By Chris Stiffler, senior economist

In late March, stay-at-home orders issued by Gov. Polis in response to the coronavirus pandemic caused a sudden halt to the tourism, travel, food service and accommodations industries. The Colorado Department of Revenue recently released their sales tax collections data for April 2020 (the first month of stay-at-home orders) and total net taxable sales for April were 81 percent of what they were the same month a year prior.

Because Colorado generates much more of its tax revenue from sales tax compared to other states, stay-at-home orders have a huge effect on state and local government budgets. Colorado has the third-highest average local sales tax rates behind Alabama and Louisiana. On average, U.S. states generate about 5 percent of total state and local tax revenue from sales tax. In Colorado that figure is 15 percent. That means local sales taxes are usually the largest revenue source for the General Funds of Colorado cities. 

Accommodations, clothing stores, arts/entertainment/recreation, and food service have been hit the hardest. Hotels and other accommodations businesses had the biggest hit from the virus, taking in only 11 percent of the taxable sales in April 2020 as they did in April 2019. 

Regionally, Boulder’s retail sales in the entertainment/accommodation/food service industry in April 2020 were only 28 percent of what they were in 2019. Denver is even lower at only 25 percent. 

Tourist towns and ski towns were also some of the hardest hit areas of the state. In Copper Mountain, with the ski resort closed in April 2020, hardly any retail sales occurred. Copper Mountain collected 7 percent of the sales tax in April 2020 than it did in April 2019. The cities of Vail, Winter Park, Keystone, Breckenridge, Black Hawk, and Aspen top the list of cities who saw the biggest year-over-year drop in sales tax collections from April 2020 to April 2019. 

It’s important to keep in mind that these data are only for April, and while the state did begin to loosen restrictions on travel and business operations beginning in May, the bounce won’t be nearly enough to make up for the lost revenue. Cities and counties will be hard-pressed to do much of anything other than cut their budgets next year to make up the difference, and long-term national projections don’t indicate a full economic recovery any time soon.

With virus cases on the uptick over the past few weeks, it’s possible more restrictions could be on the horizon, which could worsen an already tough situation for Coloradans. Cuts to local government budgets aren’t just numbers on paper – they mean a reduction in the services that families, businesses, and their communities count on.  

By Chris Stiffler & Elliot Goldbaum

1. Cuts are here to stay (at least for 2020-21 and likely 2021-22)

Following up on their special May revenue forecast, Legislative Council only had one extra month of data to work with. Some were hoping the regular June revenue forecast would deliver rosy revenue news that would soften the blow to communities from budget cuts passed in the 2020 state budget. The June forecast is a bit better than May, but not by much. Even with an optimistic outlook for the next two years, the state budget still won’t catch up to where we were prior to the pandemic, and that sober analysis actually understates the damage. That’s because it doesn’t account for growth in student enrollment enter our schools and more people sign up for health care through Medicaid. 

2. Tax policy changes during the session helped

In May, the FY2019-20 budget – which lawmakers passed last year to fund the state through the end of June 2020 – was facing an $896 million deficit. Fortunately, due to tax policy changes from legislation ($321 million), transfers to the General Fund ($145 million), and $281 million from appropriation changes and tapping into the General Fund Reserve (bringing the reserve from 7.25% to 3.07%), the legislature transformed that deficit into a $365 million surplus.

The more than $300 million worth of revenue from tax policy changes – much of it from repealing tax giveaways to the very wealthiest Coloradans that were part of the CARES Act – helped close the gap in revenue from this current year (FY2019-20). It also added badly needed revenue for closing the $3.3 billion shortfall we learned about in the special May forecast.

3. Square root-shaped recovery

During the last two recessions in 2001 and 2009, the general fund saw a 17.3 percent decline in the following two years. Legislative Council is predicting that this recession will result in a 14.2 decline. This might seem counterintuitive given the unprecedented nature of the economic response to COVID-19.

But just like the recession looks completely different than any we’ve ever seen, the recovery probably will look different too. This recession hit far more quickly than past recessions and caused a rapid decline in economic activity. Quarterly GDP fell by 5 percent in the first quarter of 2020, and the U.S. officially entered a recession in March 2020. However, some recent indicators are pointing to a correspondingly quick economic uptick as retail sales have rebounded this past month and mortgage applications for home sales are back up. Despite this swing, economists are still predicting it will take years for the economy to fully recover. Even with an optimistic forecast in the out years, don’t expect state and local government budgets to look like they did in 2019 for a while.

