brings the risk down and then you're able to, you know, recruit a -- bring in, you know, additional capital from, you know, from other investors that may be less risk averse and that, you know, that model basically continues almost throughout the lifecycle of the company.

So, yeah, having, you know, having that, you know, some of that early funds available is critical and it's, you know, it's what in a lot of cases is missing getting these, you know, these companies off the ground. And there's a lot of interesting, you know, as we mentioned, there's a lot of interesting technology coming out of, you know, coming out of Yale, coming out of UCONN, you know, they're doing a great job with that, but in order to get these technologies incubated you need money.

REP. CHEESEMAN (37TH): All right, thank you, thank you for your testimony today, and I look forward as well with the Chairman to having a more wide ranging discussion on ensuring that the companies like yours, have access to the capital they need to grow and stay in Connecticut, so thank you. Thank you very much, Senator Fonfara. 96 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

SENATOR FONFARA (1ST): Spot on, Representative Cheeseman. Representative Wood.

REP. WOOD (141ST): Thank you, Mr. Chair. And thank you, Mr. Hellsund, this was very helpful testimony as well, and following up on, it's interesting, Fred Carstensen spoke about we haven't regained all the jobs since we've lost in 2008. And then Chairman Fonfara said this is an area that we should be investing in, and I agree, I think this is exciting, it's great to hear your perspective. Love the term of leveraging incubation -- no, what did you say? It was -- sorry, I'm scrolling it on a piece of paper. But I think this is a -- point is, this is an area that we need to be building on, there are -- there's a lot of talent that we're building in Connecticut, and I look forward to supporting this effort, learning more and growing our state, growing our state's economy through this knowledge industry. So thank you. Thank you for being here, and thank you, Mr. Chair.

PER HELLSUND: Thanks for having me, I appreciate it.

SENATOR FONFARA (1ST): Thank you, Representative Wood. Representative Meskers.

REP. MESKERS (150TH): Yeah, again, I'd like to echo the same comments. You know, I come from downstate in Fairfield County in Greenwich, and so the biotech sector in and of itself, you would say okay. I'm in the financial hedge fund area, who cares, for me the most vital part of our effort as legislators is to lift the state. And to lifts the state's economy and to broaden the tax base. So it's kind of a two punch, it's one to provide you with all the opportunities space to grow and then figure out what the acceptable tax level is, so you don't leave.

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So I'd love to -- I need this economy of the state to grow. I'm -- I think the steps, I echo Senator Fonfara, Representative Cheeseman. Whatever we can do going forward to help welcome you and encourage the growth of this industry in the state, and I'm all in favor of it, so I look forward to any further commentary there, thank you.

PER HELLSUND: Thank you.

SENATOR FONFARA (1ST): Thank you, Representative Meskers. Thank you, Mr. Hellsund, we'll be in touch. Tom.

PER HELLSUND: Thanks a lot.

THOMAS SPINELLA: Yeah, we have Tom Neyhart, followed by Kosta Diamantis

SENATOR FONFARA (1ST): Here's Tom.

TOM NEYHART: Good afternoon, everyone. I'm Tom Neyhart. I'm the founder and CEO of PosiGen Solar and Energy Efficiency. You know, we weren't planning to come to Connecticut five years ago. And we were presented with an opportunity to secure funds through the Invest Connecticut program, and without those funds, it wouldn't have been possible for us to come to your state. Now, fast forward five years where we are now, we've helped thousands of low income customers gain energy independence through solar and energy efficiency; low income customers that wouldn't have been able to do that in the past.

We've also created over 100 direct full-time jobs for PosiGen and we employ close to 100 subcontractors, so we have over 16 different subcontractors that work with us for installation, energy efficiency and other work with our customers here in Connecticut. And when we came to the state, the only funds that were available for us initially 98 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

were the Invest Connecticut, but what happened with that Invest Connecticut funds that we were able to secure through Stonehenge and Enhance Capital was that that brought on further private funds.

So since that time we've secured corporate equity, we've secured tax equity and additional funds and loans, the tune of almost $100 million dollars that, you know, are seeing the reward of all those funds here in Connecticut creating additional jobs and the support work, right, that goes with it. We buy from the local electrical warehouse, we buy from the local Home Depot, and, you know, we're constantly buying materials locally here as well that create and generate additional tax revenue.

So there's numerous businesses, like us, that that are outside of the state looking for their next expansion. And when the Invest Connecticut program can be brought to bear, you can bring additional firms such as mine that create these great worker basis.

And so I would say, without the Invest Connecticut funds, we would not be in Connecticut and we would not have the 200 plus jobs that we support today. So I think continuing that program or increasing that program is beneficial to Connecticut's, it's beneficial to the job base, it's definitely beneficial to the tax base.

THOMAS SPINELLA: 30 seconds, sir.

TOM NEYHART: I just want to say that that that's why we're in Connecticut and we appreciate that, we appreciate the Stonehenge and Enhance Capital that continue to participate in it.

SENATOR FONFARA (1ST): Tom, how did you learn about the program? Were you approached by Ironwood, or how did it work?

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TOM NEYHART: We actually were approached by the Connecticut Green Bank, I think they're called SEFIA back then, and they talked about us coming to the state, because they had a disrupt -- disproportionate number of solar systems that were in affluent neighborhoods and not in communities of color and low income. And as we took a look at what the financial picture would look like coming in there, we knew that we didn't have all the financing we need, and Connecticut Green Bank introduced us to the Invest Connecticut program, so that was how we got into the state.

And I am proud to say that last year we passed parity in both communities of color and low income communities, so as a percentage of the population that have solar, we now have a higher percentage in communities of color and low income communities than in affluent communities in the entire State of Connecticut.

SENATOR FONFARA (1ST): Good to hear. Okay, I see no questions, thank you, Tom, very much for your testimony.

TOM NEYHART: Thank you.

THOMAS SPINELLA: Kosta Diamantis, if he's here, followed by Representative Winkler.

KOSTA DIAMANTIS: Hopefully, you can hear me.

SENATOR FONFARA (1ST): We can hear you Kosta. We barely see you,. We see a big table in front of you very well, but.

KOSTA DIAMANTIS: Let me -- I'm going to move a little closer so maybe that may help. Oh, here we go.

SENATOR FONFARA (1ST): Much better.

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KOSTA DIAMANTIS: All right. Senator Fonfara, Representative Scanlon, Senator Martin, Representative Cheeseman, and distinguished Members of Finance, Revenue and Bonding. I'm Kosta Diamantis. I'm the Deputy Secretary of the office of policy and management, as well as the director of School Construction Grants Review and Audit. And I'm testifying concerning Senate Bill 1053, AN ACT AUTHORIZING BONDS OF THE STATE FOR CAPITAL IMPROVEMENTS TO SCHOOLS SERVED BY THE CAPITOL REGION EDUCATION COUNCIL. Senate Bill 1053 proposes a special school construction bonding authorization for the capital regional educational council, and for me, it's problematic, I think, in a couple of ways.

The Bill proposes a very general use of -- for the proposed 20 million of bond authorization. The term use capital improvements appears that it could either include either one school construction of the type already funded by School Construction Grant Program. Or two, maintenance and repairs to equipment facilities that are considered operating expenses and not bonding expenses. Either possible use of these funds raises important considerations, first, as I noted, to the degree that proposed new bonding authorization could address school construction, it would be duplicative of the state school construction program, which currently rest in DIS.

General Statute Chapter 173, already provides for grants for construction projects, including renovations and alterations. And to provide SDE with such resources for capital outlay would be in complete conflict with the current statutes that exists now in school construction. I would advise that the proposal would sidestep the normal school construction grant in priority of those process.

The process provides that you, the legislature, ultimately make the decision on whether projects 101 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

should be authorized. And it is states long standing policy and law that you the legislature retain that authority to approve such projects.

While the Bill would place the new binding authorization under the State Department of Education, SDE statues provide that the Department of Administration is the successor agency to SDE for school construction. So this new bond authorization may be understood to be under the responsibility of Oscar.

However, if the intent is indeed for SDE to administer it, it would be a duplicative program. Second, the use of proposed new binding authorization for maintenance and repairs to equipment facilities not presently reversible under the school construction grant would be a significant departure. It has long been a stand -- long standing reality that school districts must provide these expenses in their annual budgets as operating expenses. Especially since the state makes significant investment in their schools facilities, through the school construction grant program. It is the expectation that the school districts take care of that investment.

In short, I would suggest that these two particular issues raise questions on this particular Bill at this particular time.

THOMAS SPINELLA: 30 seconds, sir. 30 seconds.

KOSTA DIAMANTIS: And my last comment would be, I think we really need to look at the legislation as it was promoted years ago regarding the creation of the CREC magnet schools. And I don't think it was thought out what would occur after 20 years when it may be necessary to renovate those schools. Thank you.

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SENATOR FONFARA (1ST): And Kosta, what do you -- given the conundrum that they're not a municipality in the traditional sense, may not have access to funds for maintenance in a way that maybe other communities would. They're -- they don't have a tax base to raise funds with. Is there a solution that you -- I mean, we've invested I believe somewhere in the neighborhood of $3 billion dollars into the Sheff V. O'Neill's lawsuit. Much of that school construction. It would -- I don't think it'd be wise for us to ignore this responsibility if we felt it was important. I would have preferred to invest in communities that needed -- need the attention more than building a lot of schools but we've done it. We have a responsibility, I believe, to maintain those investments. What do you feel is a more appropriate course?

KOSTA DIAMANTIS: Well, I think we need to look at a more holistic and global approach to those particular school -- schools. Their ownership is not a public ownership, they are particularly owned by CREC themselves, their title in their name and the statues, currently, as it says, does not allow for the use of those funds or, I believe, the renovation of those schools after the 20 years. Do I think they need to be maintained, yes. But I don't think that this is the particular solution, I think we do need to have a discussion about that as the session goes on, so that we can craft some legislation that in fact works.

I've been a strong advocate that ownership of those schools should be in the state, and we're investing state tax dollars in those schools belonging to the state. And that would be something different from it. But in fact to invest those funds in something that we, the state or municipalities do not own themselves, for me, is problematic. And certainly, the statutes don't speak to that, I think we were in a hurry 20 years ago to get these schools built for Sheff purposes and never thought out what it was 103 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

going to look like 20 years later. I think the time has come that we talk about that.

SENATOR FONFARA (1ST): I think you're right, and no one, certainly not in the last decade has done more to try to bring this monster -- this multi headed monster under control than you. When I speak about that, I mean school construction in general and make it more efficient process, so thank you for that and I hope we can have that conversation.

Representative Miller, sorry. Senator Miller, longtime member of this Committee, now in the upper Chamber. Senator Miller.

SENATOR MILLER (145TH): Thank you, Mr. Chairman, and good afternoon, Kosta. Kosta, I had a couple questions. I didn't see your testimony listed. Did you submit your testimony?

KOSTA DIAMANTIS: I thought it got submitted, but if not, I'm gonna make sure that it did, I know I drafted it, so I'll make sure it gets there.

SENATOR MILLER (145TH): All right, I could have overlooked it, but I was -- you mentioned school construction and DAS. I'm confused, I thought school construction was now on OPM.

KOSTA DIAMANTIS: If you recall, there was a Bill last year that was never acted on, with respect to moving school construction to OPM. It physically sits in the OPM building, there is an MOU between DAS and OPM that exists that school construction is here under an MOU but not from a legislative perspective. From a legislative perspective, it is still DAS, who is in control of per se of school construction.

SENATOR MILLER (145TH): And the MOU, how long -- is there expiration date on the MOU?

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KOSTA DIAMANTIS: Yes, it expires with me. Meaning that when I leave my current position as a deputy and should I go back, it's every two years, I believe, or a two year MOU, maybe a three year extension of one year. Assuming it never occurs, meaning the legislation is never passed, that we go to permanently house that OPM, which, of course, I strongly support.

SENATOR MILLER (145TH): All right, thank you for that clarification, thank you, Mr. Chair.

