In 2009, with Colorado’s unemployment insurance fund facing insolvency, the federal government dangled $127 million of stimulus money in front of the state legislature, in return for expanding eligibility. Led by state Rep. Sal Pace, D-Pueblo, they bit.
Pace is now running to represent Colorado’s Third Congressional District.
“Ironically, the House sponsor of this financial wizardry was the man who now wants you to send him to Washington for more of the same,” I wrote in June 2011.
Now, let’s go to the video from May 4, 2009…
“Based on the latest revenue forcasts, drawing this money is critical, this $127 million from the Feds, is critical to maintaining the solvency of the trust fund,” Pace said.
…“The Federal Government requires Colorado to make two key changes to our unemployment insurance law in order to qualify for the $127 million from the Feds: the adoption of an alternative base period to determine whether people qualify for benefits, and also broadening the standard for quitting a job for compelling personal or family reasons in order to obtain benefits, including quitting to accompany a spouse; quitting to care for an immediate family member; quitting because of an imminent threat of danger.
“We already have on the books, quitting a job for compelling and personal family reasons, we just needed to clarify and expand it in order to qualify for the $127 million from the federal government.
“And these reforms cost us $8 million a year to implement.”
The Democratic-controlled legislature at the time passed the bill, signed by then-Gov. Bill Ritter. The $8 million is now an annual obligation from the state unemployment fund.
Even then, in response to a question from Rep. Kathleen Curry, D-Gunnison (now unaffiliated), Rep. Pace said that the $127 million will cover the expanded eligibility for the next “13 or 14 years.”
But the money couldn’t help maintain “the solvency of the trust fund,” as Pace claimed and cover the expanded eligibility.
At that time, the fund balance was around $200 million, down from $700 million a year earlier, and – on a static basis – the $127 million probably only kept the fund going for about 7 weeks, at the rate that claims were then being paid.
The kicker is that, despite the state obtaining this “critical” money, the insurance fund still went bust, and the state had to begin borrowing money from the federal government to make ends meet. It’s the repayment of that debt in order to avoid penalties and interest that has led the Colorado Unemployment Insurance Trust Fund to float $630 million in revenue bonds this month, which we wrote about here.
In addition, in 2009, the legislature added eligibility for workers locked out during a work dispute.
Right now, according to a study by the Tax Foundation, Colorado has the 12th-lowest Unemployment Insurance Taxes, and the 8th-most generous benefits in the country. That’s a recipe for repeated exhaustion of funds, and it’s a situation that was only exaggerated by Rep. Pace and his ill-considered grasping for federal money.
