Colorado Capitol Report

In this Capitol Report:

• Worker-Retirement Bill Dies in Senate Committee
• House Sends Paid Family-and-Medical Leave Bill to Senate
• Road-and-Bridges Funding: “It Ain’t Over Till It’s Over”
• World Trade Day 2017
• CACI's Legislative Agenda

Worker-Retirement Bill Dies in Senate Committee

Wednesday afternoon, the Senate State, Veterans and Military Affairs Committee (aka the “kill committee”) on a party-line, 3-to-2 vote, killed HB-1290, which is the third year in a row that proponents of this issue have failed to pass legislation.

Most main-line business organizations, including CACI, opposed the 28-page measure, which was titled the “Colorado Secure Savings Plan.”  Employers would have been burdened by certain, unfunded mandates to administer the program as well as facing fines for not complying with the provisions of the bill.

Representative Brittany Pettersen (D-Lakewood), House Majority Whip, sponsored the bill to create a state-chartered retirement system for low-income workers whose employers do not offer retirement plans.  Workers would have contributed a portion of their compensation.

Last year, Representative Pettersen pulled her bill because of the large fiscal note.  In the 2015 session, the Republican-controlled Senate killed a bill to create a task force to analyze the issue.

The bill’s last fiscal note summarizes the House-amended bill that went to the Senate:

The reengrossed bill creates the Colorado Secure Savings Plan (plan) for private sector employees to be administered by the newly created statutory public entity, the Colorado Secure Savings Board (board). The plan includes an individual retirement account (IRA) provided by one or more financial services vendors approved by the board. Participants make contributions to the IRA through automatic payroll deductions. Moneys received from enrollees, participating employers, gifts, grants, donations, and loans, if pursued, go into the Colorado Secure Savings Plan Fund (fund), a trust established for the plan.

Board of trustees. The nine-member board responsible for instituting the plan consists of the state controller in the Department of Personnel and Administration (DPA) or his or her designee, the director of the Office of State Planning and Budgeting or his or her designee, and seven members appointed by the Governor and confirmed by the Senate who meet criteria outlined in the bill. Board members have a fiduciary duty to the plan’s enrollees and beneficiaries, and the board is the trustee of the fund.

Employer eligibility. To qualify for participation, an employer must not already offer a qualified retirement plan; choose to participate in the plan; have been in business at least two years; have not previously offered a qualified retirement plan to any employees; and, for the first three implementation years, employ a specified number of employees. Employers must establish a payroll deposit savings arrangement and automatically enroll employees who have not opted out.

Employee eligibility. To participate in the plan, an employee must be at least 18 years old, employed by the qualifying employer for at least 120 days, and earn wages subject to income tax.

Plan administration. The board must use an open bid process to engage one or more financial services vendors to provide and bear all financial responsibility for a low-risk investment portfolio and/or a target date fund. Before selecting a vendor, the board must conduct a financial feasibility study and receive legislative approval for plan implementation. The board may also contract as necessary for administration of the plan and the fund, including with state agencies. To cover start- up costs, the board may accept gifts, grants, and donations, and pursue options for bank loans or lines of credit. The board may award a 10-year record-keeping contract to allow vendors to recover start-up costs and initial losses.

Reporting, study, and audit requirements. The board must complete a performance review of financial services vendors every four years and make the review available to the public. It must conduct studies and make recommendations on the effects of greater financial education on increased retirement savings, and ways to increase the number of Colorado businesses that offer retirement savings plans. It must annually prepare and adopt a written statement of investment policy that includes a risk management and oversight program. It must contract for an annual audited financial report of the plan. Finally, the board must conduct an analysis of relevant consumer protections available under federal law and make recommendations to the General Assembly regarding any additional necessary consumer protections that should be included in plan implementation.

Penalties. The board must determine a penalty structure for employers who fail to enroll employees in the plan within time frames, including a warning for the initial offense and a gradual increase in the penalty amount over time not to exceed $250 for each employee each calendar year, and develop a process for employees to report non-compliant employers. Penalty revenue is credited to the fund.