SENATOR FONFARA (1ST): Thank you, Senator. Representative Nuccio.

REP. NUCCIO (53RD): Thank you. Thank you, Mr. Chair. Hi, Kosta. It's been a while. How are you?

KOSTA DIAMANTIS: I'm well, and you?

REP. NUCCIO (53RD): I'm thriving. Happy St Patrick's day. So I have a just a couple of clarification of questions for you, you -- are the CREC schools eligible to go through the regular school grant process?

KOSTA DIAMANTIS: It is my -- if I put on my legal hat, because I have to wear one of those over there too, is no, I don't believe they are eligible. I don't think it was thought out ten years -- 15 years ago.

REP. NUCCIO (53RD): Okay, so they're not eligible for this process. What processes do they have available to them in terms of -- And I guess that the second part of my question before we go to that is you brought up a good point on maintenance, et cetera, those are not through our regular school grant project process either, correct? Like it's --

KOSTA DIAMANTIS: The operating expenses, that's correct. 105 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

REP. NUCCIO (53RD): Yeah, that operating expenses and maintenance expenses should be picked up by the cost of the education. So whatever they're charging for rates, it should include some kind of capital project plan.

KOSTA DIAMANTIS: Right, there was a meeting with OPM, and correct, and the secretary of OPM was very clear. When CREC says we don't have a tax break that's very true, but she was very quick to point out, they do have a mechanism in which they can generate fees, and that is through their tuitions which by the way, are also fees that state of Connecticut pays into those tuition basically. So they do have a mechanism of raising fees to cover their overhead and expenses.

REP. NUCCIO (53RD): Yeah, that was my -- that was my question because they -- I know they do get -- the CREC schools, I believe, the CREC schools do get ECS, correct?

KOSTA DIAMANTIS: They do not get ECS per se. [crosstalk]

REP. NUCCIO (53RD): They get the eleven thousand, five, two, five. Yeah. Yeah, so alright, so they don't get ECS, but they do get an allotment from the state for the educational purposes, and then they also have an opportunity for tuition, correct?

KOSTA DIAMANTIS: That is correct.

REP. NUCCIO (53RD): Alright, so and that's where capital projects should really be built in rather than going through a grant process. So if --

KOSTA DIAMANTIS: I want to be very clear, that's operating expenses what I'm suggesting, you know, maintenance and repair. On capital projects that would not go under their OE line item. It would, in 106 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

fact, require a much larger sum of funds because I would assume their capital projects would most likely have a 20 year life. And that's where I put my legal hat on, and I think the problem is that we've never contemplated CREC coming back 20 years later, probably as CREC asking to renovate what is in fact their buildings, meaning CREC buildings, not a municipal building, not a state building but CREC buildings.

Now we allow it for RESC. But I don't think we've allowed -- and CREC is a RESC as it relates to that other function that they do, but not necessarily the Sheff magnet schools that they've created.

REP. NUCCIO (53RD): So it sounds like there's definitely some nuances here that we should look at creating a better piece of legislation that can address that. So the regular school grant process.

THOMAS SPINELLA: 30 second time, question and answer.

REP. NUCCIO (53RD): Okay. I could probably go a lot longer than that. So Kosta, I may reach out to you to kind of get a better understanding of how this -- of how this goes, so we can be sure that we're seeing where do they go if they can't go into the school grant process what options are available to them.

KOSTA DIAMANTIS: And I'm certainly not suggesting they shouldn't go.

REP. NUCCIO (53RD): Yeah.

KOSTA DIAMANTIS: I guess I'm suggesting we create a mechanism for that to occur, and whether or not we do it in the current state of who owns the buildings, that's all. [crosstalk] That's all.

REP. NUCCIO (53RD): I agree, thank you very much 107 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

KOSTA DIAMANTIS: Sure.

SENATOR FONFARA (1ST): Thank you. Representative Wood.

REP. WOOD (141ST): Thank you, Mr. Chair, and thank you, Mr. Diamantis. I really appreciated hearing this today. And like a couple of my colleagues I'm curious to learn more about this, and I wonder if we can do something offline with you to understand this. I think the charter school, I mean it would make sense, they're housing public school children, and I believe we should figure out a funding mechanism to support the good education that most of these schools are delivering. So, I look forward so we can figure out how to arrange that and look forward to further conversation offline on that. Thank you.

KOSTA DIAMANTIS: Right. Thank you.

REP. WOOD (141ST): Thank you, Mr. Chair.

SENATOR FONFARA (1ST): Thank you. Thank you, Kosta, good seeing you.

KOSTA DIAMANTIS: Good seeing you.

SENATOR FONFARA (1ST): And there's definitely interest in trying to address this issue.

KOSTA DIAMANTIS: Thank you, sir.

SENATOR FONFARA (1ST): Thank you. Tom.

THOMAS SPINELLA: Next up, we have Representative Winkler, followed by Takima Robison. Michael Winkler.

REP. WINKLER (56TH): Yes, I'm state Representative Mike Winkler, and I appreciate the opportunity to 108 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

talk to the Chairs, Co-Chairs, Ranking Members and Members of Finance. I'm here today to speak on House Bill 5001.

I apologize for any deficiencies in my presentation because I was up for a long, long time and I just woke up from 13 hours of sleep.

The Bill would increase the disregards of income for social security exemption from 100,000 to 150,000 which would be twice the individual amount. I submitted a detailed testimony last year, which I will resubmit showing the economics of it and showing how we could do this simply by slowing down the disregards for inheritance and gift and things like that. For me, it was easy transferring money from people who have wealth to people who are trying to get a larger disregard from their social security income because they think they're being punished for being married, they think that if we were to -- if we weren't married, we'd have 150,000 disregard, but we are married and we have $100,000 dollar disregard.

I represent a district that is 119th in terms of income and wealth in this state, and I can't believe how many people have contacted me on this Bill. Last year it was the thing I got the most mail about. It turns out that a lot of people have -- who never made $100,000 dollars in their lives, have worked out a very good retirement. They worked multiple jobs and have multiple retirements. I have prison guards and police officers in my district who work 20 and out, and then worked, you know, 25 years someplace else.

I have a lot of people in a district that does not have a lot of wealth that are affected by this fact that they have over $100,000 dollars in retirement income now as a couple, and they're now having to pay taxes that an individual paying -- I'm sorry, 109 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

collecting $75,000 dollars in retirement does not have to pay.

So it's something my constituents have been very vocal about, it's something that I have a surprising number of constituents that it affects. And so, like I said, I will submit the it's not a lot of money, and I do have a plan to pay for it and -- but I'm sure everybody has a plan to pay for it and probably the same plan. But I just wanted to touch base with you today and tell you that even in districts that don't have a lot of money, this is an important thing. Thank you.

SENATOR FONFARA (1ST): Thank you, Representative Winkler. Tom.

THOMAS SPINELLA: Yep, see no questions. we have Takima Robinson, followed Brad Smith.

SENATOR FONFARA (1ST): Ms. Robinson.

TAKIMA ROBINSON: Hello. I would like to thank the Finance, Revenue and Bonding Committee for this opportunity to support Senate Bill 178. The Bill to increase the state [inaudible]. My name is Takima Robinson, and I am the director of Asset Building Programs. [inaudible]

SENATOR FONFARA (1ST): Ms. Robinson. I'm sorry for interrupting you, your audio is not great, and we want to hear and understand your testimony. I don't know if there's a way that you can adjust that.

TAKIMA ROBINSON: Move up?

SENATOR FONFARA (1ST): It might be -- Let's try that.

TAKIMA ROBINSON: How about now?

SENATOR FONFARA (1ST): That's much better. 110 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

TAKIMA ROBINSON: Much better.

SENATOR FONFARA (1ST): Yes, why don't you start from the beginning, please.

TAKIMA ROBINSON: Thank you, so I'd like to thank the Finance, Revenue and Bonding Committee for this opportunity to speak in support of Senate Bill 178, the Bill to increase the state EITC. My name is Takima Robinson, and I am the director of Asset Building Programs with the Connecticut Association for Human Services, also known as CAHS. CAHS lead a coalition of community organizations, foundations, business, and labor leaders to create the EITC. And since its enactment in 2011 it has provided an average of $550 dollar each year in addition -- in addition of dollars to hard working families in Connecticut.

CAHS has always aggressively target racial and economic inequality through the programs we deliver. The volunteer income tax assistance, also known as VITA program is our flagship program. And we coordinate one of the largest VITA coalition's in the state. And so we see firsthand how impactful the EITC is to individuals and families we serve.

Last year, our VITA coalitions prepared over 17,000 returns, resulting in over 32 million in returns and credits, including over seven million in EITC. That pulls more money back to the pockets of the people who needed the most and also more money back into the community.

The EITC is the most effective antipoverty tool available to the LMI community. For a family living paycheck to paycheck, receiving EITC means catching up on bills, paying more for food for their household, buying a car to get to and from work, or preventing eviction.

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During the pandemic many people lost their jobs or experienced decrease in wages, which have led to falling behind on bills and rent. Increasing this EITC, would help alleviate some of those financial burdens and provide the support needed to help families move prospect -- from poverty to prosperity. Thank you.

SENATOR FONFARA (1ST): Thank you, Ms. Robinson. I think this is one prob -- one of the few programs that has across the board support. And while we're not funding it to the degree we should be and I'm hoping we can do better in this regard, but you live it every day, and you see it every day the impact that it's having. And it's my understanding, though, that it just serves families, right, with children, it does not provide a benefit to folks. Is that accurate?

TAKIMA ROBINSON: No, so the EITC goes accordance to income, so single people are eligible for the EITC.

SENATOR FONFARA (1ST): Very good. Thank you very much.

TAKIMA ROBINSON: Thank you.

SENATOR FONFARA (1ST): Tom.

THOMAS SPINELLA: Yep, next up, we have Brad Smith, and then circling back to David Kluczwski.

BRAD SMITH: Thank you. I am Brad Smith, I am a resident of Newtown Connecticut. I am the new owner of the New Britain Bees, a summer collegiate baseball team that is a member of the futures collegiate baseball league. I am also the new leaseholder of New Britain Stadium.

Our baseball roster is comprised of all Connecticut players all who played a very high level of 112 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

collegiate baseball, mainly at the division one level. We are truly a Connecticut based team.

Today I would like to show my support for Senate Bill 1040. The 5% admissions tax, as opposed to the 10% tax on non-baseball events at New Britain stadium will make a big difference for our small business. Obviously, our industry has been ravaged in the last year, and this will be a huge help in booking non baseball events for us, along with the state easing crowd size restrictions, our business is getting back on its feet. As the owner of this small business, I 100% support Senate Bill 1040. It will be greatly appreciated and will be a big help to allow us to continue to be great partners and members of the New Britain community. Thank you.

SENATOR FONFARA (1ST): Thank you, Mr. Smith, and wish you all the best. As a player in high school and college, not to the level that you'd be interested in, but still on -- it's great to hear that you've acquired this team, and we all wish you great success in New Britain.

BRAD SMITH: Thanks.

SENATOR FONFARA (1ST): Representative Cheeseman has a question for you.

REP. CHEESEMAN (37TH): Thank you, Mr. Chairman, Thank you for coming here today, Mr. Smith. So what sorts of non-baseball events do you anticipate hosting there?

BRAD SMITH: We're starting with it -- from scratch with a clean sheet here, but, you know, smaller concerts, beer festivals, car shows. We do a lot of amateur baseball events. So this Bill, really, would just clarify things. For some reason, our baseball games previously would have been taxed the 113 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

5% but our outside events would have been at 10%, so it's just a little --

REP. CHEESEMAN (37TH): A little of a disconnect.

BRAD SMITH: Yeah.

REP. CHEESEMAN (37TH): And this is just from a baseball fan, so is this the same league that the Mystic Schooners play, and is it any CBL or is it a different league?

