DENVER – Colorado’s unemployment trust fund is expected to become insolvent early next week, but the state will borrow money from the Federal Unemployment Account and people who are on unemployment should not see any interruption in their benefit payments, state Department of Labor and Employment officials said Thursday.
The state’s fund currently has less than $50 million in it, the CDLE’s Senior Economist Ryan Gedney said Thursday, adding that he expects it to become insolvent early next week.
When that happens, the state will borrow from the FUA account at zero interest for the rest of the year – as 10 other states and the U.S. Virgin Islands are already doing. Last week, Gedney said that Colorado was among eight other states that had made loan requests under the expectation they would also have to borrow from the federal government.
It won’t be the first time Colorado has had to borrow federal dollars to pay regular unemployment benefits; it did so during the Great Recession, as did around two-thirds of all states, and during the economic crash during the early 1980s.
Gedney said that about 85% of the federal money borrowed so far during the latest recession has been done by California, New York and Texas.
The state will be able to borrow at zero interest for the rest of the year under measures passed by Congress, which could also extend the zero-interest borrowing if it chooses to do so.
Colorado had about $1.1 billion in the trust fund at the start of the COVID-19 outbreak. The state paid out just more than $70 million in regular unemployment benefits last week. In total, the state has paid out $4.5 billion in regular and various federal unemployment benefits since the end of March.
CDLE Deputy Executive Director Cher Haavind said that the Colorado business community agreed during the Great Recession to use bonds to get out of the debt owed to the federal government and said the department would be exploring different options to return the fund to solvency in the months ahead.
Another 6,187 regular initial unemployment claims were filed by Coloradans last week – the lowest number since the week ending March 14. And there were 9,048 Pandemic Unemployment Assistance initial claims filed last week by self-employed or gig workers.
Accommodation and food services continued to account for the highest share of regular initial claims for the week ending July 25.
CDLE officials also discussed the FEMA Supplemental Payments for Lost Wages program – what the Trump administration ordered after the Pandemic Unemployment Compensation program was allowed to expire at the end of July.
The executive order from President Trump authorized FEMA to use up to $44 billion in disaster relief funds to provide extra payments of $300 per week if a state agrees to match with up to $100 and a person is receiving at least $100 a week in some type of unemployment benefit.
Haavind said the department received guidance on the program Wednesday night from the federal government but that Gov. Jared Polis’ administration was still deciding whether or not it would apply for the funds and agree to the match.
But she said that if the state moves forward with the program, it will likely take several weeks to reprogram the state’s systems and get the added benefits flowing to people.
The CDLE’s Jeff Fitzgerald said his reading of the guidance was that there would only be about $19 billion from the disaster relief fund available since it can only be used down to $25 billion – and the $19 billion could have money moved for upcoming disasters before it could potentially all be used by December 26.
Fitzgerald said the state match would have to come from either state funds or state CARES Act money and that the trust fund could also be leveraged to make the match if the state decides to move forward with the program. But he said estimates showed that moving ahead with the program could generate between $60 million and $100 million into Colorado’s economy.