Business could shoulder costs

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Facing the grim task of cutting nearly every area of state government, the El Paso County delegation returned to the General Assembly Wednesday.

And no one thinks this session is going to be particularly friendly for businesses, higher education or Medicaid.

Instead, those areas will be cut — and some groups are already whispering about tax increases, ending tax credit for businesses and raiding the Pinnacol Assurance war chest.

“I don’t think we can differentiate between business and the rest of Coloradoans,” said Sen. John Morse (D-El Paso), who represents District 11. “It’s going to be brutal for everyone. Cutting higher education is going to hurt businesses, cutting K-12 will hurt businesses, cutting Medicaid certainly doesn’t help. I think it is going to be just as brutal for business as it is for everyone.”

As legislators grapple with bridging the $1.5 billion gap in the budget, business groups are preparing to make their voices heard during the session.

“This is going to be a session of shared sacrifice,” said Tony Gagliardi, Colorado state director for the National Federation of Independent Business. “There are bills we are watching, hoping they don’t come to pass. But there are some ponies in with the you-know-what.”

Pinnacol legislation

Discussed during the last General Assembly, Pinnacol Assurance, the state’s largest workers’ compensation insurance company, is facing bills that pro-business groups say will increase costs for small businesses.

“Without a doubt, we’re going to be fighting for workers’ compensation insurance, for Pinnacol,” said Stephanie Finley, government liaison at the Greater Colorado Springs Chamber of Commerce. “That’s the largest pool in the state, it gives small businesses access and it’s very effective use of insurance. There’s legislation that goes after that.”

The bill opposed by the chamber’s members is the Workers’ Compensation Policyholder Protection Act of 2010, sponsored by Rep. Su Ryden (R-Arapahoe).

The bill requires the company to return a dividend to policyholders if Pinnacol surplus exceeds 800 percent of risk-based capital. It requires the insurance commissioner to approve the lowest premium rate recommended by workers’ compensation insurance rating agency or the independent actuary of the Division of Insurance.

“This is just an intrusion by the legislature into private business,” Finley said. “It limits the board of directors and there is no legitimate basis for the level of risk-based capital specified in the bill.”

The third bill, sponsored by Rep. Sal Pace, (D-Pueblo) will limit surveillance in workers’ compensation claims, requiring an insurer or employer to have a “reasonable basis” to suspect fraud or a material misstatement before they can investigate a worker for fraud. It creates a $1,000 a day penalty for violations.

“This legislation goes after the effectiveness of the program,” Finley said. “It’s to the benefit of the plaintiff’s attorney that this legislation is even being considered. They want to re-work the system to their favor.”

The NFIB is also watching the three bills to see what happens during the session. The bottom line, Gagliardi says, is to stop legislation that is going to increase the costs of doing business.

“We are paying close attention to bills that increase the cost of employment,” he said. “We have to control those costs or businesses will choose not to hire, or to lay people off. And that only exacerbates the unemployment situation we have.”

Taxes and fees

With the session still in its infancy, Sen. Keith King (R-El Paso), said that he is keeping a close eye on legislation that will affect the way businesses operate in Colorado. He said during the last session there were 60 bills that implemented some sort of fee on small businesses.

“I hope the Democrats don’t want to do that again,’ he said. “I voted against every one of them.”

The budget dilemma means that the legislature is looking at ways to make more money, he said.

“I’ve heard rumors of ending enterprise zones,” he said. “Ending tax credits for businesses. I am opposed to anything that keeps businesses from being able to compete, both nationally and globally.”

Gagliardi said there were proposals to forego tax credits and exemptions for businesses for two years and to end the energy tax credit that manufacturing companies receive.

“We’re also watching the software tax,” he said. “Right now, you can download software and receive a tax exemption on the software. They want to do away with the exemption. It’s just more money from small businesses.”

Some of the proposals affect the collection and dispersion of sales taxes, he said. And he mentioned keeping a close eye on bills that completely eliminate tax credits and exemptions for businesses — another idea being bandied about as a way to replenish the state’s coffers.

Unemployment compensation

With Colorado’s unemployment hovering around 7 percent, the unemployment compensation fund is close to insolvency. The state can borrow money from the federal government — interest free — to make up the shortfall.

“We’re trying to see if we can prevent that,” he said. “If we take a loan in 2010, then 2011 could mean more premiums for employers. And in July of this year, they set the rates for next year. Some businesses could get a 300-percent increase.”

Department of Labor and Employment Executive Director Donald J. Mares suggested borrowing money last week during the state’s Joint Budget Committee.

He said quick action is needed to address the projected shortfall in the state’s unemployment trust fund.

“Like all states, Colorado has been hit hard,” Mares said. “More people are tapping into the benefits. In November, we processed 22,222 new applicants. Just two years earlier, that monthly average was only about 11,100.”

In addition to more initial claims, he said the people who are losing employment this year are higher wage earners and are getting higher benefit amounts.

In November 2009, about $94 million in benefits was paid from the trust fund compared with only $42 million in November 2008 and $21 million in November 2007.

While more money is going out, less revenue is coming in. “The trust fund comes from employers’ premiums and fewer and smaller companies are paying those premiums that support the fund,” Mares explained.

The Colorado unemployment trust fund balance now sits at $30 million, compared with $562 million a year ago.

The good news

Businesses could benefit from a proposal to have a one-year moratorium on any mandates for small group coverage in the insurance market.

That segment of the market is saddled with several regulations — mandated coverage — that make it difficult for small businesses to offer insurance benefits. A moratorium could allow more businesses to maintain health insurance for their employees.

“We’re also keeping an eye out for someone to back a bill that would allow regional groups to come together to purchase insurance across state lines,” Gagliardi said. “That would increase purchase power for employers — and benefit everyone.”