4. Much higher unemployment rates in big tourist towns

Colorado lost 16,500 job in March and another 323,500 jobs in April, with the leisure and hospitality sector comprising the largest share of layoffs. In a continuing trend, the counties in Colorado that rely heavily on tourism have been the most affected. While the unemployment rate in Colorado as a whole was 11.3% (the 15^th highest among the 50 states), Pitkin, Gilpin, San Miguel, Summit and Eagle counties have rates that exceed 20 percent. The most recent data show a slight halt in the amount of job losses, but the decrease in tourism is reflected in travel data: vehicle miles traveled were down 22 percent compared to April last year. Even as towns begin to reopen, it’s likely consumer activity will remain subdued.  

5. We still need more revenue, and Initiative 271 is the best solution 

Even during the boom years of 2017-2019, when Colorado had one of the best economies in the country, the state budget still wasn’t able to fully pay back. Today, we’re continuing to dig a deeper hole in our commitment to education. The Budget Stabilization Factor (the annual shortfall in funding for K-12) is back to its largest-ever dollar value. We’re not just cutting education either. 

Initiative 271, which lowers the income tax rate for 95% of Coloradans and asks the top 5% to pay more, will generate about $2 billion that will offset a big chunk of the coming state budget cuts. If we want better roads, well-paid teachers, and the resources we need to get all of our communities through the pandemic and its aftermath, we need more revenue. Initiative 271 is the most impactful way we can get Colorado on the right track.

By Chris Stiffler

As the state works hard to recover from the COVID-19 pandemic, it’s important we use the best economic strategies available to make sure our communities can come back strong. Unfortunately, much of the debate over how we do that has focused on trickle-down economics. If we make sure there’s plenty of money in the pockets of those with the most, we’ll all benefit down the line, or so advocates claim. In practice, however, it’s a different story.

We don’t have to look very far to see a perfect example of the failure of this philosophy. In 2019, after years of tax cuts designed to spur growth resulted in catastrophic budget cuts, Kansas  was named the most-improved state for doing business by CNBC, their headline proclaiming: “Kansas economy rebounds from tax-cutting disaster.”

Other states aside, there’s plenty of evidence from right here in Colorado that shows designing tax policy to favor the rich isn’t the right move for policymakers who want the state to recover as quickly as possible. We can see the relative economic effects of keeping or ending preferential tax treatment for high-income business owners when we look at how people with different income levels spend their money.

Economists use the circular-flow-of-money model as a metaphor to describe how money is earned and spent. In a well-functioning economy, people earn an income through work and then spend it, which in turn becomes income for someone else who then goes out and spends it and so on. More money flowing means a stronger economy. In this way, one dollar spent can turn into multiple, which economists call a “spending multiplier.” A dollar saved doesn’t have the same consumption-boosting effect as the same dollar spent in a local restaurant. The biggest “injection” into the circular-flow model is government expenditures because they are, for the most part, buying salaries of moderate-income workers.

To see the net impact of a dollar paid in taxes by a high-income earner compared to a dollar of budget cuts, we need to explore what happens to a dollar held by an upper-income household and compare it to what happens if it’s paid in taxes.

Plenty of recent research demonstrates that the amount of a family’s income they spend, also known as their Marginal-Propensity to Consume (MPS), differs across incomes. Johnson, Parker, and Souleles (2006) find that the consumption response to the 2001 tax rebates were larger for households with low income.[1] Carroll et al. (2017) show that low-wealth households consume a higher portion of their income than upper-income households.[2] These differences in MPS are important in order to examine the impact of government fiscal policy, as suggested by Krueger (2012).[3]  Fisher et al. (2019) show the rich spend a smaller share of their income than households in lower-income quintiles.[4] 

Table 1 above shows middle-income households spend a bigger portion of their earnings in the local economy than high-income households. The average household spends 88 percent of their after-tax income in their local economy and 12 percent on life insurance, retirement, and savings. Meanwhile, a household making more than $200,000 only spends 55 percent of its after-tax income on expenditures like food, transportation, and entertainment. The reason for this difference is simple: someone making a low or moderate income is still paying the same price as a rich person on expenses like groceries and car repairs, so a larger share of their income goes towards those types of purchases, with less left over for them to save.

