In a special conference call with NFIB members, Sen. Chris Hansen discusses repairing and reforming the state’s Unemployment Insurance Trust Fund
Colorado is hardly distinguishing itself by being one of only nine states still owing the federal government money it borrowed to keep its Unemployment Insurance Trust Fund solvent. It’s more than $1 billion in the red with the interest clock ticking and a big deadline for paying it all back looming.
In normal times, the operation of the fund is quite simple: Employers pay into the fund based on the size of their payroll, and unemployment benefits are paid out to those in need of them. When the fund is tapped, states can borrow from Uncle Sam—for a while.
“Economic conditions continue to evolve and with the downturn from COVID, we find ourselves in the unenviable position of being about $1 billion in the red,” said Sen. Chris Hansen in an exclusive conference call with NFIB members on December 22.
Hansen is not just any legislator, as chairman of the Senate’s Appropriations Committee and a member of the Joint Budget Committee, he is one of the more influential members of the Colorado General Assembly. As the result of his Senate Bill 20-207 last year, businesses will not be hit with a solvency surcharge this year.
“We have to avoid the FUTA surcharge,” Hansen said about the Federal Unemployment Tax Act of 6% on the first $7,000 an employee earns. A surcharge that kicks in if states don’t get their trust funds solvent.
Gov. Jared Polis has committed $600 million in federal ARPA (American Rescue Plan Act) funds and money from the state budget toward shoring up the trust fund, but Hansen said it will not be enough.
“I think it is a great foundation for the discussions … [but] we have to frankly do better with the final direction after the next legislative session.” For Hansen that includes bonding, which saw Colorado successfully through the Great Recession in 2011. Hansen called bonding “a good policy tool.”
The goal for Hansen is “to get back to the real definition of solvency,” which he described as not merely being out of the red but also being the well in the black by a comfortable margin. “We are largely in this position because the wage base went unadjusted for 30 years. A big chunk of the negative balance, right now, is because there was a sort of pay later mentality when it came to the inflation adjustment of wage base.”
But don’t bonds also have to be paid off? For the answer to that and Sen. Hansen’s comment on how big a role UI theft played in the state’s current predicament, click the arrow below to listen to the 22-minute conference call with Senator Hansen.