DENVER—Colorado’s unemployment benefits fund will be close to insolvency next year, legislative economists predict.
There is no danger of jobless benefits going unpaid because the state can borrow money to keep paying them. But the forecast raises the prospect that Colorado may have to issue bonds or join other states like Michigan that are borrowing from the federal government to pay benefits.
In a state budget outlook delivered last week, the Colorado Legislative Council Staff predicted the fund balance “will fall precariously close to insolvency” to just $44 million by June 30, 2010, down from nearly $700 million on June 30 last year.
The Colorado Department of Labor and Employment expects a healthier fund at $187 million on June 30, 2010, but still has concerns, said Mike Rose, chief of statistical programs for the department.
“We also consider it possible that the fund might be marginally solvent at periods in 2010 and 2011,” he said Wednesday.
Unemployment insurance payouts are expected to total $834.1 million in the current fiscal year that ends June 30 and stay at that level for another year, according to the council forecast.
The fund is financed by state and federal assessments on employers and earns interest. Colorado’s jobless rate hit 6.6 percent in January.
A state Senate committee took up a bill Wednesday that would make Colorado eligible for $127 million in federal stimulus money for the fund by expanding the definition of who can qualify for jobless benefits. It would cost the state an estimated $14.6 million in the fiscal year that begins July 1 to make the changes, largely to pay benefits for newly eligible residents.
The council staff considers the fund to be healthy if its balance is a certain percentage of the wages it insures, ideally at least 1.2 percent. It was 0.8 percent on June 30, 2008, and is projected to be 0.05 percent by June 30, 2010, said Natalie Mullis, staff chief economist.
“When benefit payments are more than $800 million a year, when it comes to forecasting budgets, that’s just not statistically different from zero,” Mullis said.
The Legislative Council Staff forecasts the fund balance to recover to $225.6 million by the end of fiscal 2011-2012, or June 30, 2012.
Colorado’s fund was last considered insolvent and had to borrow money from 1982 to 1985 as the state struggled with a recession, Rose said.
When the fund balance gets too low, a solvency surcharge kicks in, boosting what employers pay on unemployment assessments. Rose said that surcharge, which varies by employer, has been in effect since 2004.
The state Senate Business, Labor and Technology Committee approved a bill 5-1 Wednesday that could pump federal stimulus money into the fund. Senate Bill 247 would expand eligibility for jobless benefits to include people who leave jobs to join a spouse who moved to work in a different city, to care for an ill or disabled relative, or because of domestic abuse. The changes would make Colorado eligible for the stimulus money.
The bill also would provide money for job training and expand the period used to evaluate a worker’s job history to determine whether he or she qualifies for unemployment benefits.
