I_ECR_TFER_2021A 09/24/2021 09:09:19 AM Committee Summary PUBLICSTAFF SUMMARY OF MEETINGINTERIM COMMITTEE TASK FORCE ON ECONOMIC RECOVERY AND RELIEF CASH FUND Date 09/24/2021 Attendance Lauren Larson E Liston * McKean X Patrick Meyers X Rodriguez X Young X Valdez A. X Moreno X Time 09:09:19 AM to 12:26:52 PM Place SCR 352 This Meeting was called to order by Moreno This Report was prepared by Elizabeth Burger Hearing Items Action Taken hRoll Call and Introductions Committee Discussion Only hAllowable Uses of American Rescue Plan Act of 2021 Funds Committee Discussion Only hEconomic Overview Committee Discussion Only hUnemployment Insurance Trust Fund Overview Committee Discussion Only hScope of the Subpanel and Next Steps Committee Discussion Only Roll Call and Introductions - Committee Discussion Only 09:14:41 AM Chair Moreno called the meeting to order and the members of the task force and subpanel introduced themselves. Members of the subpanel in attenance included Phyllis Resnick, Elissa Bruanstein, Henry Sobanet, Jason Schrock, and Alison Felix. Allowable Uses of American Rescue Plan Act of 2021 Funds - Committee Discussion Only Attachment Tag File Name Attachment A http://www2.leg.state.co.us/CLICS/CLICS2021A/commsumm.nsf/0/581781C5C876...$File/Attachment A.pdf?OpenElement Attachment A.pdf Attachment B http://www2.leg.state.co.us/CLICS/CLICS2021A/commsumm.nsf/0/AE07DC684D80...$File/Attachment B.pdf?OpenElement Attachment B.pdf Attachment C http://www2.leg.state.co.us/CLICS/CLICS2021A/commsumm.nsf/0/0E2D2D271B74...$File/Attachment C.pdf?OpenElement Attachment C.pdf 09:16:39 AM Ed DeCecco, Office of Legislative Legal Services, began the presentation regarding allowable uses of American Rescue Plan Act of 2021 (ARPA) funding (Attachments A through C). He reviewed the amount of money allocated to the state and the allowable uses of the funds. The funds must be spent by December 31, 2024, and the state must repay any amount that is not used for an authorized purpose. He further reviewed the allowable uses of the Coronavirus State Fiscal Recovery Fund, including 1) to respond to the public health emergency with respect to COVID-19, or its negative economic impacts; 2) to respond to workers performing essential work during the COVID-19 public health emergency; 3) For the provision of government services to the extent of the reduction in revenue; and 4) to make necessary investments in water, sewer, or broadband infrastructure. He discussed prohibited uses of the funds, including directly depositing the money in a pension fund and to directly or indirectly offset a net tax revenue loss. He discussed the federal rules implementing the law. 09:30:44 AM Mr. DeCecco continued the discussion of allowable uses of the ARPA funding and discussed legislation enacted in the 2021 session allocating the money. He noted that most of the money first flows to the American Rescue Plan Act of 2021 Cash Fund. From this fund, money flows to five additional cash funds. Mr. DeCecco described the provisions of law that apply to the American Rescue Plan Act of 2021 Cash Fund. He continued by discussing the Behavioral and Mental Health Cash Fund; Workers, Employers, and Workforce Centers Cash Fund; Affordable Housing and Home Ownership Cash Fund; Revenue Restoration Cash Fund; and Economic Recovery and Relief Cash Fund (ERRCF). He further highlighted the ERRCF and discussed the allowable uses for this funding, including assistance to small businesses; assistance to individuals and households; assistance to nonprofit organizations; public health expenditures for COVID-19 prevention and response; administrative costs associated with COVID-19 public health emergency assistance programs; aid to impacted industries; assistance to unemployed workers; contributions to the unemployment compensation fund; relief efforts for unmet needs, especially for communities disproportionately impacted by the COVID-19 pandemic; and to make necessary investments in water, sewer, or broadband infrastructure. 09:52:51 AM Mr. DeCecco responded to questions from the task force and subpanel regarding the use of the ARPA funds, and local government allocations of ARPA funds. He further answered questions about determining whether certain uses would meet the requirements of federal law. 09:58:20 AM He continued to respond to questions from the task force, providing responses to questions on capital improvements, public/private partnerships, and updated guidance from the Treasury Department on ARPA funds. He continued by responding to questions about whether ARPA moneys could be used to match federal funds, the use of funding by local governments, and special districts. Economic Overview - Committee Discussion Only Attachment Tag File Name Attachment D http://www2.leg.state.co.us/CLICS/CLICS2021A/commsumm.nsf/0/FE1E06513411...$File/Attachment D.pdf?OpenElement Attachment D.pdf 10:13:14 AM David Hansen, Legislative Council Staff, began the presentation on the Economic Outlook and Economic Trends to Date During the COVID-19 Pandemic (Attachment D). He began by discussing the continuing economic recovery, noting that consumer activity is driving growth. He continued by discussing how spending compares to pre-pandemic levels. Mr Hansen shared information about different economic sectors, and highlighted Colorado's labor market and levels of unemployment. 10:22:38 AM Mr. Hansen discussed the jobs recovery in various industries. He explained that job openings surpass unemployment and outpace hiring activity, noting that the employment recovery varies by region. Mr. Hansen discussed energy production in Colorado. 10:27:46 AM Mr. Hansen discussed U.S. personal income growth and the effect of declining transfer payments. He continued by discussing inflationary pressures, especially in the energy and transportation sectors, and noted that persistent supply chain issues raise the risk of inflationary pressures. He discussed home price acceleration in recent years, noting that demand is expected to cool and supply to increase, reducing home price acceleration in the future. 