BRAD SMITH: We are the futures collegiate baseball league, so the way it would work is if our guys have a really good year this summer, they would move for that week for next year, where we tend to --

REP. CHEESEMAN (37TH): Okay, [crosstalk] league for that league.

BRAD SMITH: Yes, absolutely.

REP. CHEESEMAN (37TH): All right. Terrific. Well, I look forward to coming up. We've got some great baseball teams in this state. I know Senator Fonfara has got the Yard Goats stadium in his background. So, yeah bring on baseball, bring on outdoor events, and look forward to working with you on this. Thanks so much for your testimony. Thank you, Senator Fonfara.

SENATOR FONFARA (1ST): Thank you, Representative Cheeseman. Tom.

THOMAS SPINELLA: Circling back to David Kluczwski. If he is here. And then Ryan Brennan.

SENATOR FONFARA (1ST): David is here. Please proceed, sir.

DAVID KLUCZWSKI: Right. Good afternoon, Chairs, Senator Fonfara, Representative Scanlon, Ranking 114 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

Members, Senator Martin, Representative Cheeseman, and other distinguished Members of the Finance Revenue and Bonding Committee. My name is David Kluczwski, I am the tax collector for the town of Fairfield, as well as the legislative Co-Chair for the Connecticut tax collectors association.

I'll try to be brief here, I know my colleague William Donlin did touch upon a lot of what was discussed -- what I'm going to discuss, he touched on earlier. So the Connecticut tax collectors association, we are opposed to Raised Bill 6631, which would allow for the waiving of all or a portion of interest due on delinquent property taxes for good cause.

As mentioned earlier, our mission as an association is promote uniformity in the practice and application of statutory procedures. So obviously this legislation would challenge our mission because it would allow each collector discretion in determining the definition of good cause for the waiving of interest.

So this proposal would open up -- would open up the collection of property taxes to fraud, we have 44% or 70 for tax collectors statewide are elected, they may feel pressure to waive interest in an election year to maintain support of their constituents. On the other end of things, appointed collectors could also feel pressure to waive interest in order to keep their contract of employment in good standing with administration.

Interest is also a revenue concerns to municipalities, any waiving of interest is a reduction to a municipalities collectible. This in turn would force the on time taxpayer to pay more than their fair share in order to compensate for the reduction that occurs with a waiving of interest. The best and most equity tax relief is a strong collection rate, which is achieved by treating every 115 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

taxpayer, fair and equal. And that's all I have, so I appreciate the opportunity to speak, and I thank you for your time.

SENATOR FONFARA (1ST): Thank you, David. Chairman Scanlon.

REP. SCANLON (98TH): Thank you, Senator, and David, good afternoon. I missed your colleague, I had to attend another meeting, so I missed the long exchange with him. So forgive me if I'm asking a question that somebody else asked him but --

DAVID KLUCZWSKI: No problem.

REP. SCANLON (98TH): -- are there are circumstances in which you would support perhaps express situations in which this would be allowed. I'm not sure if you were listening earlier when I discussed something that happened to my constituent, which is that they were a victim of a crime. The police made a arrest in that case, the person was prosecuted for that, and yet, despite all that evidence, the tax collector simply had no recourse to help that person and that elderly couple. Are there are circumstances in which your association would support expressed reasons for leniency?

DAVID KLUCZWSKI: I think we certainly would consider it, I think that the scenario that you're describing is a scenario where there was good intent and they can prove that there was good intent so. You know, I understand, in the current situation, the tax collector that told them there's nothing they can do, they're telling them that because, you know, as collectors, we have to abide by the law and the current law says that, you know, that there is no wiggle room, there is -- there is no room to assist them. But I'm certainly not entirely opposed to that if there's -- if it's clear that they can prove intent, that good intent was there, that the attempt was made to pay timely. 116 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

REP. SCANLON (98TH): Okay, thank you, sir, appreciate that answer.

SENATOR FONFARA (1ST): Thank you very much, David. Tom.

THOMAS SPINELLA: Ryan Brennan.

SENATOR FONFARA (1ST): Ryan, good to see you.

RYAN BRENNAN: Good to see you, Senator, thank you for the time today.

SENATOR FONFARA (1ST): Is this in California, or is this from Missouri, or where are you today?

RYAN BRENNAN: Well, I wish I was allowed to be there with you, but today, this is in from California. Thanks for having me.

SENATOR FONFARA (1ST): I'm sure it's a lot warmer there.

RYAN BRENNAN: Well, Senator. Thank you again for the record, this is Ryan Brennan with Advantage Capital Partners, we're one of the four participants in the Invest CT program, which you've heard about a few times today, and I'm here in support of House Bill 6632, which is the extension of the Invest CT program.

And maybe just a few seconds of history of how Invest CT came to be. And some of you may know, in 2010 majority leader's task force of jobs looked at all the progress in Connecticut in the existing IRF insurance program at that time was woefully underperforming. It had about 700 million spent on it and it created about 40 jobs, so at $1.3 million dollars per job. It was ready for reform.

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The legislature at that time, in our opinion, put one of the most aggressive formats for an economic develop a program in place. Which said any fund, again, advantage is one of four, that applies to be part of the program has to commit to a certain number of jobs created or else tax credits can be reclaimed. And each of those four funds now invested, as you heard, in the 133 companies across State of Connecticut and total of $320 million dollars. Those investments have created more than 12,000 direct and indirect jobs, which frankly, has just far exceeded the expectations in 2010.

I think that's a testament to some of the entrepreneurs you've heard here today that we're ready for growth, ready for risk capital, couldn't get it, and once they had that capital, really just unleashed their business plans and their growth across the state. It's a -- in addition to the money invested directly by Invest CT funds, $10 dollars, more than $10 dollars is coming in from non IRF and Invest CT funds, private sources with no tax codes associated. And Representative Cheeseman, you asked about that earlier, it's not just the direct capital coming from these funds, it's the ability to attract private, sometimes out of state capital into these high growth companies. So we're happy to be here and supporting of the Invest Ct extension, and thank you for your time. Happy to answer any questions.

SENATOR FONFARA (1ST): Ryan, thank you very much. We've heard testimony prior to you today that was very encouraging, in terms of -- for me, the attracting businesses that had not intended to come to Connecticut. As well as supporting an industry, I would say, more broadly, in terms of technology, which I think is our strength, it's in our wheelhouse but we're not what we should be. And so I think your program, is it -- is there a benefit -- I know you're asking for an extension, but again, we're gonna go further and looking at how we can 118 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

support the knowledge economy beyond today, but is there value in expanding your program? Is the investment -- with the investment show the similar or greater return if we were to entertain that?

RYAN BRENNAN: Well, Senator, thank you. I would say yes, and this extension would add $200 million dollars to these funds to be invested in Connecticut startups, so I think, by acting on this extension, you would do just that. And I think, as we heard from Scott Drozd, the first witnesses, there are hundreds, maybe thousands of small businesses in Connecticut that are ready for this growth capital. We had 50 or more that bound to testify today, we didn't want to do that to you, to the Committee so you're going to get a packet of letters of 50 startups in the state that will say that they could not get financing, but for Invest CT, and frankly, we're excited to this extent to go through to go find that next batch of high growth companies that are ready to add employees.

SENATOR FONFARA (1ST): And you mentioned you're the -- one of four companies doing this that are licensed or been authorized, are the other three performing in the same manner that that yours is?

RYAN BRENNAN: Yes, Senator, and each of the companies that you've seen today, they've been one - - from one of the -- our different funds. So we wanted you to have a flavor for how all four are focused on, not just to return on investment, but the jobs return on investment. I think you've seen, you know, four very different types of companies from solar to biotech to online parts marketplaces.

SENATOR FONFARA (1ST): Thank you, Ryan, very much. Representative Cheeseman.

REP. CHEESEMAN (37TH): Thank you, Chairman Fonfara. Thank you for coming here today, Ryan, and Senator Fonfara asked one of my questions, you know, if we 119 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

were to expand this. But along those lines, are there companies who -- I know you actively seek them out, but are there companies out there whom you have to turn away, simply because you have a lack of funds, and that would otherwise be good candidates for this kind of funding and could provide similar job growth?

RYAN BRENNAN: Yes, Representative, quite a bit frankly, and that's why I think this extension is timely. I believe, I can't speak for the other three funds, but advantage capital is largely fully invested. The money that we raised for this program, we keep a little bit on the side for when these high growth companies come back and want to keep adding employees. So that money set aside but yes we're turning down companies, unfortunately, now. The are very aggressive growth pains because we fully invested the capital.

REP. CHEESEMAN (37TH): Thank you, thank you for that. And thank you for your testimony today and for bringing such a wide assortment of companies, because I was struck by that because you're not just looking at one sector, you know, for -- as you say from automobile parts to PosiGen, you might think -- you know, wearing my other hat, so on energy and technology, one of our focuses has been making sure that all communities can benefit from the programs we have, so thank you, thank you for your time and we look forward to working with you on this, and thank you, Senator Fonfara.

SENATOR FONFARA (1ST): Thank you, Representative. Senator Miller.

SENATOR MILLER (145TH): Thank you, Mr. Chair. Good afternoon, and thank you for your testimony Mr. Brennan. I have a question, COVID-19 has impacted so many facets of our economy. So I was wondering, has it impacted your ability to function? Your company to function. 120 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

RYAN BRENNAN: So that is a very timely and a fantastic question. I believe it's a benefit of the Invest CT program we don't talk about often, which is how patient our capital is. So when we invest in the entrepreneurs you've met today, we're not a bank. So we don't say you have to have your engine payment in on the first or the 15th, or we foreclose, or we come take that money back.

We got calls through COVID where companies would say we can't pay you back for a year, we say that's fine. That to me, is one of the key benefits of capital from our for funds, is that we're not in this for a year or two years, we're often in these companies for five and ten years. So we try to be long term patient partners of theirs. And some companies have thrived through COVID with some strain, but some are companies that manufacture and make things like HABCO, which makes precision parts for Sikorsky, pivoted to make PPE and PPE equipment. They've done very well. Other companies and hospitality and restaurants and hotels services have suffered, but that's when our patience, I think is a real benefit.

SENATOR MILLER (145TH): Okay, so -- and I don't know if I'm asking you -- that using the right terminology. So have many companies defaulted on their payment or their ability to pay? Unfortunately, have gone out of business. Have you had any gone out of business as a result of COVID? And there is --

RYAN BRENNAN: No, Senator. We haven't had any this year that have gone out of business, we have in our history. I think this program encourages us to take risk with startups, so some of those three years, five, seven years ago, try their business and it didn't work, but none this year, and not as a result of COVID in our fund.

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SENATOR MILLER (145TH): Excuse me. I appreciate the word patience, you using the word patience because I think that that's what we all need to have during this time, you know, during the pandemic, is that we have to realize as a country that we're not working where we were 20, 30 years ago. And that we have to help each other and it's not about money all the time, it's about helping each other, and in this case, trying to help each other, businesses, whether it's business or individual for staying afloat and to survive and thrive, so thank you very much for your testimony.

RYAN BRENNAN: Thank you, Senator.

SENATOR FONFARA (1ST): Thank you very much, Ryan, and I'm glad to hear our encouragement that you dip your toe into the more risky startup world is hopefully is -- you're finding that to be successful, overall.

RYAN BRENNAN: Yes, sir. Thank you.

THOMAS SPINELLA: Yup.

SENATOR FONFARA (1ST): Don't see other questions. Tom. Thank you, Ryan.

THOMAS SPINELLA: Sophie Fortunato.

SENATOR FONFARA (1ST): Sophie, before you begin, I want to let my Committee know that I have not seen Sophie in a long time. She certainly has grown up since the last time I was with her, but her family is from the town of Wethersfield, and I've known and represented them for many years and your sister and your mom and dad, of course, and I'm very proud to see you here today, and looking forward to your testimony.