For more information about HB-1290, contact Loren Furman, CACI Senior Vice President, State and Federal Relations, at 303.866.9642.

For news media coverage of the bill, read:

“Colorado Senate Republicans kill plan to launch state retirement-savings program,” by Ed Sealover, The Denver Business Journal, April 26^th.

“State-sponsored retirement accounts?  Colorado Senate panel rejects Democratic plan,” by Brian Eason, The Denver Post, April 26^th.

House Sends Paid Family-and-Medical Leave Bill to Senate

This morning, the House approved HB-1307, the paid family-and-medical leave proposal, on a final, Third Reading, party-line vote, which sends the measure to the Senate, where its fate is problematic, to be charitable.  The CACI Labor and Employment Council opposes the measure.

The bill is entitled “Concerning the Creation of a Family and Medical Leave Insurance Program,” called FAMLI.  Representative Faith Winter (D-Westminster) is the House sponsor of the bill.

In essence, the HB-1307 would create a paid family-and-medical leave insurance program as a state enterprise that would be funded by every worker in Colorado, whether in the public sector or the private sector.  The insurance premium per worker could not exceed 0.99 percent of total annual taxable wages.

Another audacious aspect of the bill is that the premium would be set by only one person who would be free of any oversight whatsoever, including oversight by the legislature: the director of the newly created FAMLI Division in the Colorado Department of Labor and Employment.  The director also could impose an insolvency surcharge on workers without any restrictions or oversight.

Businesses would be mandated to administer the program and establish the proper payroll deduction scheme to send workers’ premiums to the FAMLI fund.  According to the bill’s fiscal note, the CDLE “must determine the nominal and reasonable assistance to provide to employers to offset the initial costs of creating the payroll deduction from the FAMLI Fund.”  Beyond this thin reed of help, employers would receive no “assistance” down the road for costs incurred with administering the new program.

In addition, the FAMLI Division director will be empowered to create a “fine structure” for employers who violate the bill’s prohibition against maintaining a worker’s benefits while the employee is on leave or discriminating against the worker in some other way.

From an employer’s perspective, there are many other reasons to be concerned about the bill, not the least is the creation of a new state bureaucracy employing more than 220 new workers by the state’s 2019-2020 fiscal year.

The bill is but one part of an annual House Democrat package of “messaging bills” that seeks to boost the economic welfare of low-wage workers.  The bills seek to address in different ways the larger Democrat goal of tackling the issue of income inequality, which is part-and-parcel of their national and Colorado strategy of hammering the business community on the issue, whether it’s on the campaign trail or in the U.S. Congress and state legislatures.

Summary of the bill

The bill’s third fiscal note, issued April 20^th, summarizes the current version of the measure this way:

Conditional on the success of an initial working group convening to assess program costs and plan revenue bond issuance, the bill, as amended by the House Finance Committee, creates the Division of Family and Medical Leave Insurance (FAMLI division) as an enterprise in the Colorado Department of Labor and Employment (CDLE). The purpose of the FAMLI division is to provide wage-replacement benefits for up to 12 weeks per year to eligible employees. Paid leave must be taken concurrently with the unpaid, job-secured Family and Medical Leave Act (FMLA) leave available under current federal law. The FAMLI division will pay benefits through a premium deducted from all employees’ payroll, paid to the newly created FAMLI enterprise fund, which is TABOR-exempt. The division will set the premium by rule based on an employee’s annual wages, not to exceed 0.99 percent of annual taxable wages.

Applicability and definitions. The bill requires a premium payment to be deducted from the wages of all public and private sector employees and agricultural workers. Sole proprietors may opt in to the program. Family member is defined as a person who is related by blood, marriage, civil union, or adoption, and up to one additional person designated annually by the employee. Qualifying events include an individual’s serious health condition; caring for a newborn, an adopted child, or a child placed through foster care for the first year; caring for a family member with a serious health condition; events related to a family member’s active military duty; or any other leave authorized by the FMLA.

