COLORADO’S UNEMPLOYMENT INSURANCE TRUST FUND
THROUGH THE GREAT RECESSION AND RECOVERY
2016 UPDATE
Introduction
Unemployment insurance benefits provide temporary income support to workers who have lost their jobs through no fault of their
own. To accomplish this, state unemployment insurance trust funds must accumulate reserves during periods of economic growth and
spend down those reserves in the form of unemployment benefits during economic contractions. By paying benefits to persons laid
off from work, unemployment insurance not only provides assistance to individuals and households but helps maintain and stabilize
aggregate spending during periods of economic weakness.
The Great Recession of 2007 wreaked enormous economic damage throughout the nation. Not only were employment losses the
greatest since the 1930s but other aspects of labor market activity, such as labor force participation, declined to levels not seen since at
least the late 1970s. The surge in unemployment and ensuing slow recovery in hiring placed tremendous strain on many state
unemployment insurance trust funds. As a result, more than 30 state trust funds, including Colorado’s, became insolvent during the
recession. In order to continue paying unemployment insurance benefits these states had to borrow money from the U.S. Department
of Labor.
Many statewide economic indicators have gradually improved over the past few years allowing Colorado’s unemployment insurance
trust fund to strengthen. Still, while Colorado's economic recovery in recent years has been impressive--sturdy job growth, rapidly
falling jobless rates, and a strong housing market fueled by population growth-- some measures of labor force activity have not yet
returned to their pre-recession levels.
Charts are used in this publication to focus on the status of Colorado’s unemployment insurance trust fund through the Great
Recession and subsequent recovery period. The charts are divided into two sections. Because the condition of unemployment
insurance trust funds is largely determined by overall economic conditions, Section 1 contains charts related to different aspects of
Colorado's labor market. The charts in Section 2 illustrate various facets of the State's unemployment insurance trust fund. Each chart
is accompanied by brief explanatory notes.
Table of Contents Section 1: Labor Force
Figure 1: Over-the-Year Change Nonfarm Jobs (Colorado vs. U.S.)
Figure 2: Colorado Private Sector Job Gains and Losses as Percent of Employment
Figure 3: Colorado Private Sector Establishment Births and Deaths
Figure 4: The Share of Coloradans in the Labor Force Remains Near 35-Year Lows
Figure 5: The Share of Colorado’s Working Age Population with a Job Has Rebounded Slightly
Figure 6: Seasonally Adjusted Unemployment Rate (Colorado vs. U.S.)
Figure 7: Labor Underutilization (U-6) Rates for U.S. and Colorado
Figure 8: Percent Colorado Job Leavers of Total Unemployment
Figure 9: Percent Colorado Job Losers of Total Unemployment
Figure 10: Percent New and Reentrant Unemployed of Total Unemployed
Figure 11: Share of Total Unemployed by Duration
Figure 12: Share Very Long-Term Unemployed of Long-Term Unemployed
Figure 13: Colorado Jobless Rates by Race and Hispanic Origin
Figure 14: Colorado Jobless Rates for Selected Groups
Section 2: UI Activities/Trust Fund
Figure 15: Colorado Initial Claims
Figure 16: Colorado Continued Weeks Claimed
Figure 17: Percent Colorado UI Claimants of Total Unemployment
Figure 18: Insured Unemployment Rate vs. Total Unemployment Rate
Figure 19: Quarterly UI Claimant Reemployment Rate
Figure 20: Colorado Average Paid Duration – Regular UI
Figure 21: Colorado Unemployment Insurance Trust Fund Balance (Historical)
Figure 22: CDLE Borrowing from Federal Unemployment Account during Great Recession
Figure 23: Colorado Unemployment Insurance Trust Fund Balance (Forecasts: 2016-2021)
Figure 24: Regular State UI Benefit Payments and Premiums Paid
Figure 25: Total Benefits Charged by Industry
Figure 26: Colorado Taxable Wage Base
Figure 27: Taxable Wage Base 2016 (State Rankings)
Figure 28: Solvency Trigger Value vs. June 30 Trust Fund Balance
Figure 29: Average High Cost Multiple
Figure 30: Percent Taxable Wages of Total Wages
Figure 31: Ratio of Taxable Wage Base to Average Annual Earnings 2015 (State Rankings)
Figure 32: Average Annual UI Premium and Benefit Cost Rates
Figure 33: Average Premium Rate on Total Wages 2015 (State Rankings)
Figure 34: Annual Percentage Change Taxable Wages and UI Premiums
Figure 35: Average Weekly Wages and Average Weekly UI Benefit Amounts
Figure 36: Replacement Wage 2015 (State Rankings)
Figure 37: UI Premium Rate Distribution 2016
Figure 38: UI Premium Rate Distribution 2013-2016
Figure 39: Accounts with Zero Benefits Charged
Figure 40: Colorado Inflow and Outflow of FUTA Funds
4
Figure 1: Colorado Department of Labor and Employment; U.S. Bureau of Labor Statistics.
Note: Shaded area represents recession, as determined by the National Bureau of Economic Research.