SOPHIE FORTUNATO: Thank you so much for that, it's so nice to see you and to be here, Senator Fonfara, 122 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

Representative Scanlon, Senator Martin, Representative Cheeseman, and Members of the Committee, thank you for the opportunity to submit testimony in support of Senate Bill 178, AN ACT INCREASING THE APPLICABLE PERCENTAGE OF THE EARNED INCOME TAX CREDIT.

My name is Sophie Fortunato, and I'm currently completing my master of social work degree with a concentration in policy practice at the University of Connecticut, in addition to completing my field placement at the United Way of Central Northeastern Connecticut.

According to United Way's recently released ALICE report, about 38% of Connecticut households are living below of basic cost of living, 28% are below the federal poverty line, and that tells us that economic insecurity is a huge issue that deserves more attention and raising the state EITC can help fight this problem, the EITC is an essential tool to alleviate financial hardship for low to moderate income working individuals and families.

Unfortunately, over the span of ten years Connecticut's EITC has been cut by 7%. Currently Connecticut's EITC is 23%, which is well below the standards set by surrounding states. Massachusetts I believe is 30 and New York is 40, or New Jersey.

A low EITC results in fewer people being able to meet their basic needs, such as rent, food, childcare, transportation, medical, or other essential family budget areas, which in this time of COVID-19 are more impacted than ever.

I volunteer as an intake specialist out of volunteer income tax assistance clinic in Hartford. VITA is a free tax preparation surface run by the IRS for low to moderate income taxpayers. I get to help around 20 people each week with preparing their tax returns and I hear their stories. Some have lost everything 123 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

some are working two even three jobs. They are teachers, nursing assistants, daycare workers, restaurant workers, uber drivers. Workers that we depend on every day for our society to function, yet they are struggling to get by. These are the people that EITC helps and we cannot let them down.

I support this Bill because of several reasons. An increase in family income has been associated with improved overall health and increase child development and educational achievement. Changing EITC income threshold, so it's also a way that policymakers can improve the incentive to work. Not only will it reward Connecticut workers but recipients will then put the money back into the economy by spending it locally on the things that they need. EITC has also helped people get debt free, and yet it's even more meaningful than just money, it can enhance ones feeling of inclusion in American society, which in today's divisive climate is much needed.

Connecticut can reduce poverty by restoring the state EITC back to 30%, doing so would provide needed income for struggling families and further benefit workers, businesses and the whole community. Particularly, communities of color that have been disproportionately impacted by poverty, especially during the pandemic.

THOMAS SPINELLA: 30 seconds. 30 seconds.

SOPHIE FORTUNATO: Supporting this policy is only fair to the hundreds of thousands of residents who are struggling just to get by and depend on EITC to get help and help make ends meet. Thank you.

SENATOR FONFARA (1ST): Thank you very much, Sophie. Appreciate your testimony, and we have Representative Cheeseman who has a question for you.

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REP. CHEESEMAN (37TH): Thank you so much for coming here today, Sophie, can you tell me the average amount of EITC the family may receive and how that can really make a difference to them going forward?

SOPHIE FORTUNATO: Great question. So working with United Way, I'm starting to learn a little bit more about this, the average Connecticut EITC per tax filer was a little over $2,000 dollars last year, last year the Connecticut EITC put a total of $485 million dollars back into the pockets of 216,000 Connecticut workers. And also doing so for every ETC dollar a recipient earns, they return a dollar twenty-four back to the economy.

REP. CHEESEMAN (37TH): Okay, thank you, I mean I -- you know, I wont to speak for everyone in my Caucus, but I do think the EITC is a very worthwhile way to reward people, you know, for working contributing to the economy, but also giving them the help they need to really make a difference in their lives. I mean I, you know, I think the one issue I have with it in the state and federal level, I wish there was a way this could be paid monthly and not as a lump sum, so it was an ongoing support for their activity but that's above my pay grade. So anyway, thank you so much for coming here today and best of luck in your future, this must be very rewarding for you. And thank you for committing to doing something like this and for coming to talk to us. Next year in person Sophie.

SOPHIE FORTUNATO: Thank you very, very much. I appreciate your time.

REP. CHEESEMAN (37TH): All right, thank you. Thank you, Chairman.

SENATOR FONFARA (1ST): Representative Cheeseman, nothing is above your pay grad. So, let's put that out there right now. [laughter]

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REP. CHEESEMAN (37TH): Well, let's tell that to OPM, Senator Fonfara.

SENATOR FONFARA (1ST): Who?

REP. CHEESEMAN (37TH): OPM.

SENATOR FONFARA (1ST): Yeah. [laughter] Sophie very proud of you, and all the best as Representative Cheeseman said, all the best to you and thank you for taking this on and bringing your - - the information, the detail that you have to our attention, it helps us a lot. You have a good day, and, Tom.

THOMAS SPINELLA: Yeah, next we have Senator Looney, if he is in the room.

SENATOR FONFARA (1ST): I think they're gonna set him up.

THOMAS SPINELLA: Yup. He is in the room, so.

SENATOR LOONEY (11TH): Thank you.

SENATOR FONFARA (1ST): There he is.

SENATOR LOONEY (11TH): Mr. Chairman, thank you very much

SENATOR FONFARA (1ST): Senator Looney, you have the floor, sir.

SENATOR LOONEY (11TH): Thank you, thank you so much. Good afternoon Senator Fonfara, Representative Scanlon, and Members of the Finance, Revenue and Bonding Committee. I'm Martin Looney, State Senator from the 11th district. I'm here to speak about Senate Bill -- in support of Senate Bill 178, AN ACT INCREASING THE APPLICABLE PERCENTAGE OF THE EARNED INCOME TAX CREDIT. And I would just like to say that it was a fortuitous that I'm following 126 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

the young woman who just spoke, Sophie Fortunato, who I think who did a super job, made all the arguments and I certainly second her testimony, every bit 100%, and would just add briefly to it. I think that she laid out the case exactly why the earned income tax credit is so important.

Unfortunately, we were the last state in our region of the country having a state income tax that adopted the earned income tax credit as a percentage of the federal credit that established a 30%, unfortunately, it went down to 23% a few years ago, and this Bill would bring it back up to 30%. The argument against it initially was that well, this is a windfall for people who didn't necessarily pay taxes, and it is, as we know, a refundable credit because low income people generally don't have income tax liability, but they are, of course, paying other taxes. They're paying sales taxes, they're paying property taxes, they're paying car taxes, they are paying every other tax even though their income may be so low that ultimately their state income tax liability is low. But almost every cent of what is paid to them and the credit both state and federal is turned back into the economy because they are all living on such tight margins that everything that they get probably goes back through the sales tax.

And it's critically important and it is, of course, a reward for work. It was established at the federal level during the administration of President Ford with broad based bipartisan support. President Reagan even praised it as one of the best social service programs that he thought had been created by the national government. And I think by restoring it to 30% as the prior speaker said, some states have gone even higher than that, but at least if we can get it back to 30%, which was the level of which it was established. It would be a substantial assistance to people who are struggling, especially in the wake of the pandemic now with people falling 127 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

behind in their rent and struggling about paying for daily expenses, and it is a time of even greater hardship.

So if we can restore this credit, even to the model what has now become by 30% would be a relatively modest level because other states have actually surpassed it, it would be a great help. And it is true that low income workers face the same childcare expenses and other kinds of daily expenses that people who were in higher wages do, but often those at higher levels of wages earn tax credits for these expenses, and low income workers don't receive financial assistance in many cases with childcare costs because they often don't have income tax liability, so, as we know, low income people pay a disproportionate percentage of their overall income in sales and property taxes. If they don't own property, they are, in effect, paying property taxes through their rents, and this is money that is spent on essential needs and is immediately recycled into the economy. And it is a way of empowering low income working people, so I commend the Bill to the Committee. And urge support for restoring it to what had been its previous level of 30%. Thank you so much, Mr. Chairman and Members of this Committee that I was so proud to share for three terms back in the late 90s, and first part of this century. Thank you so much.

SENATOR FONFARA (1ST): Thank you, Senator Looney. Not only do you have a history with respect to this committee, but with respect to the issue before us being the champion in the legislature of having this implement, albeit, late, but still nonetheless in your back again. With your advocacy, which we appreciate very much. And Representative Mushinsky, has a question for you, sir.

REP. MUSHINSKY (85TH): Thank you, Mr. Chairman. Senator Looney, it's good to see you, and I hope we 128 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

have a chance to march again at St. Patrick's day parade.

SENATOR LOONEY (11TH): Yes, two years we canceled the parade, but next year we'll be there.

REP. MUSHINSKY (85TH): Next year we'll be there. [laughter] Anyway, what -- when I served on the [inaudible] children, I used to Chair the Committee, we learned that the earned income tax credit was actually the fastest way of reducing child poverty in a dramatic manner. And we had a terrible time convincing Governor Rell of this. She just would not sign up for it, but when she retired and a new Governor came in, we installed earned income tax credit through the Finance Committee, and it does make a dramatic difference in elevating working families in poor -- in poverty more than anything else we get do up here.

So I'm completely with you, and I hope we will get it back to the 30% or better to help these families who really need a leg up and this is one quick thing we could do for them. So thanks for coming in.

SENATOR LOONEY (11TH): Thank you, Representative Mushinsky and, as you and I know better than anyone else, sometimes it takes a while to get things done, but the perspective of our length of service, you know, we were advocating for this for about ten years before we were able to get it on the books in 2011.

SENATOR FONFARA (1ST): Thank you very much, Senator Looney. We really appreciate you coming to testify today.

SENATOR LOONEY (11TH): Thank you, Mr. Chairman.

SENATOR FONFARA (1ST): Tom.

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THOMAS SPINELLA: Next up, Ajay Gupta, followed by Lisa Tepper Bates.

SENATOR FONFARA (1ST): Mr. Gupta.

AJAY GUPTA: Good afternoon, Senator. Good afternoon, ladies and gentlemen, my name is Ajay Gupta, I'm the founder and CEO of SDG corporation. We're a cyber security company headquartered in South Norwalk.

I'm here to speak in support of House Bill 6632, and -- so thank you for allowing me to share my experience with the Invest Connecticut program and PETROS partners, in particular.

We received investments from the invest Connecticut program, multiple investments actually since 2018. That initially allowed us to sort of weather a very rough patch in our business due to the challenges that our largest client General Electric was having with its own business. And at that time we couldn't really tap other sources of capital that are suitable terms for us, we tried at other state programs, including CI but were unsuccessful in obtaining the needed financing.

PETROS came through when we needed this capital and Barry Streamer in particular has been a terrific partner and advisor to the business.

You know, the financing was actually very helpful for us because at that time, we were also able to sort of pivot a little bit and bring to market a new cyber security management platform, TruOps, and since that investment that platform in itself has grown and is being used by multiple clients and various industries.

So we were not only able to retain jobs that we would have lost because of the challenges with our largest client, we were able to create new jobs 130 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

within our services and our product business. And we're now executing, you know, a fairly aggressive inorganic and organic growth strategy to build, you know, our cyber security business into significant scale in the next three years. In the last few months, in fact, we've been engaged in multiple discussions with tons of private equity firms that are excited about our business, and we see them as partners for our next phase of growth. And that wouldn't have been possible if he hadn't received this, you know, as somebody else said earlier, I think it was maybe, Mr. Brennan, those patient capital at the much needed time.

And I, you know, personally believe we have an opportunity to turn Southern Connecticut into a cyber tech hub. That leverages talent, not only from our state but also attracting additional talent and capital from neighboring states, so I think it's a very worthwhile and valuable program, and I'm sure there's plenty of other businesses that can also benefit from it.

SENATOR FONFARA (1ST): Thank you very much, Mr. Gupta. Tom.

THOMAS SPINELLA: Seeing no questions. We have Lisa Tepper Bates next, followed by Brian O'Leary

LISA TEPPER BATES: Thank you very much. Senator Fonfara, Representative Scanlon, and Members of the Committee, thank you for the opportunity to submit testimony I support SB 178, AN ACT INCREASING THE APPLICABLE PERCENTAGE OF THE EARNED INCOME TAX CREDIT.

