Colorado’s economy has turned definitively onto the wrong track and is forcing businesses to consider expanding elsewhere — with growing state regulations cited as the largest impediment, according to a survey of business owners done for the Colorado Chamber of Commerce.
The survey of 156 business owners, conducted in June and July by national research firm Cole Hargrave Snodgrass & Associates, found that business leaders “are more dour today than last year about the direction of the state,” CHS President Pat McFerron said. Sixty percent of all respondents said that the economy is on the wrong track, and that percentage grows to 67% or greater for companies that operate in multiple states and firms doing business primarily along the Front Range.
The primary reason for that negativity — the effect of regulations on businesses’ ability to operate — is a subject over which business owners have expressed concern for the past several years. But this year, it was so much more prevalent as the biggest struggle for firms in Colorado than for those in other states where CHS has polled that it is “shocking,” McFerron said.
Sprawling effects of regulations
While business leaders in 2022 reported an almost even split in their most pressing issue — 27% cited a scarcity of workers and 26% pointed to regulations — there was a major shift this year, despite the state still having more than two job openings for every unemployed resident. A full 48% of respondents cited regulations as their top concern, far more than the 11% pointing to a lack of workers or the 8% calling out the lack of affordable housing for staffers.
“Having conducted more than 50 studies of businesses in states across the nation, this is the greatest concern about regulations I have ever recorded,” McFerron wrote in a memo about his findings, noting that the question that prompted the deluge was an open-ended query rather than one with multiple potential answers.
Colorado Chamber of Commerce board chairman John Jacus testifies against HB 1294 in a committee in April as Colorado Competitive Council Executive Director Rachel Back looks on. The bill in its original form sought to impose new regulations on air-quality permitting.
Regulations ranked as the top concern of business owners from all parts of Colorado — with more than 60% of those along the Front Range picking it as their most painful issue — and of leaders of companies from all industries and of all sizes. And while 15% of respondents cited the federal government and an equal amount citied local government as producing the greatest regulatory burdens, 64% pointed to the state government — a revelation that McFerron said “may be the key takeaway from the entire study.”
Specific regulations businesses cited
Labor- and employment-related regulations stood out as the largest concern among state laws, with 89% of respondents ranking them as a top-three regulatory burden — a higher percentage than environmental rules, regulatory fees or data/customer-privacy laws. Colorado’s new family-and-medical-leave insurance program — for which employers started paying fees this year in preparation for workers taking time off beginning next year — drew the most complaints, followed by paid-sick-leave mandates and wage-transparency rules, both of which were stiffened by legislators this year.
Stacey Campbell, a shareholder with employment-law specialist Campbell Litigation and member of the Colorado Chamber board, said that it’s not compliance with any one law that is hurting employers so much as keeping up with all the legal changes that could get them sued. In addition to the equal-pay and sick-leave modifications, the Legislature this year approved a new definition of harassment, took further steps to crack down on age discrimination and made tweaks to the state’s disability-discrimination law.
“It seems like Colorado is becoming more of a mini-California with everything that employers are having to deal with,” Campbell said. “I think companies feel the impact. And I think they are just wanting to breathe, to slow down a little and get a chance to catch up.”
Could conditions hurt economic development?
Though most classes of businesses cited employment regulations as their top concern, environmental regulations ranked highest among businesses that are headquartered outside of Colorado but have a substantial presence in the state. The state has ramped up air-quality and greenhouse-gas-emissions regulations, including establishing its first emission-reduction requirements for buildings, and it will consider further limits on emissions from manufacturing facilities later this month.
A full 72% of companies with operations in other states responded that doing business in Colorado now is more costly than doing business in other states — a portion that McFerron called “striking” because those businesses could move production or employees elsewhere. And 44% of those multistate firms said they are likely to make future investments in places other than the Centennial State, with 39% saying they would focus growth both here and elsewhere and another 17% saying expansion would focus on Colorado.
Loren Furman is president and CEO of the Colorado Chamber of Commerce.
This hesitancy threatens Colorado’s reputation as a place where businesses want to invest and grow, and that in turn threatens both the jobs that already exist here and those that corporate leaders may consider planting here, Colorado Chamber President/CEO Loren Furman said. She hopes that state legislators and policy leaders will look at the survey results and consider the consequences of their actions as they debate proposed future regulations.
“Lawmakers need to understand that every new regulatory burden coming from the Capitol has a real impact on jobs and economic growth,” Furman said. “The data is clear – we’re losing out to other states because of our business climate, which is chipping away at our competitiveness and driving businesses to invest in other states.”