Nonfarm employment growth is generally considered the single best overall barometer of current economic conditions. Historically, job growth in Colorado has
tended to outpace that of the nation. Annual nonfarm employment growth in both the U.S. and Colorado shrank by nearly 6 percent during the Great Recession,
a much greater contraction than that seen during prior recessions. By late 2010 over-the-year gains in nonfarm employment turned positive in both Colorado and
the nation. Since 2012 job growth in Colorado has consistently ranked among the strongest of all states. In Colorado, annual UI covered private sector job gains
approached 4 percent in 2014 and 3.4 percent in 2015, the highest rates of growth since 2000.
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Over-the-Year Change Nonfarm Jobs (Colorado vs. U.S.)
Recession Colorado U.S.
5
Figure 2: U.S. Bureau of Labor Statistics, Business Employment Dynamics data.
Note: Shaded area represents recession, as determined by the National Bureau of Economic Research.
A distinguishing feature of U.S. labor markets is the high degree of fluidity or churn they exhibit. Labor market churn is important because it facilitates the
movement of workers from low-productivity industries to high-productivity sectors—employers are continually adjusting their staffing needs by increasing and
decreasing their employment levels while workers are simultaneously moving into and out of the labor market. The concept of labor market dynamism is related
to the level of gross job creation and destruction. This chart displays the gross quarterly number of jobs created and eliminated by Colorado employers as well as
the net number expressed as a percentage of total employment. During recessions net job creation falls because the gross number of jobs created is less than the
gross number destroyed; the opposite occurs during economic expansions. Since the late 1990s the rate of both gross job creation and gross job destruction has
weakened steadily in Colorado and the nation. Although there is disagreement as to the cause the explanations typically offered involve increasing globalization,
enlarged regulatory regimes, or increasingly inefficient capital flows.
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(Pe
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Colorado Private Sector Job Gains and Losses as Percent of Employment
(Seasonally Adjusted)
Recession Total Gain Total Loss Net Change
6
Figure 3: U.S. Bureau of Labor Statistics, Business Employment Dynamics data.
Note: Shaded area represents recession, as determined by the National Bureau of Economic Research.
Like gross job creation and destruction, the number of businesses that open and close over time is another measure of labor market dynamism. The number of
establishments increases with population growth and the strength of the economy, but, as shown above, even during slow-growth or contractionary periods the
number of new businesses created typically outpaces the number of businesses shutting down operations. With the start of the Great Recession, however, the
number of business start-ups plunged while the number of firms that closed soared. Both have since essentially returned to pre-recession levels.
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Colorado Private Sector Establishment Births and Deaths (Seasonally Adjusted)
Recession Births Deaths
7
Figure 4: U.S. Bureau of Labor Statistics.
Note: Shaded area represents recession, as determined by the National Bureau of Economic Research.
The labor force participation rate (LFPR) is the share of the working-age population either working or seeking work. During recessions labor force participation
often falls as individuals drop out of the labor force to go to school, retire, claim disability benefits, or simply become discouraged and give up looking for
employment. Nationally, and in many states, the extent and pace of the recent decline in the LFPR has been unprecedented in the post-War period. While some
of the decline in participation is due to the aging of the baby boomer generation it seems clear that much of the drop is a response to the Great Recession. In
Colorado, LFPRs remain near their low points of the past 35 years despite the sharp drop in jobless rates and healthy job gains the past several years.
65
70
75La
bo
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Par
tici
pat
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Rat
e (P
erc
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t)
The Share of Coloradans in the Labor Force Remains Near 35-Year Lows
Recession
8
Figure 5: U.S. Bureau of Labor Statistics.
Note: Shaded area represents recession, as determined by the National Bureau of Economic Research.
The employment-population ratio (EPOP) or employment rate is the percentage of the working-age population with a job and thus describes the economy’s
ability to provide jobs for a growing population. Like the labor force participation rate it is cyclically sensitive, but unlike the labor force participation rate a
decline in employment will always cause the EPOP to fall. This makes the employment rate particularly useful as an economic indicator near cycle lows. Sharp
job losses starting in mid-2008 combined with continued population growth caused Colorado’s EPOP to tumble dramatically. Like the labor force participation
rate the employment rate slid to levels last seen 35 years ago. The accelerating pace of employment growth has recently raised the employment-population rate
although at 65 percent it remains well below the 2007 level of nearly 70 percent.
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op
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Emp
loye
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The Share of Colorado's Working Age Population With a Job Has Rebounded Slightly
Recession
9
Figure 6: Colorado Department of Labor and Employment; U.S. Bureau of Labor Statistics.
Note: Shaded area represents recession, as determined by the National Bureau of Economic Research.
The unemployment rate is the share of the labor force seeking but unable to find work. Colorado’s jobless rates have consistently been lower than the nation’s.
The State’s rate more than doubled during the Great Recession and peaked near 9 percent in 2010. Since then the rate has steadily eased to near 3 percent, levels
not consistently attained since the late 1990s.
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Seasonally Adjusted Unemployment Rate (Colorado vs. U.S.)
Recession U.S. Colorado
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Figure 7: Colorado Department of Labor and Employment; U.S. Bureau of Labor Statistics.