I have the honor to follow Sophie Fortunato and Senator Looney who provided such important and compelling testimony. And so you've heard already from us as the United Way network of Connecticut that 40% of families and individuals in our state work very hard every day at the jobs available to 131 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

them, and yet struggle every month to make ends meet. The earned income tax credit is a particularly important vehicle in that it provides truly flexible income, which every household then can use with dignity to meet the needs that they prioritize.

So I wanted to make sure that aspect of why the EITC is an important vehicle is really at the top of your minds. I'd also like to speak just for a moment to an important question that Representative Cheeseman asked, and that was both the question of what is the average and what do families now do with this important resource. So as Sophie said, it is about $2200 dollars the average, we're looking to expand that. And here's why, Representative Cheeseman, this is a powerful tool. And in my own work in Connecticut with families facing homelessness, I would see them wait until they had that money in their pocket so that, for example, a woman working very hard as a CNA living on her mother's couch with her two small children. Once she got the EITC, she had a security deposit, she could get an apartment for herself and her family.

Similarly, I worked with a number of families who would have a car on its last legs. And they were waiting for that EITC to make repairs that would keep that car running. And in Eastern Connecticut, Representative, where both you and I live, you know that you cannot support a family, you cannot get to and from work without that car, and yet cars are expensive. So that's the type of cost that families in Connecticut are using this important resource to cover to keep themselves going, to keep themselves meeting their family's needs.

The additional $400 dollars, on average, that the restoration of the EITC to 30% would represent actually that that gap in savings that you're familiar with. The federal reserve has shown, as I 132 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

think you're all aware, that 30% of Americans do not have $400 dollars in the event of an emergency.

By restoring the EITC to 30% --

THOMAS SPINELLA: 30 seconds.

LISA TEPPER BATES: -- as it started out, as Senator Looney reminded us. You would actually be putting that $400 dollars for an emergency in the hands of that Connecticut family. Thank you very much. I'd be glad to take any questions.

SENATOR FONFARA (1ST): Thank you very much. Representative Meskers.

REP. MESKERS (150TH): Thank you, Chair, and now that Sean has rejoined us for a happy St. Pat's to you as well as, Sean. You know, I've spoken in many cases in the session finance about the sales tax cuts, the need we face in this state to grow the business and grow the business environment. But I think, quite honestly, and quite sincerely what you're proposing in the testimony and what this does, it resonates. It's aid to people at that point in the financial stream that's directed that it lifts them it dignifies their work. It recognizes and helps them to make the purchases, you know, in a low income economy that we need to see and help.

So, you know, even though I work on reducing the ticket prices for venues, and things for the economic, I think what you're doing here is and your support in particular speaker in the leader of the Senate, Senator Looney, and in Michelle Fortunato, I think -- Sophie, sorry, Fortunato. I think their testimony speaks volumes of why we should consider that, so thank you very much.

REP. SCANLON (98TH): Thank you, Representative. Next up, Representative Hennessy. 133 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

REP. HENNESSY (127TH): I thank you, Mr. Speaker. So Lisa, I just want to refer back to your testimony. You had mentioned 40% of Connecticut residents, so are you saying that 40% of the Connecticut residents that are working hard will still be available for the EITC?

LISA TEPPER BATES: So thank you, Representative, for your question. in fact, that 40% refers to the ALICE research that the United Ways of Connecticut have completed in our 2020 report. And what that means is that we have developed a typical household budget based on the cost of actual life in Connecticut. And 40% of households across our state either barely make that much or are making less, and so every month have a deficit. So that's the 40%. The vast majority, if not all of those families would benefit greatly from the EITC.

REP. HENNESSY (127TH): Thank you for your testimony. And I hope you get a pass. Thank you.

LISA TEPPER BATES: If it's so please -- the Chair, may I just speak one last item which I think relates to the comment by Representative Meskers. When we think about the EITC, please bear in mind, that for every EITC dollar a recipient earns, they return a dollar twenty-four to the economy, which supports, not only those families and those individuals, but also the businesses that, Representative Meskers, you very rightly pointed out, and that we need to help.

REP. MESKERS (150TH): Thank you much.

REP. SCANLON (98TH): Senator Miller.

SENATOR MILLER (145TH): Thank you, Lisa. Thank you for testifying today, you answered my question. You mentioned that the family, talked about the family who needed the money to repair their car. And so my 134 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

question would have been, they would have gone to -- where would they have gone to gotten to get their car repaired. And they will probably go to a business owner, a small business owner who would then be able to facilitate.

So, the EITC is not just to help the families but it's also to help our economy, it bolsters our -- So -- because studies have shown that families who are low income put the money back into the economy, and that was one of the purposes of us increasing -- - implementing the EITC, is that it stimulates the economy, it's not just for the families to help them to survive, but it also stimulates the economy.

So like my colleagues, I want to thank you for the work that you do in helping families to find it difficult to help themselves, so thank you for your testimony.

REP. SCANLON (98TH): Representative Farrar.

REP. FARRAR (20TH): Thank you, Chairman. Hi Lisa, thank you for being here today, very nice to see you. Following up a little bit on what the Senator just mentioned, and also what Representative Hennessy noted. I think we've all, you know, been reflecting on this COVID moment and who has been most affected, and also looking deeper into what the American Rescue Plan offers. And one of the things I wanted to hear from you about, particularly in the research about the ALICE population and who would be most affected by the EITC. Can you really share, you know, how that addresses some of our core concerns about who might have been most effected during codes, such as women and people of color. I'd love to understand the data a little bit more deeper in that way.

LISA TEPPER BATES: Thank you for that important question, Representative Farrar. You are exactly right when you ask the question about who will 135 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

benefit most, and it is important to remember that this is actually an issue of equity when we think about that possible expansion of the Connecticut EITC. This is an important vehicle to support the families who are disproportionately represented in the ALICE population and who have been disproportionately impacted by COVID.

In the ALICE population, we will have 57% of our black household, 63% of Connecticut Hispanic household, and 73% of single female headed households in Connecticut living below that ALICE threshold. Putting this extra $400, or if the EITC were increased to 50%, as is proposed separately to that level of $600 dollars, that's going to be a meaningful benefit to those specific families at this time of increase need. So thank you very much for pointing that out.

REP. FARRAR (20TH): Thank you for that. Yeah, I think it makes the argument, you know, this is not just an economic issue, but surely a gender justice, a racial justice issue and, as you noted, pays dividends for our own communities and the money that goes back into them, so thank you for being here and thanks for sharing a little bit deeper on the data for us to understand who would be most affected and most benefit.

REP. SCANLON (98TH): Representative Cheeseman.

REP. CHEESEMAN (37TH): Thank you, Chair Scanlon, thank you for coming here today, Lisa, and this is just a quick question on the technicalities, so how does an individual or a family become eligible for the EITC, what are the logistics of this?

LISA TEPPER BATES: Thank you, Representative. It's a fairly straightforward process, they must file their taxes, you heard separately from partners who include local United Way's as well as CAHS, that we have these VITA sites across the state to help 136 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

people file. So they must file their taxes and when they do, then the State of Connecticut uses the federal he EITC to calculate the state EITC, and then to issue that fully refundable credit.

REP. CHEESEMAN (37TH): Okay, so if you file your taxes and you've qualified for the Federal the EITC, you basically qualified for the Connecticut one, and once it placed, your return gets filed, then the payments go out?

LISA TEPPER BATES: That's correct.

REP. CHEESEMAN (37TH): Okay, thank you, thank you for that information. Thank you, Mr. Chair.

REP. SCANLON (98TH): Senator Miller, for the second

SENATOR MILLER (145TH): I'm sorry. I forgot to lower my hand.

REP. SCANLON (98TH): Okay. Thank you very much. Tom, next up.

THOMAS SPINELLA: Next up, we have Brian O'Leary, followed by Chris Wilson, and Greg Florio.

BRIAN O'LEARY: Good afternoon, honorable Co-Chairs Fonfara and Scanlon, Ranking Members Cheeseman and Martin, and distinguished Members of the Finance Revenue and Bonding Committee. My name is Brian O'Leary. I'm tax council with NBC universal. Thank you for allowing me to appear before you today to speak in support of House Bill 6628, an act relating to the application of the digital media tax credit.

The House Bill 6628 is an extension of an existing and successful measure implemented by this legislature in 2017 that allowed for digital media and television production companies to apply the credits that they earn against the Connecticut community antenna tax, as compared to selling them 137 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

in the market and having those credits used, 100 cents on the dollar by Connecticut buyers.

The community antenna tax applicability allows the production companies to use those credits against that tax at 92 cents on the dollar, the difference between the face amount and the amount that's applied on the Community antenna tax return, represents a savings to the state.

House Bill 6628 takes that principle and that proven concept, and in a limited way, extends it to allow television and digital media production companies to use their credits against the sales tax that those companies collect and remit and the collected taxes from their affiliates. The sales tax applicability, as with the Community antenna tax, is offset only up to the amount of 92 cents of the face amount of the tax credits that are issued by DECD to these production companies.

Year over a year, since the community antenna tax offset was made available, the state has saved on average of $2 million dollars a year. By extension, House Bill of 6628 will generate additional savings. That's the fiscal benefit, the economic benefit is that this industry, the digital media and television production community in Connecticut, year over year has continued to grow. Even to the difficult times, the pandemic, our industry has continued to make investments and sustain ourselves. And one of the important catalyst for our investment and the economic recovery of Connecticut has been this tax credit program; the digital media and television tax credit program.

Why NBC universal cares? A little bit of history about our company. In 2013 we made a significant bet on our future and our relationship with Connecticut by consolidating all of our sports operations from [inaudible] America to an abandoned shampoo factory in Blachley Street in southern 138 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

Connecticut. Since that time we had committed to create 450 jobs to the state. We're at over a thousand and counting. In Olympic years we add another 500 jobs.

Between that facility and our operations at the Stamford media Center, which some of you may recall, used to be the old Rich Forum, which we acquired out of bankruptcy to create a production facility. Between those two facilities, we've committed over 220 million dollars of capital investment. And year over year, generate economic --

THOMAS SPINELLA: 30 seconds, Mr. O'Leary. 30 seconds.

BRIAN O'LEARY: We generate over $500 million dollars of economic activity in the state. Our relationship with Connecticut extends beyond that. We have over 750 unique vendors over 55 communities in the state. That's important to us, we intend to continue to grow, this measure allows to do that with greater efficiency, savings going on to Connecticut. Thank you.

REP. SCANLON (98TH): Thank you, Mr. O'Leary Representative Cheeseman.

REP. CHEESEMAN (37TH): Thank you, Chair Scanlon, thank you for coming here today, Mr. O'Leary. Do you know -- do you have a backlog of tax credits waiting to be used? What's the genesis of this?

BRIAN O'LEARY: Thank you, Representative, for your question. So the way the credit program works, unlike a lot of credit programs in Connecticut. But very much like production tax credits around the country, these credits are transferable, which means if we do not have a tax liability to use them against we sell them in the market. There's always a ready market of buyers, which is why the pricing 139 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

is so competitive. We do not. NBC universal, the credits that we receive, in the form of vouchers from DECD and the year we receive them, that's the year we're gonna use them on one of our tax returns. Or we sell them in the marketplace. And, as I said, it's a very robust market, and in one that is reflective of the strength of the industry, and the fact that this program allows credits to be sold and used

REP. CHEESEMAN (37TH): Okay, and you've talked about that, you know, the investment, that this has paid off. So in terms of what Connecticut, you know, the return on investment for Connecticut with this digital ad tag, the tax credit, can you give us some data on that?

BRIAN O'LEARY: Sure. One important consideration, actually, a few important considerations. As it relates to the production tax credit in Connecticut, focused on digital media and television its origination was really focused on feature film, which is an important part of our industry, but one that didn't generate the economic returns to the state because it wasn't the same bricks and mortar longevity as relates to long form programming that represented by television and digital media, so the state suspended that voucher.

