Yankee Institute policy suggestions for mitigating the economic impact of COVID-19

Yankee Institute is grateful to Gov. Ned Lamont and his team for their work, thus far, in trying to mitigate the economic damage being wrought on Connecticut during this time of crisis and for their response to the threat posed by the COVID-19 virus. The collapse of the financial markets and the closure of businesses and schools are certain to cause long-term economic problems for the country and, in particular, Connecticut.

Lamont has issued executive orders waiving certain occupational regulations for pharmacists, face-to-face interview requirements, expanding telemedicine coverage for Medicaid recipients and has allowed the Department of Economic and Community Development to defer loan payments for 800 or so small businesses that have loans from the state.

These are positive steps and some of them should be considered as permanent policy changes following this crisis. Yankee Institute would also like to offer the following suggestions to help mitigate the economic fallout on businesses and working families during this time of unprecedented need.

1.    A hold-harmless unemployment tax provision for small businesses forced lay off employees due to the COVID-19 virus. Restaurants, gyms, child care facilities and numerous other businesses, through no fault of their own, are being forced to close or are facing such massive downturns in sales that they will be forced to lay-off employees. Normally, this would increase the cost of their state unemployment insurance tax. However, the state should consider a temporary hold-harmless provision for affected businesses as they struggle to remain open during this crisis. If forced to pay more for unemployment insurance, those businesses that are able to remain open with reduced staff, may find themselves facing higher costs and may either have to shut their doors or lay off more employees. There is precedent for this: state statue provides a non-charge provision for employers if unemployment was caused by a natural disaster declared by the President. Gov. Lamont has already eliminated the requirement that an individual receiving unemployment demonstrate they are searching for a job. A similar waiver or exemption of the unemployment tax on affected small businesses should be considered, as well.

In addition, free-lance or self-employed individuals could be granted a tax deferral in order to free up cash flow. The U.S. Treasury is already offering this to individuals and small businesses affected by the virus without interest or penalty.

2.    Temporarily increase the Earned Income Tax Credit for working families. The Earned Income Tax Credit is one of the most efficient ways to support low income working families who may find themselves facing financial hardships in the wake of decreased economic activity and business closure. Such an increase could potentially be done by the Department of Revenue Services retroactively for those who have already filed their taxes. Secondly, the increased EITC could be extended into 2021 as many families will likely face continued hardship throughout the remainder of the year, even if the current wave of COVID-19 passes.

3.    Waive occupational licensing requirements and filing fees for an extended range of services. Gov. Lamont has already waived occupational regulations regarding use of personal protection equipment for pharmacists and licensing for child care providers. These are positive and necessary steps, but the economic fallout from this crisis will extend into all areas of Connecticut’s economy. Annual licensing renewals are unnecessary and likely to be difficult given the economic and societal restrictions during this crisis and may be a hindrance to businesses trying to re-open or continue operating during this time. The governor has already taken steps in this direction for certain occupations and has also suspended DMV license renewals for at least 90 days. The same temporary consideration should be given to occupational licensing and regulations for all Connecticut industries to aid in rapid recovery.

Colorado Governor Jared Polis issued orders allowing medical professionals licensed in other states to immediately become licensed in Colorado and has expedited the licensing process for those seeking medical licenses, reducing the amount of time and requirements it takes for qualified individuals seeking to practice medicine to join in the response to fight the virus. Gov. Polis also expanded the ability of people to administer the virus test to include retired, semi-retired or professionals whose license has lapsed to be reactivated easily and efficiently so that testing can be conducted on a larger scale. Connecticut should consider a similar response as hospital staffing levels may soon be pushed to the brink.

4.    Possible one-year suspension of the minimum wage increase. It is unknown how long the state and the country will be affected by the COVID-19 virus, but the economic fallout will likely last longer than the virus itself and will impact industries and businesses employing workers at or near the minimum wage such as restaurants, stores, child care facilities and retail businesses. Connecticut’s minimum wage law mandates another increase in September of this year from $11 per hour to $12 per hour. The governor should consider a one-year moratorium on this increase so that those businesses able to survive the downturn can recover and avoid having to lay off any more employees. We are not, at this time, advocating for a repeal of the law, but rather a temporary hold on the scheduled increase to allow businesses – particularly the restaurant industry — to recover and maintain higher levels of employment.

5.    Remove all stops and implement distance learning for school children. It is essential that Connecticut’s next generation not miss out on their education during this unprecedented time. While some school districts are working — or have implemented — distance learning, others have not or face hurdles to implementation due to lack of resources or collective bargaining and employment restrictions. This is not a time to quibble over contract language. We encourage the governor, school superintendents and teacher union leaders to come together and waive any restrictions toward implementation so school districts can move ahead as quickly as possible. Parents need the support and school districts must prepare for school closures past March 30. 

Connecticut, at this time, has a record level of budgetary reserves, thanks to the 2017 budget agreement made between Republicans and Democrats during a time when members of both parties were able to work together. As the economic fallout from this current crisis begins to manifest through lower tax revenue, increased Medicaid costs and higher unemployment rates, the Rainy Day fund will be more necessary than ever.

We hope that, once again, lawmakers from both sides of the political aisle – and the governor – will see fit to use those funds in the wisest possible manner and consider removing regulatory hurdles for businesses and individuals as they also try to recover from this public health crisis and economic downturn over the coming year.