The U-6 unemployment rate is considered the most comprehensive measure of joblessness and a better signal of labor market weakness than the regular
unemployment rate. This measure includes adjustments for persons working part-time but who would prefer full-time work as well as persons who have dropped
out of the labor force because they believe their chances of finding work are negligible. Both the nation’s and Colorado’s U-6 rate doubled during the Great
Recession and still remain elevated compared to pre-recession levels. Sluggish wage growth thus far during the recovery is probably at least partly attributable to
persistent labor market slack.
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2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
U-6
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Labor Underutilization (U-6*) Rates for U.S. and Colorado (Annual Averages)
U-6 U.S. U-6 CO
*U-6, total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers
11
Figure 8: U.S. Bureau of Labor Statistics, unpublished Current Population Survey data.
Note: Shaded area represents recession, as determined by the National Bureau of Economic Research.
Job leavers or job quits are those persons who voluntarily leave their jobs to find other work. The share of the unemployed who quit their last job goes up during
periods of economic growth as individuals feel more confident about their prospects of improving their work situations and falls during periods of slow growth or
recession for the opposite reason. In the wake of the 2007 recession the share of job quits in Colorado plunged to their lowest levels in more than 25 years. Job
quits have risen steadily since 2010—a reflection of much tighter labor markets—and the proportion of job leavers are now very close to their pre-recession
levels. Persons who voluntarily leave employment are generally ineligible to receive unemployment benefits and therefore have only a small bearing upon UI
benefit payments.
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1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Percent Colorado Job Leavers of Total Unemployment
Recession % Leavers of Total 12 per. Mov. Avg. (% Leavers of Total)
12
Figure 9: U.S. Bureau of Labor Statistics, unpublished Current Population Survey data.
Note: Shaded area represents recession, as determined by the National Bureau of Economic Research.
In contrast to job leavers who separate from their jobs voluntarily, job losers comprise the group of unemployed persons who have been laid off through no fault
off their own. The share of job losers tends to consistently track economic cycles—by the end of the Great Recession the share of unemployed Coloradans who
had been laid off consistently exceeded 50 percent. While the percentage of job losers has progressively declined over the past few years it remains stubbornly
high compared to levels seen in the 1990s and immediately prior to the Great Recession. Because unemployment benefits are paid to those individuals
involuntarily separated from work through no fault of their own, the number of job losers has by far the greatest influence on the amount of benefits paid from
state unemployment trust funds.
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1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Percent Colorado Job Losers of Total Unemployment
Recession % Losers of Total 12 per. Mov. Avg. (% Losers of Total)
13
Figure 10: U.S. Bureau of Labor Statistics, unpublished Current Population Survey data.
Note: Shaded area represents recession, as determined by the National Bureau of Economic Research.
New labor force entrants or reentrants are made up of individuals who have never previously looked for work (generally students) or have not looked for a long
period. As the economy gains strength it draws into the labor force persons who had previously felt their prospect of finding employment was low. The share of
unemployed entrants of the total unemployed grew steadily from 2012 to 2014 in Colorado but has weakened of late. Because these individuals have no recent
employment experience their impact upon benefits paid from the unemployment insurance trust fund is insignificant.
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1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Percent New and Reentrant Unemployed of Total Unemployed
Recession % Entrants of Total 12 per. Mov. Avg. (% Entrants of Total)
14
Figure 11: U.S. Bureau of Labor Statistics.
The unemployed can be divided into categories by length of unemployment. During periods of sustained economic growth persons unemployed for less than 15
weeks (short-term unemployed) account for 70 percent or more of all jobless persons in Colorado with persons unemployed for 15-26 weeks (medium-term
unemployed) making up 10 to 20 percent. One of the most troubling characteristics of the Great Recession was that the proportion of the short-term unemployed
plummeted to less than half of all unemployed persons; concomitantly, the share of persons jobless for more than 26 weeks (long-term unemployed) soared to
about 40 percent. Of particular concern was the steep climb in the number of individuals jobless for 52 weeks or more. The average length of unemployment
increases as the share of the short-term unemployed falls which places additional stress on state UI trust funds.
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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Share of Total Unemployed by Duration (Annual Averages)
Share of Total (<15 weeks) Share of Total (15-26 weeks) Share of Total (27-51 weeks) Share of Total (52 weeks+)
15
Figure 12: U.S. Bureau of Labor Statistics.
The long-term unemployed can be separated into two groups—those who have been jobless for 27-51 weeks, and the very long-term unemployed who have been
jobless for 52 or more weeks. A notable and disturbing characteristic of the Great Recession was the jump in the proportion of the very long-term unemployed.
Prior to 2007 the very long-term unemployed made up about one-half of the long-term unemployed, but by 2011 seven out of every ten persons jobless for more
than 26 weeks had been unsuccessfully looking for work for at least 52 weeks. Since 2011 the share has shown improvement, but remains elevated compared to
pre-recession levels.
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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Share Very Long-Term Unemployed of Long-Term Unemployed (Annual Averages)
Share of 27 weeks+ (27-51 weeks) Share of 27 weeks+ (52 weeks+)
16
Figure 13: U.S. Bureau of Labor Statistics.
The unemployment rate for African-Americans is generally higher than that of Hispanics and whites in Colorado. During the Great Recession the jobless rate for
blacks neared 15 percent while the rate for Hispanics peaked at just over 13 percent. The rate for whites reached an annual average high of 8.4 percent.
