Colorado legislators will not be dipping into the state’s still-insolvent Unemployment Insurance Trust Fund to create new payments for children of unemployment-benefit recipients, after a Senate committee rejected a bill to do just that on Tuesday evening.
House Bill 1078 had sought to give a $35 weekly stipend to underage and disabled-adult dependents of Coloradans receiving unemployment benefits, which would have made the Centennial State the 14th to add the extra payments as a help to salary-deficient families. Proponents ranging from the Colorado Fiscal Institute to the American Federation of Teachers argued that the state’s existing benefits are insufficient for individuals to makes ends meet and become woefully short when recipients have fixed costs childcare and food for their kids.
But the effort to add the benefits came as the state continues to owe more than $100 million in loan repayments to the federal government and a private lender to prop up the UITF, which went broke in August 2020 during the coronavirus pandemic and has yet to recover. That fund instability prompted not only business groups like the Colorado Chamber of Commerce and the Colorado Competitive Council to ask for HB 1078 to be killed but drew opposition to the bill as well from the Colorado Department of Labor and Employment.
Complaints about timing
Legislators would not as part of HB 1078 have raised unemployment taxes on employers, who are responsible for filling the UITF to provide benefits when workers are laid off through no fault of their own, but the bill could have extended the time form them to pay a solvency surcharge. The surcharge, which is estimated to cost the average 10-person firm about $700 annually and cost companies a combined $133.6 million a year, will remain in place until the fund reaches reserves of about $1.4 billion, which CDLE leaders don’t forecast until mid-2026 at the earliest.
Business and workers-advocacy groups reached a deal last year to transfer $600 million to the UITF to aid its path to solvency in exchange for reforms such as new benefits for undocumented workers and elimination of a one-week waiting period before new applicants can get payments. When the HB 1078 sponsors brought forward their plan this year with an annual cost estimate between $15 million and $56 million, business groups involved in the deal said it was too soon to be amending it, especially as employers still struggle with costs of labor and goods inflation.
“I think if we’ve learned anything over the last couple of years, it’s that we can’t predict what will happen,” Colorado Chamber President/CEO Loren Furman said, noting that conservative estimates question whether economic turbulence before 2026 could delay the UITF’s return to solvency. “So, I think the fund needs to be fully solvent for several years before we take any more money out.”
Efforts to save unemployment-benefits bill
To address that situation, House sponsors had changed the bill to delay implementation of the new benefits until July 2026, and co-sponsoring Sen. Chris Hansen of Denver went further Tuesday and added an amendment to delay payments until reserves reached $1.5 billion. But Phil Spesshardt, director of the CDLE’s division of unemployment insurance, said that addition would make the bill more problematic, as the state may not have the proper amount of time to get the complex new program up and running if it’s not sure exactly when it must launch.
Beyond the technical questions that surrounded the proposal, CDLE legislative director Caitlin Adams echoed the concerns of other groups, such as the National Federation of Independent Business, that HB 1078 would have expanded the UITF beyond its purpose.
“The department allowance proposed in this bill is to use the Unemployment Insurance Trust Fund to fix a problem it wasn’t meant to solve,” Adams told the Senate Business, Labor and Technology Committee. “It tries to use unemployment insurance to fix the larger problems in the cost of living and the cost of childcare.”
Is unemployment-benefits system outdated?
Indeed, the underlying arguments from proponents of the change were that the UITF needs to modernize further to meet the needs of a changing labor force, which features a significant number of single mothers who can be devastated economically by layoffs. State unemployment benefits replace only 43% of lost salaries on average, and the ability to use added benefits to continue putting dependents in childcare while mothers or fathers who serve as a family’s primary bread winners search for new jobs could speed re-employment.
Co-sponsoring Sen. Faith Winter, D-Westminster, reiterated Tuesday that lack of childcare is a top reason that women who lose their jobs choose to leave the workforce. And boosting the labor-force participation rate of women by just 0.2% can generate a $4.4 billion economic impact in Colorado, she said.
“You can support workers and you can support businesses,” co-sponsoring House Rep. Jenny Willford, D-Northglenn, had emphasized when HB 1078 passed the House on April 24 by a 36-28 vote as nine Democrats joined with all Republicans in the chamber to oppose it. “What this does is makes sure our unemployment-insurance system works better for a modern workforce.”
Two Democrats key in defeat
The argument never won over Republicans, however. And on Tuesday, two Democrats on the committee joined with their GOP colleagues to nix HB 1078, at least for this year.
Sen. Robert Rodriguez, D-Denver, said that he shared concerns with CDLE over whether this was a proper use of the UITF and wasn’t convinced that this was a law that needed to pass now while there remains so much uncertainty around the fund’s balance. And Sen. JoAnn Ginal, D-Fort Collins, said that she believes there is a reason that this effort was not included with the numerous other reforms in the 2022 bill that shifted money into the UITF and that the lack of money in the fund is something that can’t be overlooked.
“I do appreciate the intent of the legislation … But I still have difficulty,” Ginal said before the bill fell on a 5-4 vote. “(The UITF is) in debt to the feds and to private lenders, and CDLE stated they may not be solvent until 2030.”