Eligibility. An employee is eligible to participate in the program after working 680 hours (504 in the case of an airline flight crew member) during the employee’s qualifying year, and at least 90 days for his or her current employer.

Elective coverage. Self-employed individuals may elect coverage for an initial period of not less than three years or a subsequent period of not less than one year. The individual opts in by filing a notice of election in writing with the director, which becomes effective on the day the notice is filed. Notice must be provided to the division in advance of withdrawal from the program.

Premiums and benefits. The division director must determine the premium amount, not to exceed 0.99 percent of total annual taxable wages, and may adjust the premium amount annually to ensure actuarial fund soundness and to avoid an excessive fund balance. If necessary, the division director may later establish a solvency surcharge by rule.

Table 1 shows the benefit amount in relation to the individual’s annual salary amount as a percentage of the annual mean wage, as determined by the Bureau of Labor Statistics, for all occupations in Colorado. Benefits are capped at $1,000 per week. The $1,000 cap will be adjusted each year in relation to the personal income growth rate.

Table 1. Benefit Structure Under HB17-1307

Individual's Income Compared to State Annual Mean Wage	Percentage of Weekly Wage Eligible for Benefit
not more than 20%	95%
20% to 30%	90%
30% to 50%	85%
50% or more	66%

 

The division must make the first benefit payment to a claimant within two weeks after the claim is filed, and bi-weekly thereafter, for up to 12 weeks. The division must adjust the maximum weekly benefit according to a formula outlined in the bill annually beginning January 1, 2020.

Proof of eligibility. The division director will set rules related to claim forms and the manner in which claims are filed; however, the bill makes several requirements related to claims, including that an employee prove eligibility, meet certain hourly thresholds of employment per year, disclose relevant medical records, and attest that his or her employer was notified in writing. The division may also require additional attestations from employees.

Employer requirements. Employers must collect premiums through a payroll deduction and remit the funds to the division. Employers can choose to establish a designated person selection process and allow employees to annually update their designated person; if no process is set up by the employer, the employee designates upon making a claim. Employers may not require employees to take any other form of leave during an employee’s FAMLI leave. If an employer has a disability or family leave policy already in place, this leave can be taken concurrent to FAMLI leave. Finally, employers must post notices related to and notify new hires of the FAMLI benefit program.

For background on the bill, read the “Research Note” prepared by Legislative Council staff.

For more information on HB-1307, contact Loren Furman, CACI Senior Vice President, State and Federal Relations, at 303.866.9642.

Road-and-Bridges Funding: “It Ain’t Over Till It’s Over”

The spirit of Yogi Berra must be looking down on the Colorado State Capitol as the legislative session trundles on to its conclusion, no later than Wednesday, May 10^th.  And transportation funding is not quite yet a moot issue, despite the death of HB-1242 Tuesday at the hands of the Senate Finance Committee.

Yesterday, Senate Republicans introduced SB-303, which was assigned to the Senate Finance Committee.  The Committee has scheduled it for a hearing on Monday, May 1^st, when it convenes at 2 p.m. in Senate Committee Room 357.

The House Democrats and Governor John Hickenlooper are highly likely to resist diverting 10 percent of current sales-and-use tax revenue to transportation, which is the bill’s signature attribute.

The bill also lacks any Democrat sponsors in either chamber, which means that its fate in the House will likely end in the bill’s death in the House State, Veterans and Military Affairs Committee, which is where House Speaker Crisanta Duran (D-Denver) will probably send it.

Ed Sealover, statehouse correspondent for The Denver Business Journal, first reported Wednesday on the intent of the Senate GOP to introduce the bill.  Sealover pointed out that similar Senate GOP bills have died in two prior sessions.

