Colorado lawmakers unveil bipartisan bill to shore up unemployment trust fund, close loopholes

Bill would transfer $600 million in ARPA money to help shore up fund
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Posted at 3:52 PM, Apr 27, 2022
and last updated 2022-04-27 17:53:33-04

DENVER – Colorado lawmakers unveiled a bipartisan bill Wednesday that aims to put $600 million toward the state’s Unemployment Insurance Trust Fund to pay off more than half the debt Colorado owes to the federal government for supporting its unemployment payments during the pandemic-induced recession.

Additionally, the sponsors of the bill said in a news conference Wednesday that it would extend some unemployment provisions that have been in place during the pandemic to help lower-wage workers, people excluded from receiving unemployment payments, and cut wait times for people seeking unemployment benefits.

But paying off the roughly $1 billion in funds the state borrowed from the federal government when Colorado’s fund became insolvent in August 2020 has been one of the objectives this legislative session for the governor’s office and Democrats and Republicans alike in the General Assembly.

When the pandemic started, the fund had about $1.1 billion in it – money that comes from premiums paid by businesses for their employees.

But in March and April 2020, when businesses were forced to close because of COVID-19 protocols imposed by the state and counties, 374,500 Coloradans lost their jobs, and many went on state-paid regular unemployment. Those payments quickly depleted the trust fund built up since the Great Recession.

Even though the federal government also rolled out several of its own unemployment programs later that spring, and further on during the pandemic, that money did not come from state funds.

But the trust fund became insolvent on Aug. 18, 2020, even though unemployment in Colorado peaked in May 2020 at 11.8%, as the state was paying out between $70 million and $100 million each week in regular benefits between April and August of that year.

The Colorado Department of Labor and Employment turned to the Federal Unemployment Account, as did many other states, to borrow from the federal government at zero interest to ensure regular unemployment payments continued flowing to Coloradans.

The state had previously gone that route during the Great Recession and in the 1980s, though businesses agreed to use bonds after the Great Recession to pay the money back.

As unemployment has continued to drop since mid-2020, the CDLE and lawmakers have discussed needing to address the debt to the federal government. In January, CDLE Principal Economist Ryan Gedney said the department was working with lawmakers on solutions to paying back the fund.

He said at the time the CDLE would like to get the fund back to about $2 billion to $2.5 billion in order to be prepared for another recession. He said at the time the state had not borrowed from the federal government to pay unemployment benefits since April 2021.

At the start of the session, lawmakers said they would be putting a one-time payment toward addressing the trust fund. Gov. Jared Polis asked in his annual budget proposal for lawmakers to use $500 million in General Fund revenue and another $100 million from the American Rescue Plan Act into shoring up the fund, the former of which would also go to premium relief for employers next year.

Republicans introduced a bill that would require the state treasurer to transfer $1.1 billion in General Fund money to the trust fund to get it back to pre-pandemic levels and for the Division of Unemployment Insurance to repay the full federal debt of more than $1 billion. But it has yet to see any committee action, and even upon introduction, lawmakers were talking about a compromise.

That compromise was unveiled by Sen. Chris Hansen (D-Denver), Rep. David Ortiz (D-Littleton), Sen. Bob Rankin (R-Carbondale) and Rep. Marc Snyder (D-Colorado Springs) on Wednesday.

Colorado lawmakers unveil bill to shore up unemployment trust fund, close loopholes

The measure, according to sponsors and a fact sheet, will transfer $600 million in American Rescue Plan Act (ARPA) money to the federal FUTA loan repayment, which, combined with increased premium payments for employers this year, sponsors believe will put the fund back into positive territory in coming months. The state received around $3.8 billion in ARPA funding.

Sponsors say upping the size of the fund would lower premiums for employers. The measure would also extend a solvency surcharge suspension for businesses through 2023.The federal government requires states that have outstanding loan balances on Jan. 1 for two consecutive years to repay the full loan amount by Nov. 10 of the second year lest states see their FUTA credits for employers reduced, according to the IRS.

Other provisions of the bill include a permanent increase on how much unemployment part-time workers can receive without losing benefits, the elimination of a week waiting period for beneficiaries once the fund reaches $1 billion, the creation of a permanent benefit recovery fund so people like immigrant workers can receive benefits, and clarity surrounding when overpayment waivers can be provided.

The sponsors praised the insurance the fund provided for unemployed Coloradans and said it had done exactly what it was designed to – provide insurance for people who might suddenly lose their jobs and need money to pay for rent, groceries and other necessities.

But they said that shoring the fund up quickly was necessary to be prepared for another recession any time even though the state’s economy has already recovered all the jobs lost in the first two months of the pandemic.

“We don’t know exactly when, but it will happen,” said Rankin, adding that though Republicans had their own bill originally, he was pleased with the new bill – calling it “the right solution.”

“This bill does accomplish most of the objectives we wanted both from the business community and from our perspective, so I’m really proud to join in and be a sponsor.”

The Democratic sponsors agreed, saying they knew it was beneficial to reduce the financial burdens on businesses while they continue to recover, and that the pandemic had exposed some loopholes and challenges for certain groups – especially undocumented people – when it comes to receiving unemployment.

Hansen added that bonding would still be an option for businesses as part of the bill but said he did not believe that would have to be used.

“This bill is a win for Colorado,” Ortiz said. “It’s why you see working and businesses come together to say this is the way forward.”

The leaders of both the Denver Chamber of Commerce and Colorado Fiscal Institute said they supported the measure. JJ Ament, the CEO of the chamber, called the bill “one of the most important pro-business, pro-economy bills introduced this session.”

Kathy White, the executive director of the Colorado Fiscal Institute, called the measure a “good compromise” between business interests and workers both in accelerating solvency for the trust fund and for the closing of the unemployment loopholes, which she said would preserve some of the policy changes made at the state and federal levels for low-wage workers.

The state's unemployment rate dipped to 3.7% in March, and Colorado has now recovered 104% of the nonfarm payroll jobs lost during the first two months of the pandemic. The 3.7%. unemployment rate was the lowest it has been since February 2020, just before the pandemic started.

The bill had not been introduced Wednesday afternoon as of publication.

Denver7's Meghan Lopez contributed to this report.