In this Capitol Report:
PODCAST: Colorado Chamber and Common Sense Institute Break Down Cost of Prop 118
The Colorado Chamber’s Loren Furman sat down with the Common Sense Institute (CSI) this week to talk about Prop 118, how it will impact workers and businesses, and what it will cost Colorado.
The initiative, if passed, would create a $1.3 billion state-run family and medical leave insurance program funded by a payroll tax on working Coloradans and their employers.
“Employers in Colorado, I will tell you, have always been supportive of trying to find a solution around a paid leave program,” Furman said. “But what they’ve tried to do is find a solution that’s not only affordable for workers, but also that actually provides the benefits that workers need [and] works with how a business actually operates.”
CSI recently released a report finding that if the program is more popular than anticipated, it runs the risk of quickly becoming insolvent. Under these circumstances, the program would need to exceed its 1.2% cap on payroll taxes or reduce benefits to remain fiscally sustainable. The program would also be one of the most generous in the country, offering higher wage replacement and length of leave than other states. This runs the risk of creating higher than expected demand, which could get expensive.
“I think the proponents [for Prop 118] have a real dilemma on their hands,” said Furman. “They want to create a program that’s ‘Cadillac program’ – but they’re hoping that only a small percentage of workers actually use the program…. And legislators, as you’ve seen over the last six years, really have concerns with this issue in and of itself, and going to their constituents and asking them to increase taxes on their payroll is a really hard nut to swallow.”
Furman also warned that if demand for the program is higher than anticipated, it could end up like the state’s Unemployment Insurance program, which has run out of funding due to the pandemic and increased claims.
“That’s exactly what could happen with this paid leave program: too many folks use it, and not enough money to pay for it. Either you reduce benefits, or you increase the tax.”
Furman asks voters to do their due diligence on Prop 118 to fully understaind what the program entails.
“Read closely the details of this ballot initiative,” she said. “Get educated on how it’s going to be funded. It’s got a financial impact on all of us, and it could fail to the detriment of those it’s actually trying to help. So do your homework, try to be educated on what this actually says and does before voting on a very large costly program like this.”
Governor’s Budget Office Releases Quarterly Economic Forecast Showing Impact of COVID-19
The Governor’s Office of State Planning and Budgeting (OSPB) released its quarterly economic forecast today. According to the Governor’s press release, the forecast found Colorado’s economic activity still below normal levels; however, the state’s economy continues performing better than the national average because coronavirus cases are comparatively low, and Colorado has a high percentage of the workforce that can work remotely.
“Overall, the U.S. economy continues to recover from the pandemic recession in April, but activity remains below normal levels and the rate of improvement is slowing. Nationally, the unemployment rate remains above eight percent. Personal incomes and savings rates are above pre-pandemic levels due to major federal relief measures such as expanded unemployment insurance benefits. While higher incomes and savings are positive signs for the economic outlook, the recovery remains highly dependent on the course of the virus.” The press release said.