$1.00 in taxes paid by a household earning more than $200,000 a year reduces spending in the economy by $0.55 (the other $0.45 is either saved or used on life and disability insurance). When that $1.00 is re-injected in the form of the salary of a snowplow driver, teacher, or other public employee, the local economy gets $0.76 worth of spending. 

How is that spending injection calculated? According to the State of Colorado Annual Compensation Report, 78.9 percent of a state employee’s compensation is base salary.[5] The remaining 21.1 percent goes to benefits (health and dental insurance) and retirement. Additionally, the state saves a bit, so we subtract an additional $0.03 to account for the state’s current general fund reserve. That leaves us with $0.76. This analysis suggests that re-injecting revenue from taxes on the wealthy into the economy as wages for public employees like teachers can increase aggregate consumption and boost economic growth. Conversely, it also suggests that preserving tax loopholes for the wealthy, and the corresponding budget cuts necessitated by that special tax treatment, is a net economic negative.

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[1] Johnson, David, Jonathan Parker, and Nicholas Souleles. 2006. “Household Expenditure and the Income Tax Rebates of 2001.” American Economic Review 96(5): 1589–1610

[2] Carroll, Christoper, Jiri Slacalek, Kiichi Tokuoka, and Matthew N. White. 2017. “The Distribution of Wealth and the Marginal Propensity to Consume.” Quantitative Economics 8(3): 977–1020.

[3] Krueger, Alan B. 2012. “The Rise and Consequences of Inequality in the United States.” Council of Economic Advisers Address, January 12, 2012.

[4] Jonathan D. Fisher & David Johnson & Timothy Smeeding & Jeffrey P. Thompson, 2019. “Estimating the marginal propensity to consume using the distributions of income, consumption and wealth,” Working Papers 19-4, Federal Reserve Bank of Boston, revised 01 Feb 2019.

[5] Available at https://www.colorado.gov/pacific/sites/default/files/FY%202019-20%20Annual%20Compensation%20Report%20%26%20Director%27s%20Recommendation%20Letter.pdf

By Chris Stiffler and Elliot Goldbaum

Note to readers: This special edition of our usual Forecast Five has been expanded due to the size and scope of the revenue reductions created by the COVID-19 pandemic.

1. Lawmakers will start work on the budget with 25 percent less than they had last year

Hundreds of thousands of workers have been laid off by their employers in the last two months, many businesses remain closed, projects and deals have been delayed, and with all of that comes a drastic reduction in state tax revenue. Revenue that provides services and pays wages in communities across the state.

To put this revenue decline into perspective, $3.3 billion is roughly one-fourth of the entire state General Fund. The General Fund is where most of the funding for state support of K-12 education, Medicaid, and colleges and universities comes from.

As hard as that number is to fathom, it’s still understating the real size of the problem. Even during the best economic times, growth in population and the cost of government services mean even level funding is effectively a cut. During this current crisis, the need for services will be much higher than it would have been if COVID-19 never existed.

2. Reduced income tax collection is driving the decline in revenue

Since income taxes are 61 percent of the General Fund, any time the state isn’t collecting as much of them it means we have less to invest in education, health care, transportation, and other priorities. Even before the current crisis, those collections haven’t been enough to adequately fund our investments.

Compounding this problem is Colorado’s constitutionally mandated single income tax rate of 4.63 percent, which hasn’t changed since the year 2000. During the last two decades, income gains for those at the very top have grown substantially, but that hasn’t translated into similar gains for education or transportation. Overall, the wealthiest Coloradans pay the lowest share of their income in state and local taxes.

3. The CARES Act helped, but contained unfair tax provisions

The CARES Act, the most important of several federal relief laws passed since March, is providing some relief to Coloradans through increased unemployment benefits, one-time cash payments, and loans to some small business owners.

However, other less-noticed provisions from that legislation are worsening the state budget picture. Legislative analysts are now predicting those changes, which overwhelmingly benefited the wealthiest people, will mean over $255 million less in revenue the state will have to make up for elsewhere in order to balance the budget.

For more on this, be sure to read this blog on those provisions by Carol Hedges from April.