And in a couple of other important considerations, is that, as compared to a number of the state's competitors, in the US, and around North America, and frankly, around the world, there are a lot of elements of our industries expenses that aren't eligible under the Connecticut Program. We have to use Connecticut vendors, and that's why my earlier comment about how many vendors that we have across the state, and the number of unique vendors in the state, is a reflection of the policy of this program.

140 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

It doesn't make financial sense for us to go outside of Connecticut to find a supplier, it makes us develop relationships within the state. That's an efficiency, most states don't require that. And the other consideration is there are limits on cast compensation, very different in so many other states.

So the efficiency of this program is different than a lot of the analyses, and what I understand is that DECD in their discussions with the industry is undertaking a report at the direction of Commissioner Lehman, which is different than the analyses that have been undertaken in the past, much more complete and thoughtful analysis. Because this industry and its relationship with the state had earned that.

So, as I understand, what DECD has directed is an economist firm with global reputation that is sudden work for governments around the world is undertaking a more comprehensive view of this industry and its relationship with the state. The data collection is already begun, DECD has already reached out that the business can ask the questions and get the information to give a complete analysis to -- frankly, be responsive to your question, Representative, in questions that should be asked.

REP. CHEESEMAN (37TH): All right, thank you, thank you for coming here today. Thank you, Chair Scanlon.

REP. SCANLON (98TH): Senator Fonfara.

SENATOR FONFARA (1ST): Thank you, Mr. Chairman. Good afternoon, Brian.

BRIAN O'LEARY: Senator.

SENATOR FONFARA (1ST): I'd like to ask you to -- if you wouldn't respond to a more broad based question, 141 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

and that is, what got you here? In terms of government involvement or other reasons. I know there's substantial amount of government investment. But, you know, economic development happens for a lot of different reasons, where businesses locate, what they return to the economy, you've spoken about some of those things terms of you certainly employing a lot of people in Connecticut now. What number I've seen is what 900? I don't know if it's greater than that now, but certainly substantial number. We gotta believe some of those people moved into our state from New York or wherever to work here in Connecticut, which now they're paying income taxes, they're buying things.

Just wanna understand the interplay of decisions that -- forget about which administration and what the attitude is of one administration versus another. I want us -- I'd like to hear from you -- have the Committee hear from you regarding what got you here and what now we're seeing in terms of that investment and what is meaning to our state from the standpoint of jobs in terms of what those jobs are paying, in terms of salary and what likely is returning to us in many ways. The spillover effects of that.

BRIAN O'LEARY: Thank you, Senator. So it is a bit of an alchemy, there are a number of considerations that that decision making takes into account. The tax credits are important catalyst or investment, but if the state didn't have an abundance of talent and infrastructure that this industry can repurpose, my examples, just our company's experience at the old Clairol factory, and at the Rich Forum. Those are opportunities for us to take something that other sectors of the economy have put aside or idled or we're struggling and reinvest it, so the importance of the credit is it reduces the barriers to entry and continued investment in our industries relationship with this state, and, frankly, our 142 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

industry's relationship wit, you know, other territories around the world.

But it shouldn't be lost on the fact that there are important attributes, it's not just the tax credit, the tax credit allows us to continue year over year to make these smart investments. But if the resources weren't here that we could build on, including workforce and infrastructure and the supply chain that I referred to you -- We've learned a lot in working with local Connecticut businesses who are so keen to understand what our industry's needs are, and respond to them. So we have this important supply chain, and just to understand how that reflect is reflected across the Connecticut economy, frankly, just speaks to the fact that our facilities may be in southern Connecticut, but the 55 communities that I referred to go very up, right up to the very top of the state.

So that's an important consideration, but in terms of monetization, Senator, I just want to make sure that that this Committee appreciates that this company and the other companies that have made long term bets in Connecticut, are some of the most important champions that this state has. We have met with our competitors and our partners and encourage them to make these investments, which you've seen. The announcements at DECD over the last handful of years and may reflect the fact that the digital media and television production community see Connecticut as a place that is smart to make investments for the long term.

And why this Bill is relevant? If we couldn't use these credits, then we wouldn't be encouraging our partners or ourselves to continue to invest. But we have invested with our own dollars and made our own bets on our future, and I think I've mentioned this in the past, we through the pandemic we relocated our golf channel business, from outside of the state 143 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

to Connecticut. Hopefully, some of you our viewers of our Peacock talk streaming service. And you should appreciate that the technical backbone and the external facing attributes of that business all originate from Connecticut. And we relocated our Olympic channel from the western part of the United States, with the support of the IOC, to our facilities in Connecticut.

So Senator, we certainly see that this is an opportunity for this industry to be part of the recovery of the state. This program is an important part of our investment decisions, but I -- as I've also said in the past, it doesn't underwrite all of the expenses that we incur. So much of what I've just described to you, isn't covered by the credit. And that's why this program operates so efficiently. It's related to production activities that we have all of our corporate functions and support activities, which gets caught up in the wake of these investments, which I would submit is the upside and part of the smart policy that this legislature and the administration have maintained.

SENATOR FONFARA (1ST): So if I could just -- I think you said this far better than I could ever. But the opportunity that got you here and what you brought at that time, what was part of the deal, has grown well beyond that, decisions that you've made separate from the agreement, and how that's benefiting Connecticut you just named some of them. But that gets lost, I think, when we talk about candidly this -- I don't want you to weigh in on this part. It's just my own editorial comment. This administration has been very critical of those kinds of deals, but I think yours is not the only but certainly a significant example of how those kinds of deals can produce benefits far beyond what the original agreement was. And often, does not get recognized when the issue about doing deals like this to attract companies to Connecticut when that conversation takes place, so thank you for shedding 144 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

light on the experience so far. Thank you, Mr. Chairman.

REP. SCANLON (98TH): Thank you very much, Senator, and thank you, Mr. O'Leary for being here today. Next up, Tom.

THOMAS SPINELLA: We have Chris Wilson, followed by Greg Florio.

CHRIS WILSON: Good afternoon, Senator Fonfara, Representative Scanlon, Senator Martin, Representative Cheeseman, an honorable Members of the Finance Revenue and Bonding committee. I'm Chris Wilson, a Bristol Board of education member, and Chair of the CREC Council.

For approximately 20 years on behalf of the State of Connecticut, CREC has been managing 17 award winning magnet schools across the region to support Sheff versus O'Neill. I'm attending this afternoon to support SB 1053. I provided you written testimony and I will summarize my comments.

Probably the biggest challenge, or I heard the term used earlier today, conundrum for the CREC Council is this ongoing sustainability. When these magnet schools were created to satisfy the stipulated order of Sheff versus O'Neil, there was no master plan to fund either operational or capital expenses. So the challenge for us is how when we have 17 buildings, do we manage fixing those schools and keeping them in great repair?

Many of them have been built in the last ten years but some of them between ten and 20 years. And my experience in my local district is even newer schools need to have maintenance and repair. That I would call capital expenses, they're not operational expenses, they're not tuition, they're not personnel expenses, but they're heating and cooling systems fail, HFAC systems fail, roofs need to be replaced, 145 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

safety and security upgrades need to occur, sidewalk and parking lots need to be repaired, new lights need to be put on the outside of the buildings. All this is good stewardship, it's a good investment, and it's important for CREC to have the mechanism to do that.

Currently, we're about the size of a middle sized school district in Connecticut, we serve over 8,000 students, but there is no mechanism for us to go and get those funds to make those repairs, which I spoke about. And I've heard some suggest that we should just increase tuition. But that's assuming that there's elasticity in those tuition payments the local school districts pay, and there's certainly not. The school districts are struggling with their budgets so there's not an ability for CREC to just pass on these costs to the participating school districts. And so I come here this this afternoon to ask that you consider SB 1053.

And I'd like to use up just the remaining part of my time to mention that I didn't think she got on the list to give testimony today but Dr. Maureen Brummett From the superintendent of Newington and a former superintendent of Plainville, and the President of Hartford area superintendent association and a leader in the Connecticut association of public school superintendents passed on --

THOMAS SPINELLA: Three minutes, sir. Three minutes.

CHRIS WILSON: Passed on testimony to me, that they too would support SB 1053. Thank you very much.

REP. SCANLON (98TH): Thank you, Mr. Wilson, the Senator from Bristol. Senator Martin.

SENATOR MARTIN (31ST): Thank you, Mr. Chair. Hi, Chris, how are you? 146 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

CHRIS WILSON: Hi, Mr. Matin. [laughter]

SENATOR MARTIN (31ST): No need for the mister. First Chris, thank you for -- Chris, thank you for everything that you've done in the past for Bristol, but more so for your involvement with CREC and you are -- where you on when Kosta Diamantis made his testimony? I just wanted to get your thoughts on what he had to say.

CHRIS WILSON: Well, I think he admitted that it was -- yes, I was on, and I think he did admit that there is a funding gap here and we need to fix the problem, I think we just disagree on the approach.

SENATOR MARTIN (31ST): Okay, so I think the Bill ask for no more than 20 million, and I totally agree. I mean, you know, we help fund these buildings and you said what, there is like 17 buildings that you guys have currently in your -- you take care of, you know, supposedly, the maintenance of these. And how are you managing now? How are you not getting funding for these ongoing repairs? You know, you mentioned HFAC, you mentioned the maintenance overall, the parking lots the lighting, et cetera. You know, I'm in a real estate business, so I understand fully, you know, this stuff even though you may build brand new, there's always expenses, year one, year two, year three. And, as you go out in years, those expenses increase. So how are you managing today?

CHRIS WILSON: I'm gonna let Greg Florio, the executive director probably answer that question for you to probably a little more detail than I can. But I will say that, you know, the buildings are relatively new and we have, you know, built a lot of those into the construction projects when we renovate the schools. But I think now we're getting to the critical point where some of these schools as 147 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

they age are needing some of these more expensive repairs.

SENATOR MARTIN (31ST): So, Chris, we say -- in the Bill it says no more an aggregate amount of money 20 million, how much do you think you need on an annual basis?

CHRIS WILSON: Again, Henri, I was not privy to the planning with CREC administration, so I would ask that Greg, the executive director Florio, could give you probably better detailed answers than I can on that.

SENATOR MARTIN (31ST): Okay. Is he on, Chris ? Or did --

REP. SCANLON (98TH): He's next up, Senator.

CHRIS WILSON: Yes, yes, he's the next speaker.

SENATOR MARTIN (31ST): Oh he is. Okay, great. All right, thank you. Thanks, Chris, and again --

CHRIS WILSON: Yeah. Yeah. Thank you, Henri. Yeah.

SENATOR MARTIN (31ST): Yeah. Thanks for everything that you do. Thank you Mr. Chair.

REP. SCANLON (98TH): Seeing no questions, Mr. Florio, I think you're up.

GREG FLORIO: Thank you, thank you Chair Fonfara, Scanlon, Ranking Members, Martin Cheeseman, and distinguished Members of the Committee. Yes, I'm Greg Florio, the executive director of CREC the Capital Region Education Council. As I'm following our Council Chair, Mr. Wilson, I'm not gonna be -- trying not to be repetitive because he made all of the key points obviously supporting Senate Bill 1053 that would provide a mechanism for the Capital 148 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

Region Education Council to maintain the magnet schools that CREC built on behalf of the State Department of Education in the State of Connecticut to meet the Sheff mandate.

A number of our schools are, as Mr. Wilson said, very new, but we also have a number of them that are approaching or passing the 20 year mark. And at that point, we do need to start considering significant capital upgrades to those buildings to maintain them as high quality schools that they are.

I want to be very clear, this is not a blank check, this is not a break and fix request. Those are things that we manage, you know, through our operating budget to maintain the buildings, but when there are significant system issues, whether it's an HFAC system, significant repaving, roofing, that's where we need this mechanism in place to be able to take care of funding those sources, so we do not have to take those funds out of the operating funds that provide the educational services that we want.