Hispanic, black, and white unemployment rates have all fallen significantly from their recession highs.
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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Colorado Jobless Rates by Race and Hispanic Origin (Annual Averages, 16 Years and Older)
White Black Hispanic Origin
17
Figure 14: U.S. Bureau of Labor Statistics.
Unemployment rates for men and women age 20 and older tend to be roughly equal. The rates for men surpassed those for women during the Great Recession
probably due to job losses in construction, an industry with a predominantly male workforce. Although the jobless rate for persons aged 16-19 soared to about
25 percent from 2009-12 the rate has since receded to under 15 percent.
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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Colorado Jobless Rates for Selected Groups (Annual Averages)
Male, 20 years and older Female, 20 years and older Both sexes, 16 to 19 years
18
Figure 15: Colorado Department of Labor and Employment.
An initial claim is one filed to establish eligibility for unemployment benefits. Not every claimant who files an initial claim for unemployment benefits is
entitled to receive payment; however, the number of first-time claims filed is a very reliable indicator of layoff activity as well as the overall level of
unemployment. During the Great Recession, the number of initial claims filed in Colorado reached unprecedented levels. Not only do first-time unemployment
claims mirror economic cycles, in Colorado they exhibit a clear seasonal pattern as well. Within the year, initial claims tend to peak in January and reach their
lows in late summer reflecting hiring patterns in construction, retail trade, and tourism and recreational related activities. The weekly count of initial claims can
fluctuate greatly due to weather, as well the presence of holidays and other factors, making the evaluation of short-term movements in these numbers difficult at
times. Additionally, the absolute number of claims filed will increase as Colorado’s population and workforce grow making long-term comparisons with
previous periods less meaningful over time.
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Colorado Initial Claims (Weekly Counts)
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Figure 16: Colorado Department of Labor and Employment.
A continued unemployment claim is filed weekly after eligibility has been established through an initial claim. A claimant must attest they are actively seeking
and available for work during any week for which a benefit is claimed. Depending upon individual circumstances, in most states, including Colorado, claimants
may receive up to 26 weeks of unemployment insurance benefits. Like the number of initial claims, the number of continued weeks claimed shows clear cyclical
and seasonal movements. The number of continued weeks filed is related to the overall strength of hiring—as labor markets tighten claimants increasingly return
to work thereby reducing the total number of weeks for which benefits are claimed.
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Colorado Continued Weeks Claimed (Weekly Counts)
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Figure 17: Colorado Department of Labor and Employment; U.S. Bureau of Labor Statistics.
Note: Shaded area represents recession, as determined by the National Bureau of Economic Research.
The proportion of unemployed persons filing a weekly benefit claim is referred to as the UI recipiency rate. Nationally, the recipiency rate has been falling for
about the past 50 years, implying the deterioration of the UI program as an effective income stabilizer during periods of widespread unemployment. Many
reasons have been identified as contributing to the declining recipiency rate including: the shift in industrial structure from manufacturing to services, geographic
population shifts from the northeast to the south and southwest, and shrinking union membership. In Colorado, the recipiency rate has remained relatively stable,
generally ranging between 15 and 25 percent. At the peak during the Great Recession more than 35 percent of jobless persons in Colorado received some type of
regular UI payment—if individuals were also included who received a federally paid benefit the recipiency rate would have jumped to more than 60 percent.
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1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Percent Colorado UI Claimants of Total Unemployment (Claims without earnings week including 12th of month)
Recession % Claims of Total 12 per. Mov. Avg. (% Claims of Total)
21
Figure 18: Colorado Department of Labor and Employment; U.S. Bureau of Labor Statistics.
The total unemployment rate (TUR) shows the percent of persons in the labor force seeking but unable to find work, while the insured unemployment rate (IUR)
is an analogous measure for persons receiving UI benefits. The IUR is a summary measure of a state’s UI liability and is lower than the TUR. The gap between
the two rates narrows during periods of economic growth and widens during economic slumps in part because the share of workers who receive benefits during
downturns grows more slowly than those become unemployed. The TUR has declined more sharply than the IUR in the post- Great Recession rebound.
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Insured Unemployment Rate vs. Total Unemployment Rate
Insured Unemployment Rate (IUR) Total Unemployment Rate (TUR)
22
Figure 19: Colorado Department of Labor and Employment; U.S. Bureau of Labor Statistics.
Note: Shaded area represents recession, as determined by the National Bureau of Economic Research.
During recessions employers not only lay workers off but reduce their hiring rate as well. All state workforce agencies track the rate at which individuals who
were laid-off and received a first UI payment become employed in the quarter immediately following the one in which they were separated from their job. The
reemployment rate in Colorado plummeted during the Great Recession but has rebounded to pre-recession levels.
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Pe
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Re
emp
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Quarterly UI Claimant Reemployment Rate
Recession
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Figure 20: Colorado Department of Labor and Employment.
Note: Shaded area represents recession, as determined by the National Bureau of Economic Research.
The average length of time unemployment benefits are paid is strongly related to economic cycles. During the Great Recession the average number of weeks
paid on an unemployment claim climbed from about 11 weeks to nearly 20 weeks. The enormous increase in average paid duration had a profound impact upon
the amount of benefits paid from Colorado’s UITF in 2009 and 2010.
