Unemployment Job Vacancy
Photo courtesy of Canva.

Have you wondered where unemployment benefits come from? It’s not the federal government. Indeed, state unemployment benefits are paid for using the Unemployment Insurance (UI) Trust Fund. This is a fund that each employer pays into, making the fund entirely employer funded.

Before the pandemic Colorado’s UI Trust Fund had a positive balance of $1.2 billion. Now, however, it’s over $1 billion in the red. What’s going on and what does this mean going forward?

Unemployment Office
Photo courtesy of Bytemarks (CC BY 2.0).

Colorado’s UI Trust Fund

When you work for a company, that company pays a percentage of your wage into Colorado’s UI Trust Fund. The amount each company pays varies based on several factors, including, but not limited to, the type of company it is, the benefits it offers and turnover rate.

Then, if you lose your job through no fault of your own (meaning you don’t quit), you can apply for benefits, and a letter is mailed to your previous employer letting them know you applied. Assuming everything is kosher, you should start receiving unemployment benefits, helping hold you over until you find a new position.

The idea is like car insurance — everyone pays into a central system. Then if something happens, money is doled out so that a single person doesn’t shoulder the entire burden. But what would happen if wrecks increased exponentially, and the fund started depleted rapidly? The answer: Everyone’s premiums would increase significantly. Well, that’s what’s happening to Colorado’s employers.

Unemployment Closed due to health crisis
‘Closed Due to Health Crisis.’ Photo courtesy of Tony Webster (CC BY 2.0).

Sky-High Unemployment

Prior to the pandemic in February 2020, Colorado’s unemployment rate was 2.5 percent, which was the fifth-lowest unemployment rate in the country. Now, Colorado’s unemployment rate is 6.2 percent, according to the Colorado Department of Labor and Employment (CDLE) — higher than the national average of 5.9 percent.

That rate equals a significant increase in unemployment claims. For example, in 2019, there were just under 100,000 unemployment claims for the entire year, according to the United States Department of Labor. In contrast, there were over 746,000 unemployment claims in 2020. In April 2020, alone, there were 104,572 unemployment claims in Colorado. Obviously, this put a significant strain on Colorado’s UI Trust Fund. Since the pandemic started, the UI Trust Fund has paid out over $2 billion in unemployment benefits, according to The Colorado Sun.

However, unemployment isn’t the only thing draining this fund.

Unemployment Fraud
Photo courtesy of Got Credit (CC BY 2.0).

Fraud, Fraud, and More Fraud

When someone filed for unemployment before the pandemic, their employer received a letter stating a previous employee had filed. This happened before any benefits were paid. That way, if someone tried to defraud the system, the employer would hopefully catch it and report the fraud. Still, fraud was a problem even with this measure.

But, due to sheer volume, during the pandemic not all unemployment claims were verified. In fact, the Inspector General (IG) found that 40 percent of states didn’t verify claims. Even when claims were found to be fraudulent, 38 percent of states didn’t perform recovery activities, according to a letter from Colorado Rep. Lamborn to the IG requesting an audit.

Indeed, the letter states, “As a result of this mismanagement by states, the IG office predicts that $89 billion of the estimated $896 billion in federal unemployment program funds could have been paid improperly, basing the prediction on a historic improper payment rate of at least 10%. However, the security company ID.me estimates that possibly 50% of all claims equaling more than $400 billion have been paid out improperly through fraud or errors since March 2020.”

Unless the IG audits Colorado’s UI Trust Fund, we won’t know to what extent fraud is an issue for Colorado. But there’s a strong possibility that fraud’s at least part of the problem.

Financial adviser Allan Roth said he received two letters from the CDLE for employees he’d never employed. But, when he tried to contact CDLE to correct the issue, he couldn’t get reach anyone. “I just followed the directions in the letters, calling the 800 number or the 303 number, and couldn’t get through to anybody,” Roth said. “I’d be on hold for a long time, and then the call would get dropped,” reports the Colorado Springs Business Journal.

Additionally, in June 2021, Colorado officials told The Colorado Sun they estimated $22 million “had been paid to fraudsters.” They further added that increased anti-fraud efforts had saved $500 million from going out for fraudulent claims.

Increases Coming Soon

The lockdowns and social distancing mandates associated with COVID-19 had a marked impact on Colorado’s economy. And because of that, unemployment claims went through the roof. This drained the UI Trust Fund, forcing Colorado to borrow from the federal government to supplement this fund. Now, employers are on the hook to pay that loan back.

According to Common Sense Institute, employers might’ve paid as little as .07 percent for an employee’s total UI premium before the pandemic. By 2023, that rate is expected to increase to as much as 13.1 percent. This will cost the business thousands of dollars.

In some instances, businesses will pass on that cost increase to the consumer, but in some small business cases, those new costs could force the business to close its doors, further hampering unemployment rates.

Hopefully, the IG will audit Colorado’s UI Trust Fund and pursue repayment when possible. In some cases, this may prove impossible as the payments went to criminal syndicates and to those using stolen identities.

Another possibility under consideration is using federal money from the American Rescue Plan Act to pay down the loan. The money was intended to stimulate the economy, but some believe the funds would be better used helping employers pay for unemployment insurance.

Will Colorado help its employers? How much UI money went out fraudulently? These are both questions The Maverick Observer is following and will update as more information becomes available.


The Maverick Observer, or “The Moe” as we affectionately call it, is an online free-thinking publication interested in the happenings in our town. We launched in February 2020 to hold our politicians and businesses accountable. We hope to educate, inform, entertain, and infuse you with a sense of community.


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Katie Spence
Before starting her career as a journalist, Katie served in the Air Force as an active-duty Airborne Operations Technician on JSTARS. After leaving active duty, Katie joined the Colorado Air National Guard and returned to college. Katie has a degree in analytic philosophy and a minor in cognitive development from the University of Colorado. She uses this to help further her understanding of current issues — from politics to economics to environmental issues. Katie wrote for The Maverick Observer before moving to the Epoch Times. Katie’s writing has appeared in The Motley Fool, First Quarter Finance, The Cheat Sheet, Investing.com, and numerous other sites.

4 COMMENTS

  1. Fantastic article, a link and a hard copy should be sent to every state legislator and Colorado government official, however since I suspect that most of them have, shall we say, dirty hands in this mess they’ll do nothing regarding the problem.

    • Thank you for your comment. We agree and will add that task to our list next week and email out a copy of the article to our elected officials. There has to be a reckoning and investigation into this program.

  2. WOW! Congratulations millions of small business owners will now suffer because SOMEONE else’s STUPIDITY! I can’t believe how hypocritical politicians are. They the politicians say we care about the “people” but at the end of the day in the dark of night, they corruptly still the money that OTHER hard worked people have been paying into. Unless all businesses are truthfully owned by 1 person. Did that selfish, hypocritical, fat cat, get in a jam, some bad business deals maybe? There is zero logic or even common sense in depleting the Colorado unemployment fund. Absolutely no fore thought about anyone else’s business besides, the fat cats bad business moves. The democrats campaign on human rights, and the working people. Well as I said above this is so hypocritical from what they platform on. Nothing I have seen from the Democrats says anything about human rights, un less of course you live in a different country. If I were a small business owner I would close my doors immediately, it is not worth having a business, unless of course you hold the purse strings to the money bag. Way to go elected and non elected officials! I hope you enjoy your stupid prizes!

    • Thank you for your comment. We at TMO agree that politicians should be held accountable for their actions, and that’s why we write articles such as this one. Our hope is people will be better informed when voting, and can make informed decisions. We also think the politicians and government officials should account for the monies wasted due to fraud.

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