In brief, the bill would:

• Not increase taxes;
• Take 10 percent of current state sales-and-use taxes and funnel it to the Highway Users Tax Fund (HUTF);
• The Colorado Department of Transportation (CDOT) would use the funds to first pay off up to $3.5 billion in revenue bonds (TRANS) that it would issue with the approval of voters this November;
• Second, CDOT would use remaining funds for road improvements with 90 percent of this going to highway construction with no more than 10 percent going for “transit-related capital improvements”; and
• Eliminate statutory transfers from the General Fund to the HUTF and the Capital Construction Fund for three fiscal years beginning this July 1^st.

The TRANS bond revenue, according to the bill’s summary could only be used for the “completion of economically and regionally significant state highway system projects throughout the state, including a specific list of projects.”

Here’s the bill’s summary:

On and after July 1, 2017, section 4 of the bill requires 10% of the net revenue generated by existing state sales and use taxes to be credited to the highway users tax fund, paid to the state highway fund for allocation to the department of transportation (CDOT), and spent by CDOT first to make payments due on any transportation revenue notes (TRANs) issued, subject to voter approval, as required by section 7 and, to the extent not needed for that purpose, for highway purposes or highway-related capital improvements as specified in section 6. Section 7 requires the submission of a ballot question to the voters of the state at the November 2017 statewide election, which, if approved, requires the executive director of CDOT to issue TRANs in a maximum principal amount of $3.5 billion and with a maximum repayment cost of $5.5 billion. TRANs must have a maximum repayment term of 20 years and must be paid first from the net state sales and use tax revenue paid to the state highway fund and allocated to CDOT by section 4 and thereafter from any legally available money under the control of the transportation commission. Section 8 requires TRANs proceeds to be used only to provide sufficient funding for the completion of economically and regionally significant state highway system projects throughout the state, including a specific list of projects.

Section 2 eliminates required statutory transfers from the general fund to the capital construction fund and the highway users tax fund for state fiscal years 2017-18, 2018-19, and 2019-20. Section 3 requires CDOT rules that govern the consideration of contractor bids for CDOT projects to require consideration of all bids submitted by prequalified contractors and prohibit shortlisting. Section 5 requires CDOT, with respect to any transportation projects for which it awards a competitively bid contract on or after July 1, 2018, to report on its public website within 30 days of the contract award and maintain on its website for at least one year thereafter all information, excluding specific corporate financial information, from all bidders submitted in response to its invitation for bids for the project.

For more information on SB-303, contact Loren Furman, CACI Senior Vice President, State and Federal Relations, at 303.866.9642.

For more information and news media coverage of the transportation issue, read:

“Colorado Republicans are resurrecting tax-free highway-bonding proposal,” by Ed Sealover, The Denver Business Journal, April 26^th.

“Senate Finance Committee Kills Transportation Funding Bill,” CACI Colorado Capitol Report, April 26^th.

World Trade Day 2017

CACI member the World Trade Center Denver is hosting its annual World Trade Day 2017 on May 16^th at the Colorado Convention Center from 7:30am to 6:30pm.  This year’s theme, Containers to the Cloud: Trade as Goods, Services and Knowledge will focus on the diverse nature of international trade around the movement of products, services, knowledge and ideas across borders.  Learn about our region’s prominence in global trade and identify ways to jump-start your global business, mitigate risk and protect your innovations.

This full day conference allows for networking with the globally active community, increasing awareness of international business-related topics and participating in interactive activities with a dynamic group of people.

The Breakfast keynote speaker is Derek Gianino, Director of Trade Policy, US Chamber of Commerce and his speech is titled, “Is Trade Under Attack?  A View from Washington”.

Dr. Noah Raford, Chief Operating Officer of the Dubai Future Foundation, former adviser on “futures, foresight and innovation” to Prime Minister of the United Arab Emirates, will be keynote speaker for the 2017 World Trade Day Luncheon.

For more information and to register click here.

CACI's Legislative Agenda

Below is a list of bills and their status on which CACI Policy Councils and the Board of Directors have taken positions.  For more information on the bills, contact Loren Furman, CACI Senior Vice President, State and Federal Relations, at 303.866.9642.