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Nu
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Colorado Average Paid Duration - Regular UI
Recession
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Figure 21: Colorado Department of Labor and Employment.
Note: Shaded area represents recession, as determined by the National Bureau of Economic Research.
Note 2: Fund balance January 2010 – June 2012 includes borrowing from Federal Unemployment Account.
Most state trust funds, including Colorado’s, are designed to be forward funded. This means the fund builds up reserves during low unemployment expansionary
periods and draws down those reserves to pay benefits during economic contractions. Whether or not adequate reserves exist to pay benefits during recessionary
periods depends upon many factors including the severity, duration and frequency of economic downturns. The chart illustrates how quickly fund reserves were
depleted in the aftermath of the 2001 and 2007 recessions.
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Mill
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Colorado Unemployment Insurance Trust Fund Balance
Recession
Unemployment Compensation Bonds issued June 2012: $630m
25
Figure 22: Colorado Department of Labor and Employment.
Colorado's trust fund became insolvent January 2010 as a result of long-standing structural financing imbalances brought to the forefront by the economic
damage created by the Great Recession. During the recession trust funds in roughly two-thirds of all states became insolvent with total state borrowing exceeding
$40 billion at the peak. Colorado repaid its federal borrowing by issuing unemployment compensation bonds in June 2012, a strategy also adopted by a handful
of other states during the downturn. Many of Colorado’s trust fund financing deficiencies were addressed statutorily in HB11-1288.
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Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12
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CDLE Borrowing from Federal Unemployment Account During Great Recession
Quarterly Borrowing FUA Quarterly Principal Repaid Net Principal Outstanding
$630 million unemployment compensation bonds issues; federal advances fully repaid
26
Figure 23: Colorado Department of Labor and Employment.
Forecast UI trust fund balances 2016-2021 are shown above. The forecasts show net fund reserves available to pay unemployment benefits under conditions of
low, moderate, and high economic growth as well as a potential recession scenario. The fund does not reach federally recommended solvency levels in any
forecast scenario and becomes insolvent in the recession scenario.
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Colorado Unemployment Insurance Trust Fund Balance (Forecasts 2016-2021)
High Growth Moderate Growth Low Growth Recession
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Figure 24: Colorado Department of Labor and Employment.
The UI trust fund balance increases during periods of economic growth and declines during economic slumps when benefit payouts climb. The jump in benefit
payments following the 2001 recession brought the fund to the brink of insolvency by 2004, although imposition of the solvency surcharge tax allowed the fund
to narrowly avoid insolvency at that time. By the Great Recession of 2007 the structural financing imbalances had grown so great that the fund was unable to
avoid insolvency by the start of 2010. Unemployment compensation bonds in the amount of $630 million were issued in June 2012 to make the fund solvent and
HB11-1288 addressed some of the existing financing inadequacies. Under conditions of moderate economic growth 2016-2021 employer premiums paid into the
fund are expected to exceed benefit payouts, thereby allowing fund reserves to accumulate throughout the forecast period.
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$1,200
1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021
Mill
ion
s $
Regular State UI Benefit Payments and Premiums Paid (Moderate Forecast 2016-2021)
Contributions Benefit Payments
28
Figure 25: Colorado Department of Labor and Employment.
Professional and business services, Colorado’s largest industry employer, typically accounts for the greatest share of UI benefits charged. While layoffs
increased across all industry sectors during the Great Recession, construction experienced the biggest increase in benefit payments. Between 2006 and 2010
construction related UI benefits climbed from about $42 million to $240 million. By 2010 one out of every four dollars paid in regular state UI benefits were
attributable to construction, although it made up only about 6 percent of all private nonfarm jobs that year.
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2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
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ion
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Total Benefits Charged by Industry
Construction Manufacturing Trade, Transportation, and Utilities Professional and Business Services All Other Industries
29
Figure 26: Colorado Department of Labor and Employment.
Prior to passage of HB11-1288 in 2011 the maximum taxable wage base had been fixed at $10,000 from 1988-2011. Over time this stunted the ability of the UI
trust fund’s revenue capacity to keep pace with the mounting number of workers covered under UI whose earnings had also grown—i.e., the fund’s revenue
capacity continued to erode relative to its potential liabilities. HB11-1288 raised the wage base to $11,000 in 2012 and subsequently linked the wage base to the
annual change in employee earnings. The chart illustrates the projected growth in the wage base under conditions of moderate economic growth through 2021.
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1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021
Colorado Taxable Wage Base (Moderate Forecast 2016-2021)
Shaded areas represent periods of UITF Insolvency and Federal Borrowing
30
Figure 27: U.S Department of Labor, Office of Unemployment Insurance, Division of Fiscal and Actuarial Services.
Note: U.S. average taxable wage base is from 2015.
Colorado’s 2016 taxable wage base of $12,200 places it near the bottom-third among all states. Comparisons of the taxable wage base between states are more
meaningful if the wage base is expressed as the percentage of average earnings in a state. The taxable wage base level plays a critical role in determining the
robustness of a state’s UI financing structure (see Figure 31).