4. The Gallagher Amendment continues to negatively affect the state budget

Revenue reductions will be worse in the future as Constitutional provisions mean less property tax revenue to support all kinds of local public services. State officials predict the residential assessment rate used to determine the amount of property tax owed by homeowners will fall to 5.88 percent from its current 7.15 percent level. This won’t be felt until the 2022 tax year and will result in $500 million less for schools. (Note: some of this is in dollars from local mill levy overrides and some will have to be backfilled by General Fund dollars)

This means even more pressure on emergency fire and medical services which rely on property taxes, many of which were already facing budget challenges created by Gallagher and TABOR. Local fire protection and other districts will have difficult decisions to make about how to cut services and balance their budgets. 

5. Bottom line: Colorado needs more revenue

Cutting $3.3 billion from the state budget will be devastating. Because Colorado was already barely keeping up with the demand for all the services our tax dollars pay for before the crisis, there isn’t much lawmakers can cut that won’t make life harder for many.

One way lawmakers can act is by passing a temporary emergency tax, which is authorized under TABOR to deal with the effects of a public health emergency like the one we’re in currently. Carol Hedges wrote about the emergency tax in a blog post last month.

They can also look to tax loopholes that overwhelmingly benefit those with the highest incomes as a way to protect some services. However, there is not nearly enough wiggle room in the tax code to make up for the entire $3.3 billion needed to fill in the gap in the budget created by the pandemic.

Finally, Congress can provide aid to the state beyond the emergency funds they already authorized. New funds specifically designed to help state budgets, rather than just deal with the immediate need of fighting the virus, would go a long way towards reducing the impending budget cuts.

6. It won’t just be the General Fund that gets hit hard

Revenue the state raises when we buy things like gasoline, along with severance taxes paid on the extraction of natural resources, don’t flow to the General Fund. Instead, they go to Cash Funds, which are only authorized to pay for specific purposes. Collections for those funds are projected to fall by an additional $250 million.

Because of decreased demand (analysts said demand for fuel plummeted by more than one-third during the stay-at-home order) gasoline taxes are expected to drop substantially. 

There has also been a substantial reduction in supply due to the steep drop in oil prices because of global market shifts and the pandemic. Severance taxes, an already volatile part of Colorado’s tax code, closely track the price of oil, and analysts predict as much as a 90 percent drop compared to last year. Those taxes, almost all of which are paid on the production of oil and natural gas, help fund many important functions of state government including the Department of Natural Resources and the Department of Local Affairs.

7. The broader economy is headed for a “swoop-shaped” recession

Though there is significant disagreement among economists about how bad the coming recession will be, state legislative analysts predict a 5.6 percent contraction in 2020. That number is double the size of the Great Recession and, while there is some immediate anticipated recovery, it will be years before the state economy fully recovers.

And despite problems with the CARES Act, it provided a boost to the state’s sputtering GDP. The declines in GDP growth would have been worse without the federal stimulus payments and other provisions like expanded unemployment. The national economy would be $1.8 trillion smaller without the federal investments made in the CARES Act.

8. Some industries and geographic regions have been more affected than others

While everyone has been affected by COVID-19, unemployment is not being spread out equally among workers and communities. Workers in the hospitality, food service, and recreation industries are the most likely to have been laid off. To read more about the analysis of job losses to date, check out Jeremy Albright’s blog from March.

Mountain communities have twice the unemployment claims as those on the Front Range, with average claims at 11.5 percent along the Front Range compared to 21.6 percent in the mountains. One reason for this difference: spending from tourists is down 80 percent from the same time last year.

It’s also important to note the revenue forecast only looks at state government, and doesn’t address the drastic decline in city and county government revenue as local sales tax collections have plummeted.

9. Budget reserves won’t make much of a dent

Because of TABOR, Colorado lacks a true “rainy day” fund like the ones most states have. Instead of banking revenue over a certain amount, the state constitution requires that money be refunded. While lawmakers have set aside enough every year to build a 7.25 percent budget reserve, it won’t be nearly enough to balance the budget.

10. Uncertainty in the forecast

The biggest question mark for the state budget is the same one that’s on all of our minds: how long will the COVID-19 pandemic last? No matter how the pandemic plays out, it’s clear we’ll be feeling its economic effects for a long time.

Another source of uncertainty is the lack of hard data. The last month of actual collections calculated by the state is for March. Everything else, including April, is being modeled. The governor’s decision to follow the lead of the IRS and delay tax payments until July also makes the future murky. Because businesses have deferred tax payments, they don’t know how much less they’ll be paying.

The next revenue forecast is scheduled for June, and economists were quick to point out that we will have only a slightly clearer picture of the revenue situation, if not the pandemic. 