I, again, don't want to repeat all of the points because Chris made them so well, but I just want to reiterate that again, CREC did not just through its own auspices decided to build these magnet schools. Over the last decade and a half, the State of Connecticut to meet the judicial mandate of the Sheff versus O'Neil settlement worked with the Regional Education Service Center in the Hartford area, which happens to be CREC, to build these buildings and operate them to meet the requirements of that settlement. And we do that with a lot of pride, we take, you know, again, a great deal of pride in the services we offer to the region and we just are looking for that mechanism that will allow us to maintain the high quality schools and the high quality buildings that we operate, again, on behalf of the state. And I don't want to get -- don't want to be repetitive, so I just really want to be here to answer your questions. 149 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

REP. SCANLON (98TH): Thank you, Mr. Florio, and again Senator Martin.

SENATOR MARTIN (31ST): Thank you, Mr. Chair. Hi. Good afternoon, Mr. Florio, thank you for testifying. Regarding the previous testimony by Kosta Diamantis. You know, he made various comments regarding that, you know, there's a gap here. We set this up 20 years ago I think he said, and that we sort of didn't plan on what would happen in 20 years to these buildings. So he said -- he sort of -- well, he has said that we sort of need to fix statutorily. And have you had any conversation with OPM a regarding your dilemma here?

GREG FLORIO: Yes, we have with OPM, and in the past with the DIS about how this could look. one of the conversations that we had in the past was to look at these facilities, not unlike the Vo-tech schools, which do have a line item for those capital upgrades within -- in the state budget. So, you know, we're just looking for the mechanism, we believe this is that mechanism. Again, this would be based on a capital Improvement Plan it's not a -- it's not based on what do we think we need this year. It would be, you know, a detailed look at our buildings at a reasonable timeline for those significant upgrades, working with the state, the state Department of ED, DAS, OPM, to make sure that it's done in the most efficient and effective way possible, but to maintain the building's as needed.

SENATOR MARTIN (31ST): Regarding the amount that we've put in this Bill, what is the -- on an annual basis, what do you feel is the correct amount?

GREG FLORIO: I think the 20 million is a start. Again, we have three of our buildings that have reached the 20 year mark and are starting to get to the point where significant work will have to be done. And then, beyond that, as the buildings 150 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

reached that age, we'll have to reassess that number going forward.

SENATOR MARTIN (31ST): Mr. Florio, if they're significant work to be done, would you not fall under the current GO bonding for school construction money?

GREG FLORIO: We could, that would be one avenue. The concern there would be that a portion of that cost may not be covered under the state construction grant, and then either CREC or our member districts would have to fund the difference.

SENATOR MARTIN (31ST): What portion would not be funded?

GREG FLORIO: It would depend on the reimbursement rate, which in the construction was 95% initially, and actually, fully paid by the state. Other RESC receive 80% depending on the work, so I don't have an exact number at this time, but it could possibly not be fully funded, which again would then place the burden on CREC in our member districts.

SENATOR MARTIN (31ST): And one last question, so currently, how do you may manage your maintenance costs and some of these, you know, HBC systems that may need to be repaired?

GREG FLORIO: So again, you know, we consider that the day-to-day maintenance, the operation of the building turning the lights on and off, that's part of our operating budget. We build that into the funds that we receive for each student that attends our school from the state and the fees that are paid intuition by our districts, that's, you know, the day-to-day maintenance. Unfortunately, when we do have a significant expense, we have to make adjustments within our budget to address that right now to keep 151 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

a building operational. So if there was a, you know, a significant amount of concrete and paving work that had to be done at one of our schools recently, we had to adjust the budget to make sure that we could do that.

But that would become a significant challenge to continue to do that as more and more buildings reached that point of needing that level of work. We just wouldn't -- it wouldn't be feasible for us to be able to do that going forward.

SENATOR MARTIN (31ST): Thank you, Mr. Florio. I have no further questions, Mr. Chair. Thank you.

REP. SCANLON (98TH): Thanks, Senator. Thank you, Mr. Florio.

THOMAS SPINELLA: We have Chris Wilson -- oh, that what -- we already had, I'm sorry. We have Sana Shah, and then Eric Gjede, and then that's it.

SANA SHAH: Senator Fonfara, Representative Scanlon, Senator Martin, Representative Cheeseman, and esteemed Members of the Finance Committee. My name is Sana Shah, and I'm testifying today on behalf of Connecticut Voices for Children. Connecticut Voices for Children support Senate Bill 178, AN ACT INCREASING THE APPLICABLE PERCENTAGE OF THE EARNED INCOME TAX CREDIT.

Senator Looney and Representatives from the United Way did such an incredible job emphasizing the importance of this legislation, so I figured a better use of my time would be to highlight how many residents in your respective districts will benefit from the EITC. And you'll see that some towns will benefit more than others, but I urge the Committee to support this Bill because of its overall impact on Connecticut. So I'll try to use this time to get through as much as I can.

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So in Branford it would be 8%. In Guilford, it would be 5%. In Chester, it would be 6%. In Clinton, it would be 8%. In Colchester, it would be 8%. In Deep River, it would be 8%. In East Haddam, it would be 7%. In East Hampton, it would be 6%. In Essex, it would be 4%. In Hamden, it would be 5%. In Lyme, it would be 4%. In Old Saybrook, it would be 5%. In Portland, it would be 6%. In Westbrook, it would be 8%, and these are for the amount of families that would benefit from the EITC. In Bristol, it would be 13%. In Harwinton, it would be 6%. In Plainville, it would be 10%. In Plymouth 19%, Thomaston 9%, Easton 3%, Fairfield 5%, Newtown 5%, Weston 2%, Westport 3%, Greenwich 5%, Hartford 32%, Avon 3%, Canton 5%, Middletown 12%, Branford 8%, Durham 4%, Guilford 5%, Killingworth 4%, Madison, 4% North Branford 6%, East Lyme 6%, Salem 7%, Fairfield 5%, Trumbull 5% --

REP. SCANLON (98TH): Ms. Shah, if I can make a suggestion, perhaps you can share this with me and I can share with the Committee. [laughter] You're doing a great job running through the numbers. My Members would maybe like to see it on paper and they can be able relate to that a little better, so if you could share that with us, that'd be great.

SANA SHAH: Yeah, I can send out all this data on all the families that would benefit, how many families, what the average that they would receive. And also, I can just send tax data in general to Members of the Committee. So yes, that would be much more prudent.

So in addition to all that, I do want to add one more points the Bill, which is I would urge the Committee to considering expanding the Bill to include immigrant workers filing with an individual taxpayer identification number. A group that contributes substantially to Connecticut's economy, and yet has almost entirely been left out of the six 153 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

Congressional Bills -- relief Bills with holy -- under -- unholy under supported by the state. So thank you.

REP. SCANLON (98TH): Thank you very much, and thank you for your testimony and for your advocacy today for the EITC. I don't see any questions, so if you can please share the data with us, that'd be helpful. And thank you for being here.

SANA SHAH: Absolutely. Thank you.

REP. SCANLON (98TH): Alright last, not least, Eric Gjede from CBIA.

ERIC GJEDE: Appreciate that. Yes, Eric Gjede from CBIA, consistently bad lottery drawer, but here on behalf of business and industry association. I want to, you know, remind you all have a story that you know anyway, back in the 2008, 2009 recession, Connecticut borrowed $1 billion dollars from the federal government to ensure that we could pay all of the unemployment claims that were made during the recession.

We, of course, the state took out the loan, but it was the business community and the business community alone that paid it back, and thankfully we did do that. But it was, you know, not without paying significant interest and assessments in order to get there. And then, fortunately, within the past few years and without any adjustments to the unemployment insurance tax, we were making progress towards our solvency goal. And, of course, then the pandemic happen, which was unlike any other economic downturn that we have seen in the state, and now we are back in a very similar situation to where we were those years ago.

The business community has been advocating for unemployment trust fund solvency for the last decade, it's something that we feel very strongly 154 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

about. But it is clear that this is not an issue related to the revenue we take in but more so, related to the benefits we pay out. We have the same or right around the same taxable wage base as all of our neighboring states, the only difference is we historically have not made any reasonable benefit reforms.

And despite our belief that it's the -- or the benefit side of the coin that is the problem here, we have been open to compromise and we remain open to compromise. Unfortunately, House Bill 6633 is not reasonable, in our view. This would increase the taxable wage base from $15,000 dollars to over $70,000 dollars, and then index thereafter. This would make us have the highest taxable wage base in the nation, while maintaining some of the least stringent criteria for benefit payouts.

Now, I'm not gonna say there aren't any benefit reforms in HB 6633, the problem is they just don't go far enough. So, for example, HB 633 -- 6633 raises the minimum earnings to qualify for unemployment benefits to $1,200 dollars. Currently, claimants in Connecticut need to only earn $600 dollars in a year to qualify for benefits, this is the second lowest earnings threshold in the United States. Most states require between three and $5,000 dollars in earnings. In the State of Washington, for example, requires more than $9,000 dollars in earnings. The earnings requirement in Connecticut has not been raised in 53 years.

The Bill would also prohibit claimants from receiving unemployment benefits until they have exhausted their severance pay, we do support this provision. And then, finally, it freezes the maximum weekly benefit rate for one year. The maximum benefit rate increases by up to $18 dollars every single year, and did so throughout the last recession. This rate should be frozen for not less than three consecutive or nine consecutive years. 155 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

Now, taken together, none of these benefit reforms would result in less benefits for anyone who is working even close to part-time, and certainly, not for anyone for -- that was working full-time. They simply freeze the benefits where they are at, you know, the status quo for a short amount of time. We also encourage the Committee to look at including reforms that may not necessarily impact solvency, and those are highlighted in my written testimony.

I just want to reiterate again, you know, we are committed to working with this Committee to finding a balanced approach in order to provide solvency or return solvency to our state's unemployment trust fund.

Connecticut businesses have suffered a lot over the last year. We've incurred massive federal debt to ensure every unemployed person receives their benefits. And we already have some of the highest unemployment taxes in the nation. House Bill 6633 has all the right ingredients for reform just not the right proportions, and with that I'm happy to pause right there, and take any questions that the Committee may have.

REP. SCANLON (98TH): Senator Fonfara.

SENATOR FONFARA (1ST): Thank you, Mr. Chairman. Hello, Eric. Do you have an understanding at all as to why we would keep the requirement in terms of earnings so low compared to what the benefit is?

ERIC GJEDE: I mean, I can't -- I don't know why the policymakers in the Department of Labor have long refused to do this, or to alter it, make the earnings requirement higher. So many other states have done this in the past, you know. The current level right now, at $600 dollars in the course of a year, when you get to a $15 dollar minimum wage, like we're going to reach in a few short years, 156 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

you're talking about qualifying for unemployment benefits after working only one 40 hour week in an entire year. It has not been adjusted at all in that entire time. So we -- and we would strongly encourage making these adjustments, just as so many of our neighboring states have done.

SENATOR FONFARA (1ST): Yeah, I don't really care about other states. My interest is in a program that recognizes that unemployment should be just that, you lose your job, whatever reason, you get unemployment but that doesn't seem to be a relationship between the two with that lower threshold to qualify.

ERIC GJEDE: Well, if I can just respond, Senator. The unemployment system is exactly what you just said, it's meant for those who become unemployed through no fault of their own. But you -- in order to get benefits, you need to have demonstrated a reasonable attachment to the workforce. Working one week or one, yeah, one full week an entire year is not a reasonable attachment to the workforce, and that's our problem with such a low threshold.

You know, we want to make sure this fund is solvent for future workers. That's incredibly important to us, and it proved to be incredibly important in just this past year, but we got to make sure that those workers who are getting these benefits and have demonstrated that they want to work and, you know, other programs are meant for folks who cannot work. And so again, it's just simply not what this program was intended for.

SENATOR FONFARA (1ST): Thank you. Thank you, Mr. Chairman .

REP. SCANLON (98TH): Representative Nuccio.

