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Storefronts along Main Street in Walsenburg, Colorado, are shown in this March 23, 2021 photo. (Mike Sweeney, Special to The Colorado Sun)

The last time Centennial Container saw the cost of its unemployment insurance premiums increase, owner Jim Noon didn’t think too much about the additional $40 a year per employee. 

“I mean, it adds up, but it’s not close-the-business material,” said Noon, who called a January 2020 state law to increase the base wage employers must use to calculate insurance premiums “a cost of doing business.” 

He’s more concerned about the increase he and other surviving Colorado employers face when higher fees start in 2023 to replenish Colorado’s depleted unemployment insurance trust fund. The fund is about to hit a $1 billion deficit due to high unemployment during the pandemic. Other states are facing a similar crisis and trying to find a solution that doesn’t end up with employers being solely responsible for the debt. Gov. Jared Polis is also considering using some of the recent federal stimulus to pay down the loan. 

The last time the trust fund was depleted and the state had to borrow money from the feds was during the Great Recession. During that recovery, employers statewide were hit with added fees to pay the loan and replenish the fund. Noon said the surcharge tripled his annual insurance payment to $300 per worker.

“We had to pay it all back with just the regular old businesses who were left,” Noon said. “And it was difficult. I mean, it more than tripled our unemployment costs.”

As of Monday, Colorado owed the feds $985.7 million, up nearly $25 million in a week. It went up to $991.7 million a day later. That’s already higher than the state Legislative Council’s forecast of a $955 million deficit they presented just weeks ago by the end of fiscal year 2021 — and there’s still three months to go. 

Pandemic or no pandemic, Colorado employers — not the legislature or taxpayers — bankroll the state’s unemployment fund so their workers can get up to 26 weeks of benefits if they lose a job. In the first six months of the pandemic, the fund distributed $1.1 billion before running dry. That means Colorado has spent more than $2 billion on unemployment since the pandemic began. The federal loan is interest free until Sept. 6. 

In the Great Recession, Colorado’s federal loan ballooned to $578.2 million by March 2011, according to a U.S. Government Accountability Office report. Surcharges on insurance premiums kicked in and it took years for Colorado employers to pay it back. At some point, the business community backed an effort for the state to issue a bond to finance the debt. The bond was finally paid off in May 2017.

“As long as the loan stays interest free, that’s in our favor,” said Tony Gagliardi, state director of the National Federation of Independent Business. “Last time (with the bond), we had a pretty solid trust fund. We got rid of the unemployment surcharge. But all of that is going to come back. The surcharge is going to go back and my members are looking at an 84% increase.”

In an attempt to avoid a high surcharge this time around, the legislature passed Senate Bill 207 in June to build up the trust fund faster by raising the base wage used to calculate insurance premiums. The law also postponed any trust-fund solvency surcharge fees till 2023. 

Polis hasn’t made a decision on whether to use American Rescue Plan money to reduce the unemployment deficit.

“The governor is open to supporting the unemployment insurance trust fund with these stimulus dollars, and also wants to continue hearing ideas from Coloradans and community leaders on what would be most helpful for strengthening communities across the state,” Shelby Wieman, a spokeswoman for the governor, said in an email.

But with thousands of Coloradans still unemployed — 245,481 were receiving some form of unemployment benefit as of March 13 — the deficit will continue to grow before it starts to shrink. And beyond the debt, there’s the issue of getting it funded again. A healthy fund has enough money in reserve to handle unemployment payments for about a year. The ratio should be 1:1 so a healthy solvency level is 1 or higher, according to the U.S. Department of Labor. Before the pandemic began, Colorado’s was 0.78, or already below the recommended minimum.

“The good news is for the businesses that have survived, they get a bit of a buffer” before rates increase, said Tatiana Bailey, an economist and director of the University of Colorado-Colorado Springs Economic Forum. “Especially for smaller businesses that have been negatively impacted, this would be really beneficial. … And the last thing you want is higher unemployment insurance payments to put a company over the edge when they’ve made it this far.”

Colorado has 9th largest unemployment deficit

Colorado isn’t the only state borrowing money to pay unemployed workers. As of Monday, there were 18 other states and the U.S. Virgin Islands with a federal loan. Colorado has the ninth largest loan, between $1.3 billion for Minnesota and $969.3 million for New Jersey. California led the pack, at $21.3 billion. New York was second, at $10.4 billion, and Texas was third, at $6.7 billion.