By Carol Hedges

On Monday, the Joint Budget Committee (JBC) staff released recommendations for balancing Colorado’s first state budget since the onset of COVID-19 (FY2020-21). Those recommendations are terrifying. Every department document outlines the kinds of cuts necessary to balance a budget that anticipates a 10 to 20 percent reduction in revenue. The approved FY2019-20 budget outlined spending $12.2 billion collected from the variety of state taxes. A 20 percent reduction from last year would mean $2.4 billion less in revenue and even more in cuts now that the COVID-19 pandemic has increased demand for a variety of publicly provided services.

The severity of the budget slashing needed to balance the FY’21 budget, should revenue impacts of the health emergency equal a 20 percent reduction, is startling:

• Stripping health insurance from 76,000 kids in the middle of a health crisis.
• Repurposing funding that is currently propping open the doors of rural hospitals.
• Increasing health insurance premium costs for Coloradans across the state.
• Forcing decisions about closing higher education institutions in rural Colorado.
• Slashing 25 percent of funds for medical services for Coloradans with intellectual disabilities.
• Increasing waiting times for services for Coloradans with physical disabilities.
• Pulling back on funding for affordable housing.
• Forcing all school districts to increase class size, shorten school weeks or both.

And it’s not like the legislature will get to pick and choose. All these proposals may be necessary in order to bring the budget into balance. Nothing state government provides seems exempt from cuts. 

And what will all these cuts mean? Less services and fewer jobs. The state employs thousands of workers in every community in Colorado. Jobs performed by public employees provide vital community services like teaching our kids, maintaining buildings on state university campuses, providing medical care in health centers, plowing snowy highways, and cleaning and maintaining our state parks. And workers then spend their salaries at local businesses, buying food, cars, furniture, and other products and services that employ even more people. Budget cuts mean job cuts, and with hundreds of thousands of jobs already lost in Colorado, our communities can’t afford to lose either the wages or the public services brought on by these massive budget cuts, let alone both.

It’s common knowledge that I’m no fan of TABOR, the country’s most restrictive tax and budgeting limit. But even TABOR recognizes that during emergencies there can be a need for additional community investments. It actually outlines the specific conditions under which the legislature can authorize emergency, temporary taxes. Because TABOR is so strict, the conditions when an emergency tax is a possible option for legislators are extremely limited. It requires a two-thirds vote of both chambers of the legislature, full depletion of emergency reserves, and whatever revenue is raised can only be used for emergency costs. These conditions are daunting but not nearly as daunting as the prospect of extending the pain of COVID-19 beyond what is absolutely necessary.

The emergency tax could be crafted to help provide relief for low- and middle-income families while generating more dollars to support the public services that build and maintain our communities. An emergency tax that lowers the income tax rate on the first $250,000 in income and then increases the rate incrementally on income above $250,000 would mean we could all share the costs of this pandemic more equitably than we are now sharing the costs for providing our public services. Under our current rules, those making the most pay the smallest percentage of their income to support the government-provided services that will be on the chopping block without additional revenue. By analyzing data from past recessions, we’ve also learned that those with the most income and assets are the first to regain lost income and wealth in recovery. An option that provides economic relief, new revenue, and a more equitable tax system for the future deserves serious consideration.

What do Gunnison and Alamosa become without Western Colorado University and Adams State University? What does Sterling look like without a hospital? What do early childhood classrooms in Commerce City look like without state funding for preschool? These are the imponderable questions raised by the possible cuts outlined in the JBC staff recommendations. That speculation doesn’t have turn into reality, and for a state with as many resources as Colorado, it shouldn’t need to.

While the federal government has authorized badly needed assistance, it will not only be insufficient to shield our state from the long-term effects of the pandemic, it’s not the Colorado way to leave our fate to Washington. Colorado elected officials can act now to ask Coloradans with the means to do so to do the right thing, to step up when it’s needed, and pay a little more to make sure all of our communities can get through this together.

By Jeremy Albright

Since mid-March, efforts to contain the spread of COVID-19 and avoid overloading our health care system have created historic job losses. By breaking down the data, it’s apparent just how deep the economic consequences of the pandemic are.

Every month, the Bureau of Labor Statistics at the US Department of Labor releases data on employment, unemployment, and the labor force for each state. Employment refers to the total number of workers who are currently employed, while unemployment is the number of workers who are out of work and looking for a new job. The labor force is the sum of those two numbers — everyone who is either working or looking for work. These measures are always important for measuring the health of Colorado’s economy, but they are especially critical now.

