Colorado businesses can expect higher unemployment insurance taxes thanks to House Bill 1288, which Gov. John Hickenlooper signed Thursday.
But business lobbying groups willingly went along with the new rates because the rates should restore solvency to the states unemployment insurance trust fund and make life easier on businesses during future recessions.
Unemployment insurance helps Colorado stay economically robust even in difficult times. Business understands this, Hickenlooper said.
The bill will allow Colorado to adapt to future changes in the economy, he said.
Government is never going to solve all the problems, but it has to serve the people and be there to help businesses when they need it, Hickenlooper said.
HB 1288 changes the taxable wage base from the first $10,000 of every employees salary to the first $11,000 as of Jan. 1, 2012. The change is expected to bring at least an additional $50 million into the trust fund in the 2011-12 fiscal year.
Like many other states, Colorados unemployment insurance trust fund went into deficit to deal with a surge of people applying for unemployment benefits during the recession. Colorado owes the federal government more than $500 million, and if the legislature had not passed HB 1288, the state might have had to charge businesses higher taxes to pay off the loan.
Once Colorado pays off its loan from the federal government, HB 1288 also simplifies the system that charges different employers different tax rates based on their layoff history.
Under the new system, employers with few layoffs can get a discounted rate. Also, the changes in the taxable wage base will be indexed to average wages, resulting in higher collections in good times and a lesser burden during recessions. Businesses testified that the new rate table will be more predictable for them.
Under current projections, Colorado should pay off the loan by 2012 or 2013.
A bipartisan group put together HB 1288. Business groups and the states major unions agreed on the system before legislators introduced the bill.
These are not natural allies, said Democratic Rep. Dan Pabon, who co-sponsored the bill with a Republican.
Because of the behind-the-scenes agreement, the bill passed with little controversy.
Reach Joe Hanel at joeh@cortezjournal.com.