Let’s talk about the uber-interesting topic of unemployment insurance. That is sarcasm, folks. I don’t know too many who find unemployment insurance interesting or compelling conversation.
However, business owners need to pay attention. Last year, employers paid taxes on the first $13,600 of an employee’s wages a year. On Jan. 1, that number increased from $13,600 to $17,000.
While many of the metrics (sales tax, visitation) we measure are strong, the pandemic continues to strain our state’s economy. I can speak directly to the difficulties faced by both employers and employees over the last two years as both a representative of Colorado’s business community and as a business operator. We’re not out of the woods yet, and challenges remain for our business community.
Our legislators in Denver have a key role to play in shaping the state budget, which is critical to our continued economic recovery. That’s why we are asking our legislators and the state legislature to support our local businesses by passing the governor’s proposal for $600 million in relief to the Unemployment Insurance Trust Fund. The fund was fully depleted in the height of the pandemic – combined with upcoming surcharges, fraudulent claims, rate schedule changes, and $1 billion in federal debt, businesses and their workers are in dire need of economic relief.
Unless legislators act, every business in Colorado will face significant premium increases in the coming years – especially those who had to lay off workers through no fault of their own. These premium increases will directly impede our recovery and will be felt across the board by Colorado’s workforce, small businesses, and consumers. Many other states have already taken action to help businesses with these premium increases, and it’s critical that Colorado plays a leading role in our national recovery by addressing this issue.
Employers will see increases because of our state’s Unemployment Insurance Trust Fund (UITF) solvency issues. The state borrowed $1 billion from the federal government to continue paying unemployed workers after the fund was depleted in August 2020. Because the UITF receives no general fund money, the burden to repay the debt and get the fund back to solvency will fall solely upon employers.
Those changes will include a shift in the premium rate structure for unemployment insurance from the second-highest rate schedule to the highest rate schedule on Jan. 1. Employers will also be hit with an interest surcharge to pay back the federal loan. An additional solvency surcharge will take effect in 2023 until the trust fund balance reaches 0.8% of the prior year’s wages — an amount that previously has been around $1.1 billion and likely will take several years to reach.
And, if there is an outstanding loan balance to the federal government, Colorado employers won’t be eligible for the existing reduction they get via a Federal Unemployment Tax Act credit. That credit is about $21 per employee per year. The credit rollback could be in place for several years until the loan balance is paid off. The specific rate an employer will pay is based on their experience rating, which varies among employers. For more information, visit the Colorado Department of Labor and Employment (CDLE) website.
Buying down the unemployment insurance trust fund debt and replenishing the pre-pandemic account balance will make it easier for employers to grow and rehire displaced workers. We encourage our elected officials to support Unemployment Insurance Trust Fund relief to help businesses hire more workers, pay strong wages, and prevent cost increases for customers.
Chris Romer is president & CEO of Vail Valley Partnership, the regional chamber of commerce. Learn more at VailValleyPartnership.com