States are in different stages of funding their unemployment benefits. Most states haven’t tapped into federal loans. Some states borrowed money but have dropped off the list, like Georgia, which put $1.5 billion from the CARES Act to pay off its loan and shore up its trust fund last fall to save employers an average of $350 a year per worker, the Atlanta Journal Constitution reported. 

Others, including Colorado, are contemplating different ways to reduce the deficit, said Alexa Tapia, a campaign coordinator with the National Employment Law Project, an organization focused on improving economic security among workers.

“We are definitely seeing a mix across the nation. Some states’ trust funds are solvent. They’re not moving to borrow just yet. Others are having to think about how they can adjust their trust fund for solvency so we’re seeing different legislative packages being put forth,” Tapia said. “There’s been a multitude of good and bad actions happening.” 

Florida, which still has money in its trust fund, is considering increasing retail sales taxes to offset the additional payments small business owners face to replenish its fund. 

But an attempt to use the state’s portion of the new American Rescue Plan to pay down debt may not be legal, Tapia said. 

“There’s a provision in (ARP) where it can’t be used to either reduce or eliminate taxes and so by technically putting the ARP funding into their trust fund, it could be in violation,” Tapia said. “However, we’re waiting for more regulations and guidance from the Treasury. But there are … states that are in a lawsuit right now about the provision.” 

Her organization advocates for getting money into the hands of people who need it most instead of focusing on replenishing the trust fund. States have figured out other ways to offset costs to employers but if states can expand unemployment eligibility or length of benefits, that will go further.

She pointed to a series of studies about the Great Recession that showed unemployment benefits helped buttress the economy, lifting 5 million people out of poverty and saving 2 million jobs. 

“For every dollar of unemployment insurance, it generated $1.61 in economic activity,” she said. “The states that prioritize getting benefits into the hands of people who need that have a faster recovery after the economic recession.”

Colorado has more employers than before

The current economic crisis is still different from the Great Recession, which hit higher-wage professional workers and industries like finance and real estate, rather than service workers at restaurants, hotels and the tourism industry this time around.  

In fact, according to data from the Colorado Department of Labor and Employment, there were more employers contributing to the unemployment trust fund in December than a year earlier. Approximately 194,097 employers paid into the trust fund during fourth quarter 2020, or about 7,700 more employers. 

Ryan Gedney, the labor department’s senior economist, wasn’t quite sure why. 

“Yes, we have more employer accounts on file than a year prior, but at this time I don’t have an explanation for what’s driving that or if we should expect a reversal in trend in 2021,” Gedney said. 

But in looking at the Quarterly Census of Employment Wages for the third quarter, he said 40% of the new businesses were in professional and technical services, and health care and social assistance, which are industries that did well during the pandemic.

Employers will continue to pay into the unemployment trust fund quarterly and the next payments are due at the end of April. That should limit additional trust fund loans although no one quite knows how much employer contributions will be offset by payments to unemployed workers in upcoming months.

“We expect to receive over 50% of employer contributions for the year during that period,” Gedney said. “…Legislative Council’s forecast (of a $955 million deficit) should be pretty well lined up with the expected FY trust fund end balance.”

Sen. Chris Hansen, the Denver Democrat who sponsored Senate Bill 207, knows there’s still a long way to go to get the state’s trust fund back to a healthy minimum. 

But he said the new law will help offset the burden of federal loan repayment and the anticipated high surcharges. The new law doubles the base wage for insurance premiums over five years. By 2026, employers will have to pay insurance premiums based on the worker’s first $30,600, compared to this year’s $13,600.

“That was the point of Senate Bill 207,” Hansen said. “Set up a system that is fair, that makes the necessary inflationary adjustments and that puts us back on a path to solvency in a more sustainable way. I think the part that I don’t think worked well last time is that we basically put all the burden of paying off those loans on the businesses that survived the recession. And I’d like to avoid that if we can. Let’s have the UI fund be properly provisioned in good times, so that it’s ready for the tough times.”

This story was updated on April 1 with the latest loan amount for March 30, 2021. Additional comments from Ryan Gedney, the state economist, were added April 2.

Tamara writes about businesses, technology and the local economy for The Colorado Sun. She also writes the "What's Working" column, available as a free newsletter at Contact her at, or or on LinkedIn at in/gadgetress/