COVID-19 has caused significant unemployment. Colorado’s current unemployment rate (the number of unemployed workers as a percentage of the total labor force) shot up to 4.5 percent in March from 2.5 percent in February. By comparison, the last time Colorado’s unemployment rate was 4.5 percent or higher was September of 2014. Such a large increase in the unemployment rate in such a short span of time is shocking, but it doesn’t even capture the full picture.

In addition to rising unemployment, the labor force is shrinking due to the lack of available jobs. While total employment in Colorado fell by 108,000 in March, only 62,300 of the people who lost their jobs are considered unemployed. For another 45,700 workers, not only are their jobs gone, they’re not actively seeking out a new one and therefore aren’t considered unemployed under the technical definition. Figure 1 below shows how the numbers break down:

Similarly, we can learn more about the present employment situation by comparing today’s numbers to points in the past. Since the Great Recession, Colorado had been among the leading states for job growth, adding nearly 618,000 jobs between February of 2010 and February of 2020. The change in the number of jobs over the last month starkly contrasts with the accelerated job growth of the last decade. In March 2020, Colorado now has about as many jobs as it did in March 2018. COVID-19 has erased nearly all of the job growth of the past two years.

It remains to be seen just how much COVID-19 will damage Colorado’s economy in the weeks ahead, but the sacrifices businesses and employees are making are already evident. Next month’s state employment and unemployment report will give us a clearer picture of just how many of the last decade’s job gains have been wiped out by the pandemic.

By Carol Hedges

Ever since the COVID-19 pandemic began, the deluge of data and reports on the health and economic consequences of the coronavirus has been overwhelming. This week, as virus-related deaths nationwide passed 30,000, we also learned that US debt is expected to exceed the size of the overall economy for the first time since World War II. Horrible as it’s all been, I thought I had grown accustomed to reshaping my perspective and my emotions on the magnitude of the crisis daily.

And yet, this week I read something that did more than just surprise me. It literally made me sick to my stomach. The CARES act, a bill that my organization evaluated and even lauded as desperately needed relief for millions, contains a provision that will provide some of the wealthiest people in the country with billions of dollars they would have otherwise paid in taxes.  

CFI missed this “easy-to-overlook provision” because we were squarely focused on the relief provisions for the workers and businesses who’ve lost their livelihoods as we try to “flatten the curve.” We spent our time combing documents, comparing notes with partner organizations, getting insight from small business groups, sharing in the pain felt by immigration advocates, and doing everything else necessary to understand what the federal response will mean for Coloradans. As we focused on our priorities, we neglected to scrutinize the bill’s other provisions more heavily, including those that benefit the country’s wealthiest and most powerful.

As Congress denied $1,200 direct cash payments to millions of immigrants who file their taxes using an Individual Tax Identification Number (ITIN) instead of a Social Security number, they carved out a generous deduction that applies only to those who earn over $500,000 in income. Rough calculations suggest that providing the $1,200 cash payment, along with a $500 per-child boost, to families who file using an ITIN would have cost just under $7 billion. The portion of the tax break to benefit those earning over $1 million, by my rough calculations, will cost about $75 billion.

This provision also has real costs closer to home. Since Colorado’s tax code links the amount of a filer’s income subject to state taxes to their federal taxable income, state revenue will be further drained. At a time when Colorado is already expected to be getting $3 billion less in revenue to pay for the public services we’ll need to recover from the pandemic, Colorado’s wealthiest will be able to deduct losses on their real estate investments from as far back as 2017. It’s incredible and infuriating. 

For years before COVID-19 even existed, our upside-down tax code let the highest-earning Coloradans avoid contributing their fair share of the costs of essential public services. Now, because of this tax break, we’ll have even less to face one of the greatest fiscal challenges in our history.

The crisis created by COVID-19 didn’t cause the weaknesses in our social fabric, but it is exposing them. This shameful piece of the stimulus bill demonstrates how difficult it will be for us to make sure the costs of this crisis are spread equitably rather than being borne disproportionately by low- and middle-income families.  

When Congress returns to work to consider another round of badly needed federal aid, I hope they will rethink these provisions. Failing that, I urge the members of the Colorado General Assembly and the governor to decouple Colorado from this section of the federal tax code and spare us from this unwanted and inequitable piece of tax policy.   

