On Sunday, John Cumalat told his seven employees at Cannon Mine Coffee that they were out of a job.

But he didn’t close the Lafayette shop as the new coronavirus spread across Colorado. He just wanted to make sure his staff would be able to collect some sort of payment by filing for unemployment if COVID-19, the disease caused by the coronavirus, continues to wreak havoc for months ahead.

“I told people, ‘Look, I think there’s gonna be a whole lot of unemployed people, so I’m going to let everyone go with the assumption that if things return to some level of normalcy, you’ll be rehired. So keep your keys and try to get toward the front of the line for unemployment,’” said Cumalat, who thought he had given his crew a week’s lead before the spread of the virus put other restaurant and coffee shop workers out of a job. “It accelerated faster than I thought.”

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Cannon Mine Coffee cut back its hours and was open for to-go lattes on Tuesday, a day after Gov. Jared Polis ordered the closure of restaurants and bars, except for take out or delivery, as well as movie theaters, casinos, gyms and other gathering places.

And coffee shop employees were probably among the thousands who tried to file claims in the past two days — 6,800 on Tuesday morning, as of 10 a.m., up from 3,900 on Monday and from 400 the Monday before, according to the Colorado Department of Labor and Employment.

“Never before in Colorado have we had such a high volume of impacted workers due to the necessary decisions that the governor made for the state of Colorado this past weekend, as well as on Monday,” Joe Barela, executive director of the labor department, said during a news conference on Tuesday, also referencing Polis’ Saturday night order that all Colorado ski areas close for at least a week.

“It’s really forcing hundreds of thousands of Colorado workers into some type of employment status that was different than what it was a few days ago and so, as a result of that, we’re seeing unprecedented volume in our unemployment insurance claim system,” Barela said.

John Cumalat, owner of Cannon Mine Coffee in Lafayette, prepares an espresso drink for a customer on March 17, 2020. The shop has a liquor license and typically hosts evening music and community events, but in the wake of the spread of the novel coronavirus, hours have been reduced, employees have been furloughed and all of the chairs have been put up on tables to keep customers from lingering in the store. (Dana Coffield, The Colorado Sun)

The online system was inundated with claim requests and outages that were reported on Tuesday. Officials recommend that anyone trying to file a claim at coloradoui.gov should save frequently throughout the process.

Right now, the state’s unemployment fund — called the Unemployment Insurance Trust Fund — has $1.1 billion available, according to the labor agency. Employers pay premiums on their workers’ wages to replenish the fund, which gets no federal dollars nor money from the state’s general fund.

In a downturn, the $1.1 billion is enough to pay benefits to unemployed workers for 18 months, said Cher Haavind, the agency’s deputy executive director and spokeswoman.

But that’s in a regular economic downturn.

“That would change if, you know, 80% of employers had layoffs,” Haavind said. And conditions are changing quickly, she said.

To-go orders sit ready in the empty Vine Bistro restaurant in downtown Montrose Tuesday afternoon. (William Woody, Special to The Colorado Sun)

Colorado’s unemployment fund is underfunded

But according to state Sen. Chris Hansen, a Denver Democrat, Colorado began this COVID-19 downturn with its unemployment safety net underfunded by more than 30%. The unemployment fund hasn’t adjusted for inflation since the 1980s, he said.

“We were about $400 million dollars behind where we should have been on the unemployment insurance trust fund,” Hansen said, citing numbers provided by the labor department in a December budget report. “That is largely the result of not adjusting the taxable base over many, many years — about three decades, actually, for inflation, which is why we are so far behind.”

He hopes to introduce a bill when the state legislature is back in session — lawmakers are taking two weeks off because of COVID-19 — to address the funding imbalance. Right now, employers pay premiums based on the first $13,100 of taxable wages, a metric used since the 1980s, he said. If adjusted for inflation, the number should now be $28,000.

“I want to be very clear: We’re not going to run out of money to pay people benefits,” Hansen added. “It’s just likely that we’re going to run out of money in that fund very quickly and have to start borrowing, which means when the economy recovers we’re going to have to pay it back. And that’s what I was trying to prevent. Unfortunately, we’re now in this crisis and we’re going to have to play catch up.”

Cannon Mine Coffee in Lafayette reduced its hours and switched to paper cups on March 15, 2020, and by March 17 had cut back hours even further and was advising patrons they were not able to allow people to linger in the shop because of new coronavirus concerns. (Dana Coffield, The Colorado Sun)

Some business groups, like the Colorado Chamber of Commerce, look at this differently. They say the fund is currently solvent and increasing the amount means businesses would have to pay higher premiums.