10:31:11 AM Mr. Hansen responded to questions from the task force regarding the labor force participation rate in Colorado and oil and gas activity. Kate Watkins, Chief Economist, Legislative Council Staff, discussed inflation in the energy and transportation sectors. The task force discussed the current labor market and labor market participation. Mr. Hansen responded to questions regarding retail sales data and contributing factors to the labor force participation rates in Colorado. Mr. Hansen and Ms. Watkins further addressed inflation. 10:44:19 AM Ms. Watkins responded to questions from the committee regarding inflation and potential bubbles in the housing market and stock market. The task force and presenters discussed costs associated with public and employee benefits. Ms. Watkins responded to questions regarding the unemployment rate and GDP. Representative Young asked if health and safety concerns were affecting the labor force participation rate in Colorado. Unemployment Insurance Trust Fund Overview - Committee Discussion Only Attachment Tag File Name Attachment E http://www2.leg.state.co.us/CLICS/CLICS2021A/commsumm.nsf/0/AC8AA921570C...$File/Attachment E.pdf?OpenElement Attachment E.pdf 11:03:32 AM Daniel Chase and Ryan Gedney, Colorado Department of Labor and Employment, distributed copies of their presentation regarding the status of the Unemployment Insurance (UI) program in Colorado (Attachment E). Mr. Chase reviewed the status of UI prior to the pandemic, and federal changes to the UI program as a result of the pandemic. Mr. Chase responded to questions from the task force regarding gig workers and whether they or their employers paid into the UI Trust Fund prior to the pandemic. Mr. Gedney shared charts related to UI claims (found in Attachment E). 11:10:55 AM Mr. Chase and Mr. Gedney responded to questions from the task force regarding state and federal obligations for UI benefits. Mr. Chase continued by discussing the UI Trust Fund, describing how the trust fund is funded, and how benefits are paid from the trust fund. He emphasized that the UI Trust Fund can only be used to pay benefits for state unemployment insurance claims, and the federal government provides loans to continue to pay unemployment benefits if the states' trust funds run out of funds. 11:15:25 AM Mr. Gedney discussed the employer UI contribution schedule and how the schedule has changed since 2020. He described how the employer contributions are calculated. Mr. Gedney responded to questions from the task force regarding modeling of future employer costs. He discussed recent legislation that made changes to employer premiums and surcharges. Mr. Chase and Mr. Gedney discussed the availability of federal loans for the trust fund. 11:22:19 AM Mr. Chase discussed interest payments due to the federal government, and Mr. Chase noted that Governor Polis has issued an executive order directing that the interest payments be paid from Coronavirus Relief Funds. Mr. Gedney explained that most employers are concentrated on the lower end of the premium rate schedule, and explained that layoffs during the pandemic are not counted against employers' experience ratings. Mr. Gedney responded to questions from the committee regarding how the industries most affected by the pandemic are typically affected by recessions. 11:27:06 AM Mr. Chase responded to questions from the task force regarding fraudulent claims, overpayment claim notices, and liability to victims of unemployment insurance fraud. 11:35:35 AM Mr. Gedney discussed the balance of Colorado's UI Trust Fund, noting that it became insolvent on August 18, 2020. He explained that the state has had to borrow to pay benefits twice before. Mr. Gedney explained the various UI benefit programs. Mr. Chase explained the various provisions of law that become effective when the UI trust fund is in deficit, including the interest surcharge (by law interest payments cannot be made by traditional premium revenue); the solvency surcharge, a rate schedule shift which will move employers to the highest rate schedule in 2022, and the Federal Unemployment Tax Act (FUTA) credit reduction. 11:41:52 AM Mr. Chase discussed considerations for policy makers regarding the trust fund, and noted that any reduction to employer contributions should be backfilled with stimulus funding to ensure the stability of the UI Trust Fund. Mr. Gedney shared a forecast of the UI Trust Fund balance, assuming current law, and based on the strength of the economic recovery. He continued by discussing the solvency surcharge and estimates of employer costs and how long the surcharge may be in effect. 11:49:52 AM Mr. Gedney discussed the FUTA credit reduction, and explained how a reduction in the FUTA credit could affect employers. He responded to questions from the committee regarding the FUTA credit, the UI Trust Fund, and the calculation of the solvency surcharge. 12:01:24 PM Mr. Gedney discussed impacts to other states' UI trust funds during the pandemic, and noted that some states have paid off their loans or bolstered their UI trust funds with federal relief funds. Mr. Chase and Mr. Gedney discussed the employer wage base and rate schedule over time. Mr. Chase and Mr. Gedney discussed the importance of SB 20-207 to the solvency of the UI Trust Fund in future years. 12:10:15 PM Mr. Gedney discussed borrowing and the repayment strategy during the Great Recession, including bonding. Scope of the Subpanel and Next Steps - Committee Discussion Only 12:19:12 PM Phyllis Resnick, Chair of the subpanel, announced that the subpanel would hold its first meeting on Thursday, September 30, from 11 am to noon. She discussed the potential scope of the subpanel's work. Senator Moreno asked if any task force members had direction on study topics for the subpanel. Director Meyers asked for modeling on how using ARPA moneys for the UI Trust Fund would affect employers. Representative McKean focused on the one-time nature of ARPA moneys and how to best use the money to provide a stimulative effect. Representative Young asked for information on household debt, and asked for further information on household financial health across all income levels. 12:25:31 PM Senator Moreno made comments related to the task force's upcoming meetings. 12:26:52 PM The committee adjourned.