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Mas
sach
use
tts
Co
nn
ect
icu
t
Mis
siss
ipp
i
Ne
w H
amp
shir
e
Kan
sas
Wis
con
sin
Sou
th C
aro
lina
Un
ited
Sta
tes
Mis
sou
ri
Illin
ois
Co
lora
do
Mai
ne
Ark
ansa
s
Wes
t V
irgi
nia
Ne
w Y
ork
Ken
tuck
y
Mic
hig
an
Ge
org
ia
Pen
nsy
lvan
ia
Ind
ian
a
Ne
bra
ska
Texa
s
Oh
io
Mar
ylan
d
Ten
nes
see
Ala
bam
a
Vir
gin
ia
Lou
isia
na
Flo
rid
a
Ari
zon
a
Cal
ifo
rnia
Taxable Wage Base (2016)
$12,200
31
Figure 28: Colorado Department of Labor and Employment.
The solvency surcharge is intended to be a temporary remedial means of staving off insolvency by augmenting fund revenues. Currently, should the trust fund
balance on June 30 of any year fall below 0.5 percent of the total wages paid to UI covered workers the previous year, then a solvency surcharge paid by
employers goes into effect the following calendar year. The surcharge then remains on until the ratio of the June 30 fund balance to total wages reaches at least
0.7 percent. The solvency surcharge first triggered on in 2004 as the fund neared insolvency and remained on through 2012. The surcharge was finally turned
off in 2013 after $630 million in unemployment compensation bonds were issued and deposited into the trust fund. The solvency surcharge is anticipated to
remain off through 2021 because the forecast June 30 fund balances are expected to exceed the solvency trigger value.
($400)
($200)
$0
$200
$400
$600
$800
$1,000
1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021
Mill
ion
s $
Solvency Trigger Value vs. June 30 Trust Fund Balance (Moderate Forecast 2016-2021)
Solvency Trigger Value June 30 Fund Balance
32
Figure 29: Colorado Department of Labor and Employment; U.S Department of Labor, Office of Unemployment Insurance, Division of Fiscal and
Actuarial Services.
The average high-cost multiple (AHCM) is one metric used to assess the health and solvency adequacy of a state’s UI trust fund. An AHCM of 1.0 means the
state’s trust fund has enough reserves to pay for 12 months of benefits under recession conditions without considering any employer contributions to the fund
during that time. In 2014 the U.S. Department of Labor (USDOL) adopted solvency standards for all states under which states may borrow money interest-free,
if necessary, on a short-term or cash-flow basis in order to continue to make benefit payments. Full implementation of the USDOL solvency standards requires
states to have an AHCM of 1.0 by year-end 2019 in order to be eligible for interest-free short-term borrowing. Under moderate economic growth conditions
Colorado’s trust fund is forecast to fall short of this solvency standard.
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1994 1997 2000 2003 2006 2009 2012 2015 2018 2021
Average High Cost Multiple (Moderate Forecast 2016-2021)
Federal solvency threshold for interest-free loan requests. Phase-in requires AHCM of at least 0.50 in 2014. Threshold increases by 0.10 each year after 2014 until it reaches 1.00 for 2019.
33
Figure 30: Colorado Department of Labor and Employment.
When the taxable wage base was raised to $10,000 in 1988 average annual earnings for UI covered workers was about $22,000. This meant the proportion of
total wages subject to UI taxes was around 45 percent. By 2010 the average annual wage had risen to about $48,000 but because the taxable wage base had
remained fixed the share of total earnings subject to UI taxes had fallen to under 25 percent. This severely limited the revenue capacity of the fund and was a
large reason the fund became insolvent in 2010. HB11-1288 raised the wage base to $11,000 in 2012 and indexed it to the change in average earnings in
subsequent years. This will stabilize the ratio between taxable and total earnings at around 26 percent but will not allow the fund’s revenue capacity to grow to
the point where it will become fully solvent under USDOL standards.
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021
Percent Taxable Wages of Total Wages (Moderate Forecast 2016-2021)
Long-term decline in taxable wage ratio stabilized but not reversed by HB 11-1288
34
Figure 31: U.S Department of Labor, Office of Unemployment Insurance, Division of Fiscal and Actuarial Services.
The ratio between the taxable wage base and total wages is critical in determining whether a state’s UI trust fund can accumulate enough reserves to pay for
benefits during recessionary periods without borrowing. Colorado currently ranks among the lower-third of all states by this measure.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Idah
o
Haw
aii
Mo
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na
Was
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n
Ore
gon
Uta
h
Ala
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No
rth
Dak
ota
Iow
a
Ne
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a
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ne
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Ne
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co
Wyo
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Ne
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No
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Car
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a
Rh
od
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lan
d
Okl
aho
ma
Sou
th D
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ta
Mis
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i
Ver
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nt
Del
awar
e
Sou
th C
aro
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Wis
con
sin
Ark
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s
Mai
ne
Wes
t V
irgi
nia
Mis
sou
ri
Kan
sas
Ne
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amp
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e
Un
ited
Sta
tes
Illin
ois
Ken
tuck
y
Co
nn
ect
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t
Mas
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use
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Co
lora
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Ind
ian
a
Ne
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ska
Ten
nes
see
Ge
org
ia
Oh
io
Mic
hig
an
Ala
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Pen
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ia
Lou
isia
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Texa
s
Ne
w Y
ork
Mar
ylan
d
Flo
rid
a
Vir
gin
ia
Ari
zon
a
Cal
ifo
rnia
Ratio of Taxable Wage Base to Average Annual Earnings (2015)
#34
35
Figure 32: Colorado Department of Labor and Employment; U.S Department of Labor, Office of Unemployment Insurance, Division of Fiscal and
Actuarial Services.