REP. NUCCIO (53RD): Thank you, Mr. Chairman. Hi, Eric, how are you? 157 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

ERIC GJEDE: Well, thank you.

REP. NUCCIO (53RD): Happy St. Patrick's day. I'm Irish. I feel comment to say that to everybody today. [laughter] Quick question for you, so you had mentioned that the $600 dollars threshold hasn't been raised in 53 years, and I know we change the base amount. You probably don't know this, but do we have any idea like what that number -- 'cause, of course, 53 years ago $600 dollars probably represented a lot more than one week's time of work, as you said, attachment into the workforce. Do we have any idea of what that number would be if we had kept pace with inflation over the 53 years, or how many weeks the original intention was before collecting unemployment?

ERIC GJEDE: Actually, I do. I had a lot of time to sit here and listen to other folks. I did plug that into a historical inflation calculator, $600 dollars in 1968 would be equivalent to just north of $4500 dollars in 2001 -- or 2021 excuse me.

REP. NUCCIO (53RD): So it seems like the states around us have probably increased there's by inflation to show the applicable amount of work in order to qualify for benefits where we have not. Is that a fair assumption?

ERIC GJEDE: That is fair. We have not. Again, we've made no adjustments since the earning requirement was put into statute, which was 1968.

REP. NUCCIO (53RD): Ok, so the next question that I have for you, and I kind of rely heavily on CBIA and then talking individually with all of my small businesses in town and people who reach out to me directly, do you have any kind of sense, on its face, this plan, you know, making it a higher threshold but lowering the rates, on its face looks like a good thing. But I'm wondering if you have 158 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

any input from the businesses that you represent, anything that you've put out to people that you could share on what impact this would have on business overall?

ERIC GJEDE: That would -- it would certainly depend on the industry because a big portion, of course, of the state unemployment tax is based on how often you as a business use the unemployment trust fund. If you have a lot of, you know, high turnover in your business, then, you know, I would think that your rates are based on what has been put forward here would go up, so you would be paying a higher portion of the overall unemployment tax burden. And that's certainly something that we support. And then, of course, if you were on the lower end, you may receive less, but at the end of the day, this is still a tax increase for virtually all businesses in our view, and a significant one too. And we just ask that it'd be more of a balanced approach than what has been put forward here.

REP. NUCCIO (53RD): And do you provide suggestions on how you think it could be more of a balanced approach in your testimony, or something that you could whip off in the remainder of our five minutes here?

ERIC GJEDE: I do. it's in my written testimony, but we believe that the taxable -- or I'm sorry, we believe that the earnings requirement should be around $5,000 dollars, which would put us right in the middle look back across the country, despite the fact that we have some of the highest wages across the country.

We recommended, and I think I mentioned this in my testimony, that the maximum benefit rate be frozen for at least three years you're, not necessarily consecutive years, but three years, nonetheless. And then we did talk about -- we did support the require that you exhaust your severance pay in all 159 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

cases, which is actually in the Bill now. We could certainly be happy to enter into discussions regarding an increase to that taxable wage base but, you know, I have seen data coming out of the Department of Labor that, you know, a relatively small taxable wage increase and, of course, this was back pre pandemic I don't want to -- I don't want to confuse the Committee. But a relatively small taxable wage the basic increase would have returned us to solvency in a matter of a few short years, and so we are happy to discuss that provided with is accompanied by much more balanced benefit reforms than what we see in this current package.

REP. NUCCIO (53RD): Thank you very much for your testimony, I appreciate it.

REP. SCANLON (98TH): Representative Cheeseman.

REP. CHEESEMAN (37TH): Thank you, Chairman Scanlon. Thank you for being here today, Eric. And you've touched on that, I was going to ask you if there were things in this proposed Bill that you liked and you mentioned the severance pay. And there are also some of those recession recovery measures that were included that would have experience rate increases during economic shocks, reduce the maximum solvency tax rate, and, you know, not have a non-charge for shared work. Are those things you could support and would you build on -- you know, do you have other suggestions along those lines that would particularly address the issues that have been faced by businesses during the COVID period?

ERIC GJEDE: Yeah, I mean, I certainly -- we certainly support those measures. I think those are very important, especially when you have very unexpected downturns. The way that our economic downturns, the way that we saw in the past year. So, you know, again I want to reiterate one more time, you know, we think all of the right ingredients are in this package, it's just that the 160 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

proportions are off, and so we are happy to work with the Committee to make those adjustments. And to -- I don't know if you -- there are other -- there are other certainly other things that could be done, ideas that are not included in this, you know. We are one of the few states that have a dependency allowance related to the unemployment, so if you have children, you get additional benefits beyond what an individual with your exact salary would get if they -- who did not have children. Again, one of the few states that did -- that have that, you could certainly discuss removing that. Again, I don't understand policy wise why you receive additional benefits, I certainly don't get paid more work because I have -- I'm blessed with children, but, you know, we're not here advocating on that but that is an additional idea that could be used or could -- or additional reform that could be made that Connecticut has that very few other states have that would result in savings.

REP. CHEESEMAN (37TH): Okay, thank you. And I, you know, I think the one thing on which everyone has agreed is there needs to be reformed, there needs to be a fixed to this because this doesn't work going forward. And the pandemic has only brought this into greater focus, so. And I hope again, you know, you will stay engaged, all the parties will stay engaged, because it would be distressing to get, you know, to get out of this session and not having address this real problem. So thank you for your testimony today, appreciate it. Thank you, Chair Scanlon.

REP. SCANLON (98TH): Representative Meskers.

REP. MESKERS (150TH): Thank you, Representative Chairman Scanlon. Eric, I'm a little confused and I know you're hesitant to come out with the comprehensive solution and a negotiated strategy to figure out what we're doing on reform, I can appreciate that. It would seem to be the single 161 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

largest item of your concern, I would think financially would be what we refer to as the attachment point on work, and this in the question about whether we do $600 dollars or 3000 or 4000. I was shocked with the number of people that I dealt with it at unemployment claims resolving their issues during the pandemic, realizing that they were a number of people who are in this gig economy that are in wages for seasonal work going throughout the year. So I can understand the concern that I wouldn't want to punish the people are in seasonal work, but the question becomes is a week seasonal worker is three months seasonal work, and the wages related. So I can understand that. Do we solve the majority of the problems from what you saw in the modeling or what you looked at with a 3000 or $4,000 dollar attachment point?

ERIC GJEDE: Well, the seasonal work issue is a whole can of worms that we could be opening up. In fact, I would think -- I would almost argue that a lot of seasonal workers benefit more from the system in terms of their whole salary being accounted for when benefit determinations are made far more so than folks who do work all year round. So, you know, again the Bill doesn't get at that seasonal work aspect, so we're talking about what will have, you know, a really low attachment to the workforce. You know, even with this reform that's talking, you know, the increase to the earnings -- what you need to qualify for benefits, you know, I talked about at $600 dollars, you know, it's only a 40 hour -- one 40 hour work week the entire year. This, of course, would just double that, so it's simply two full work weeks in the entire year. So you need -- I think you need a little bit more than that in order to demonstrate that you are attached to that workforce.

REP. MESKERS (150TH): Okay. The only thing I would also bring to you, it's not that I want to -- I don't want to open up a can of worms on the seasonal side in terms of unemployment benefits. But under 162 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

the current system, you know, given the fact that we haven't got a graded level of -- in the salary or high enough salary threshold. If you've got four part-time job to 15,000 year, you are paying more than the individual who's got a singular job at 60,000. So right now the way we're scaled out, the seasonal worker is supporting a lot of the unemployment benefits.

Albeit, the attachment issue is a separate issue, and I can see you. So at some level I think scaling in the level of employment makes sense in terms of the salaries, and adjusting. And I think at some level the attachment makes sense, I don't know where the happy balance is, but are those are the two principal areas you'd look or are there other areas you're concerned about?

ERIC GJEDE: Well, again I'm happy to look at any multitude of areas related to this Bill, or a lot of other ideas that I certainly could bring forward. But I was just testifying to what is in the Bill itself today, so I could have -- I'm happy to take that conversation offline with you, or have it in a more public forum, however you'd like.

REP. MESKERS (150TH): No, I just I want to understand the wrestling of the issues that are to be negotiated or considered to be negotiated because, you know, frankly, the fact -- the status of the fund is frightening and I think we need to make sure we do that in a way that doesn't harm business but also protect workers or -- You know, if the feds don't provide us with the wherewithal in another economic cycle for unemployment, we have a significant issue tracing us. So getting a -- that fund healthy is super important to me. But thank you.

REP. SCANLON (98TH): Representative Terrie Wood, I believe.

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CHRISTINA PEN: That's Representative Mushinsky, Representative Scanlon.

REP. SCANLON (98TH): Oh, Representative Mushinsky, I apologize.

REP. MUSHINSKY (85TH): No problem, Mr. Chair. Eric, I just wanted to ask you about -- I have a elder -- I shouldn't use that word. I have an older worker constituent who is a -- was out of work for a very long time, mainly because of her age, she -- the older workers have a harder time getting called in, and she finally got a job that was in her field, and she was so happy and then like a week later, the pandemic hit and her job disappeared. So she was really a worthy worker, an enthusiastic worker, but she might have been one of those $600 dollar people. Is there a way we can separate out someone like that who's enthusiastic and would have stayed there forever till she retired, from someone who really just did the minimum effort? Is there a way we can write that?

ERIC GJEDE: I'm certainly happy to have that discussion with you, Representative. You know, I don't know, of course, any of this -- the particulars related to the circumstance surrounding your constituent. You know, even for folks who are out of the workforce for, you know, a reasonable amount of time, you know, your benefits are calculated based on the last -- the first four of your last five quarters. So again, I don't know if they were out of work for, you know, more than a year or not, so they could potentially still have qualified for benefits, and it would have been charged back to an earlier employer. If they were within that window, but again, you know, this does require -- you know, your benefits are determined using your two highest quarters of earnings. And so I don't know how long they were on the job, again, before they lost it, so, you know, they very well could have qualified for very minimal benefits. 164 March 17, 2021 vs/mi FINANCE, REVENUE 9:00 A.M. AND BONDING COMMITTEE

Depending on, again, if they had reached that $600 dollar threshold or not.

REP. MUSHINSKY (85TH): Okay. I'm just trying to - - I know who you're talking about, you're talking about people that take a small seasonal job just to make the qualification, I know who you're talking about. But I'm trying to separate them out from the people who would dearly love to be working year round. And it's not their fault that they're not.

ERIC GJEDE: I certainly appreciate that Representative. You know, I would just say that while I not sympathetic, you know, of course, I feel for that individual. It's a horrible situation and, of course, none of us knew this pandemic was coming. I'm just simply saying that there are other safety nets out there meant for that type of situation, and I'm just talking about what this particular safety net was meant to do, and so, you know, that's all I guess I would offer on that.

REP. MUSHINSKY (85TH): Okay I'm trying to think of what the language would be and I'm not coming up with it right away, but that might be 'cause we have too many 15 hour hearings. [laughter] Have to look at it again. But thank you, Eric, for coming in, and hopefully we'll get this fixed for.

ERIC GJEDE: Thank you.

REP. SCANLON (98TH): Thank you, Representative Mushinsky. And, you know, Eric, I would say the same thing, I said to Mr. Dach earlier today that I look forward to working with you and Labor and the administration to try to figure this out in the coming weeks before our deadline and see if we can get a Bill done. I think it's vitally important that we do something, especially in this moment, and look forward to working with you and the Committee to do so.

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ERIC GJEDE: I really appreciate that, Representative. And really appreciate your commitment on this issue.

REP. SCANLON (98TH): And with that we shall conclude our hearing and get on with celebrating the victory of St. Patrick and all that he did for our world and my people. And just remember, if you're not actually Irish, you're Irish today, so go and responsibly and safely enjoy this great St. Patrick's day, and we'll see you soon. Thank you, everybody.

REP. CHEESEMAN (37TH): Thank you.