“Sen. Hansen has shown some great interest with this issue over the last two sessions, and is trying to increase the wage base,” said Loren Furman, senior vice president of state and federal relations for the Colorado Chamber. “When you increase the wage base, what you’re doing is asking employers to pay more in premiums. But my understanding is that the fund is fully solvent.”

The last recession

Colorado’s unemployment fund has been insolvent before.

After the Great Recession, the fund ran out of money in fiscal year 2009-10, according to the 2019 budget report from the state Department of Labor. So did all of the other states.

At the time, Colorado also saw a record of unemployment claims. The historical numbers were not readily available from the state’s labor agency. But according to state annual reports, new unemployment claims shot up to 408,644 in fiscal year 2010 — an average of 7,859 new cases per week.

According to published reports during the last recession, the state recorded an average of 4,600 new unemployment claims per week in November 2008, up from 2,500 in November 2007, according to the Associated Press.

New cases from just two days this week — for Monday and as of 10 a.m. on Tuesday — numbered 10,700.

During the last recession, the federal government loaned money to states to make unemployment payments.

In 2013, Colorado issued bonds to finance the federal debt to help employers avoid a federal tax credit reduction. But that meant employers had to pay a surcharge of 20 to 25% until the bonds were paid off in May 2017, according to the report.

While no one is worried that unemployed workers won’t get paid today, business groups do oppose extra interest or surcharge payments should federal loans kick in again. That was painful for Colorado’s small businesses, said Tony Gagliardi, state director for the NFIB, which represents 7,000 small businesses in Colorado.

“Small businesses especially took the brunt of that (surcharge),” Gagliardi said. “Anything we do that affects our unemployment trust fund, we are going to look at very critically and make sure that we can continue forward and keep that fund at a sufficient level where if we do have a massive downturn, we’ll be able to weather the storm.”

Federal help expected soon

The state labor agency and business leaders are counting on pending federal legislation, which passed Saturday in the U.S. House of Representatives. It’s expected to pass the Senate and get President Donald Trump’s approval as early as next week.

The Families First Coronavirus Response Act would make it easier for workers to apply for unemployment compensation and speed up the process so workers can get paid faster. For states seeing a 10% increase in unemployment rates, the proposed law would waive the one-week waiting period to receive benefits, nix the requirement to search for a new job and extend payments up to an additional 26 weeks beyond the usual 26 weeks. It would also provide interest-free loans to states to cover their unemployment benefits.

On Tuesday, the Trump administration pushed for a $1 trillion economic stimulus package, which could mean cash payments to Americans “in the next two weeks,” Treasury Secretary Steven Mnuchin said during a White House briefing. The package would also allow individuals to defer tax payments of up to $1 million and corporations of up to $10 million for 90 days, interest- and penalty-free. It would have to pass both chambers first, though.

This also means Colorado is in waiting mode until Congress passes the revisions to unemployment.

“We don’t want to do anything with our emergency rules until we know what Congress is going to do,” said Haavind, with the state labor agency.

MORE: The economic impact of the coronavirus is huge. Now Colorado lawmakers are looking at a budget deficit.

What can workers do?

A big difference between today’s rise in unemployment cases compared to the last recession is that many employers hope their workers will return soon.

That being the case, there are several types of people who may qualify for some form of unemployment compensation:

Laid-off workers receiving no pay can file for unemployment, which would cover 55% of their usual wages for up to 26 months. Details at coloradoui.gov

Full-time workers who find their hours reduced by at least 10% — but no more than 40% — may also be eligible for some unemployment and should file a claim. As part of the state’s Work-Share program, workers with reduced hours can qualify for a percentage of the lost pay.

Seasonal workers or union employees who plan to return to their employer are eligible. Called “job attached,” this helps out seasonal workers who often stop working for up to 16 weeks. These workers can be eligible for unemployment compensation and their work-search requirements are waived.

Haavind, with the state labor department, said that typically, a laid-off worker files an unemployment claim, her team verifies it and the worker could start collecting unemployment pay within a few weeks. With thousands of claims now pouring in, she said it’s too early to say how long before that first check arrives, though the agency hopes to figure that out soon.

But what will speed up the process is for employers to respond immediately when labor staff try to verify a worker’s eligibility. Employers may soon be able to give the labor agency a heads up about large job cuts due to the coronavirus by using the Rapid Response Program, a tool typically used when companies face a corporate restructuring or downsizing.

Every situation is different, she said, and staff will still have to vet each claim unless a new federal rule is created or state policy changes.

“It’d be a simpler process for the claim if (employees) are out of work for 30 days. That’s a pretty clear example of eligibility,” Haavind said. “Quite frankly during the recession, it was a little more cut and dried than what we’re seeing now. They were just mass layoffs.”

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