The average premium or tax rate (ATR) is equal to total employer contributions divided by total UI covered wages; the benefit cost rate (BCR) equals total
benefits paid divided by total UI covered wages. The fund’s reserves increase when the ATR is greater than the BCR and decrease when the BCR is greater than
the ATR. The BCR rises during recessions as layoffs increase and total benefit payments surge. As employers see more benefit charging to their accounts, their
layoff history worsens and their premium rates gradually begin to escalate—however, because premium rates are adjusted annually, increases in the ATR lag
those of the BCR. This means trust funds are vulnerable to insolvency if fund reserves are not large enough at the beginning of a recession to withstand the sharp
increase in benefit payments that occur during economic contractions. Moreover, the subsequent increases in the ATR may not be large enough to permit the
fund to regain solvency before the onset of the next recession. Colorado’s BCR almost quadrupled between 2007 and 2009. Though the ATR more than doubled
from 2009 to 2012, the increase was not large enough to avert fund insolvency in 2010.
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021
Average Annual UI Premium and Benefit Cost Rates (Moderate Forecast 2016-2021)
Average benefit cost rate
Average tax rate on total wages (includes solvency surcharge 2004-2012 and bond principal surcharge 2013-2017)
36
Figure 33: U.S Department of Labor, Office of Unemployment Insurance, Division of Fiscal and Actuarial Services.
The average premium or tax rate, when applied against the amount of total taxable wages, yields the amount of revenue generated for the trust fund in a given
year (excluding interest and certain employers whose rates are specially set). The average rate is the result of the combined effects of the taxable wage base and
the premium rate schedule. Because UI premium rates generally decrease as the trust fund balance grows, the rate reflects where a state is situated over the
course of business cycles—i.e., premium rates in tend to fall during expansions and increase during recessions. Premium rates that are consistently low generally
point to state trust funds that are more vulnerable to becoming insolvent during economic contractions. Colorado’s average UI premium rate for 2015 is in the
bottom third of all states.
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
1.6%
Ore
gon
Ver
mo
nt
Rh
od
e Is
lan
d
Ala
ska
Pen
nsy
lvan
ia
Ne
w M
exi
co
Ne
w J
ers
ey
Ne
vad
a
Wis
con
sin
Haw
aii
Mo
nta
na
No
rth
Car
olin
a
Wes
t V
irgi
nia
Idah
o
Co
nn
ect
icu
t
Ark
ansa
s
Mic
hig
an
Was
hin
gto
n
Illin
ois
Mai
ne
Ken
tuck
y
Wyo
min
g
Kan
sas
Min
ne
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Mas
sach
use
tts
Iow
a
Cal
ifo
rnia
Un
ited
Sta
tes
Ne
w Y
ork
Del
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e
Sou
th C
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Ind
ian
a
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sou
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Co
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Oh
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Mar
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s
Ala
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a
Ari
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Mis
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i
Okl
aho
ma
Vir
gin
ia
Lou
isia
na
Ne
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ska
Ne
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amp
shir
e
Ten
nes
see
Sou
th D
ako
ta
Average Premium Rate on Total Wages (2015)
#33
37
Figure 34: Colorado Department of Labor and Employment.
Displayed are the yearly percentage changes in taxable wages and UI premiums. Premiums are the main revenue in-flow to the UI trust fund (interest earned on
fund balances are the other revenue source but represent only a minor share of overall revenues). Total employer contributions or premiums are dependent upon
the tax rate schedule in effect for a given year (which is a function of the UI trust fund balance) as well as the layoff history of individual employers and overall
job and wage growth. Taxable wages are the portion of total wages paid by UI covered employers that are subject to UI taxes. Between 1988 and 2011, the first
$10,000 of an employee’s annual earnings were subject to UI taxes; under HB11-1288 the first $11,000 in wages became taxable in 2012 with subsequent years
indexed to changes in average weekly earnings.
-20
0
20
40
60
80
100
1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021
Pe
rce
nt
Ch
ange
Annual Percentage Change Taxable Wages and UI Premiums (Moderate Forecast 2016-2021)
Taxable Wages Premiums
Solvency surcharge effective 2004-12
Deficit rate schedule effective 2011 and 2012
38
Figure 35: Colorado Department of Labor and Employment; U.S. Bureau of Labor Statistics.
In 1988, the average weekly benefit amount paid was $156 while the average weekly wage for a private sector worker in Colorado was about $408; this means
the UI benefit replaced roughly 38 percent of a typical employee’s weekly earnings. By 2015 the average benefit amount had grown to $375 per week and
average weekly earnings to $1,051 so that the replacement wage had slipped to 36 percent.
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Average Weekly Wages and Average Weekly UI Benefit Amounts (Moderate Forecast 2016-2021)
Average Weekly Wage (private)
Average Weekly Benefit Amount
39
Figure 36: U.S Department of Labor, Office of Unemployment Insurance, Division of Fiscal and Actuarial Services.
Replacement wages refer to the proportion of a laid-off worker’s earnings replaced by unemployment benefits. The ideal replacement wage is generally
considered to be around 50 percent, which is thought to be a reasonable balance between a benefit amount that acts as a disincentive to work with one whose goal
is to provide income support to an unemployed individual. Colorado’s replacement wage ranks higher than the U.S. average.
0%
10%
20%
30%
40%
50%
60%
No
rth
Dak
ota
Haw
aii
Uta
h
Iow
a
Wyo
min
g
Kan
sas
Okl
aho
ma
Mo
nta
na
Min
ne
sota
Ne
w M
exi
co
Idah
o
Sou
th D
ako
ta
Was
hin
gto
n
Ver
mo
nt
Pen
nsy
lvan
ia
Ore
gon
Wes
t V
irgi
nia
Co
lora
do
Mai
ne
Oh
io
Ark
ansa
s
Ken
tuck
y
Ne
bra
ska
Texa
s
Ne
vad
a
Mas
sach
use
tts
Rh
od
e Is
lan
d
Wis
con
sin
Ne
w J
ers
ey
Un
ited
Sta
tes
Ne
w H
amp
shir
e
Illin
ois
Sou
th C
aro
lina
Mar
ylan
d
Ind
ian
a
Mic
hig
an
Vir
gin
ia
Ge
org
ia
Mis
sou
ri
Co
nn
ect
icu
t
Mis
siss
ipp
i
No
rth
Car
olin
a
Flo
rid
a
Ala
bam
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ska
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ifo
rnia
Ten
nes
see
Del
awar
e
Ne
w Y
ork
Lou
isia
na
Ari
zon
a
Re
pla
cem
en
t W
age
Replacement Wage (2015)
#18
40
Figure 37: Colorado Department of Labor and Employment.
The UI premium rate for most employers in Colorado is determined by their layoff history—employers with little or no layoff history are assessed the lowest
rates while those with the greatest layoff history pay the highest premiums. The link between an employer’s layoff history and their premium rate is referred to
as experience-rating and is a mandatory feature of all state UI financing systems. This chart shows the number of employers at various premium rate intervals for
2016. Most employers have consistently paid more in premiums than have benefits charged against their accounts and thus have relatively low premium rates.
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000N
um
ber
of
Emp
loye
es
Combined Base/Bond Premium Rate
UI Premium Rate Distribution 2016 (Experience-rated only)
125,483 employers with benefits less than premiums paid into Trust Fund (black bars)
15,048 employers with benefits exceeding premiums paid into Trust Fund (red bars)
Better Layoff History
Worse Layoff History
41
Figure 38: Colorado Department of Labor and Employment.
The premium rate schedule in effect for any given year depends upon the trust fund balance on June 30 of the previous year. Employer rates may also change
each year because of changes to their layoff history. Layoffs generally diminish during periods of economic growth and climb during contractions which means
employer premium rates tend to rise during recession and fall during expansions. The movement of employers toward lower tax rates during growth and higher
rates during slumps may have a significant effect upon the flow of revenues into the fund. Between 2013 and 2016 there has been a slight shift toward lower
employer premium rates.
0
10,000
20,000
30,000
40,000
50,000
60,000N
um
ber
of
Emp
loye
es
Combined Base/Bond Premium Rate
UI Premium Rate Distribution 2013-2016 (Experience-rated only)
2013 2014 2015 2016
42
Figure 39: Colorado Department of Labor and Employment.
The majority of employers in Colorado (as well as in other states) never lay off workers and therefore have no benefits charged to their account. Many of these
businesses employ a small number of workers. UI premium rates are set in a way so that employers that pay more into the UI system than have benefits charged
against them have low rates compared to employers with a large amount of benefit charging relative to the amount paid in contributions. The share of firms with
no history of benefit charging in Colorado was around 80 percent prior to the Great Recession. This proportion slid to under 65 percent after 2007 and has been
gradually increasing during the subsequent economic recovery.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Shar
e o
f El
igib
le A
cco
un
ts
Accounts with Zero Benefits Charged
43
Figure 40: U.S Department of Labor, Office of Unemployment Insurance, Division of Fiscal and Actuarial Services.
In addition to paying state unemployment taxes, employers are subject to a federal unemployment insurance tax known as FUTA on the first $7,000 of a covered
workers’ wages. The tax rate is 6 percent of which 5.4 percent is credited back to the employer so that the net FUTA tax rate is 0.6 percent or $42 per employee
annually. FUTA funds pay for the administrative costs of state unemployment insurance and employment services programs, partial funding of state extended
benefit programs during periods of high unemployment, as well as some federal extended compensation programs. FUTA also provides for a fund from which
states may borrow to pay benefits if necessary. During recessions the amount of money returned to the states is much greater than the amount paid into FUTA,
while the reverse is true during periods of expansion. Since 1981 nearly 96 percent of the $3.1 billion Colorado employers have paid in FUTA has been returned
to Colorado for the purposes described above.
$0
$50
$100
$150
$200
$250
$300
$350
$400
1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014
Mill
ion
s $
Colorado Inflow and Outflow of FUTA Funds
FUTA $ from CO employers
FUTA funds returned to CO