By Esther Turcios and Louise Vazquez

A Crisis Within A Crisis
Everyone in Colorado, in the United States, and across most parts of the world is feeling the effects of the coronavirus pandemic. Whether we’re dealing with illness, losing our jobs or income, or even an increase in everyday stress from staying at home to curb the spread of the virus, this pandemic has affected every Colorado family and community. That includes immigrants.

Those of us who have lost our livelihoods and worry for our health and well-being are now seeing our elected officials start to step in with aid. Congress and the president recently came to an agreement on a $2 trillion stimulus plan to get cash out to families, businesses, and state and local governments to mitigate the toll of the COVID-19 outbreak. Whether that aid comes from cash payments or unemployment insurance (UI), leniency on utility bills or evictions, or any other form, it all helps.

But imagine if you were excluded from receiving this aid, and had to deal with losing your home, struggling to feed yourself and your family, and trying to find a way to earn income to pay the bills without the help others are receiving. This is the reality for many undocumented immigrants. The reason: recent federal relief efforts left out those who use an Individual Tax Identification Number (ITIN). 

In the midst of this pandemic, we’ve seen a common refrain: we are all in this together. But that’s not the reality for so many of our friends and neighbors. So how do we live up to the goals and aspirations of truly being all in it together? First, we must agree and recognize that our immigration status doesn’t determine our humanity. Everyone should be able to meet our own needs and the needs of our families and weather the storm created by COVID-19. Being able to do so shouldn’t be a privilege afforded to most, it should be a basic right for all of us. Second, we need to recognize that with the fear of being detained by Immigration and Customs Enforcement (ICE), being subjected to discrimination and racism, and many other day-to-day worries continuing despite the outbreak, immigrants are in many ways dealing with a crisis within the COVID-19 crisis.

How Colorado Can Help
Immigrants are a part of our communities. They’re our family members, our neighbors, our colleagues and friends. Like everyone else in Colorado, immigrant should be able to receive aid without additional barriers. Colorado immigrants contribute greatly to our economy, they pay nearly $4.2 billion in local, state, and federal taxes and do many important jobs — many of which are currently deemed essential under stay-at-home orders in Colorado and across the country. And while the fiscal and economic contributions made by immigrants of all statuses are important, we should include them in relief efforts, not only because they work and pay taxes, but because it’s the right thing to do. By leaving immigrants out of federal and state responses (like Congress did when they passed the CARES Act), families are going without the relief they need to pay their bills, put food on the table, afford doctor visits and other costs associated with staying healthy, and make it through this crisis. Not only is this immoral, but as this public health crisis has made plainly clear, when we forget and neglect the well-being of some us it affects us all.

People of all races, citizenship statuses, and income levels must advocate for federal and state responses to include immigrants in relief efforts by: 

• Distributing cash funds to all residents regardless of status.
• Providing health care and UI benefits to individuals regardless of status.
• Prohibiting ICE from detaining people during the pandemic.
• Releasing people imprisoned in detainment centers.
• Asking community and philanthropic partners to prioritize immigrant communities by issuing statements to their grantees to provide spaces where they are not at risk of being detained.

Colorado has already taken some of the action necessary to provide support to our immigrant communities, including banning ICE arrests in courthouses. The Colorado Immigrant Rights Coalition (CIRC) has also provided unemployment, medical, and legal resources for immigrants and refugees in the state of Colorado. CIRC is also petitioning Governor Jared Polis to take action on providing needed assistance and protection for immigrants during the COVID-19 outbreak. You can sign and share the petition here. 

If you or someone you know requires help during the crisis, the Center For Health Progress has provided resource guides in English and Spanish with information on options for food, housing, health care, mental health, domestic violence, utilities, unemployment, and more, as well as general information about social distancing, the stay-at-home order, and COVID-19 itself. The Colorado Center on Law and Policy has also put together a list of resources for immigrant families.

A crisis like the COVID-19 epidemic brings to light how connected we are and how much we need each other. Let’s include everyone in conversations and policy regarding prosperity, economic well-being, and safety because immigration status should not determine whether any Coloradan is treated with humanity.

By Jeremy Albright, research manager

On March 5, the first reported case of COVID-19 was reported in Colorado. By that time, the disease had already wreaked havoc on economies and health systems in China, Iran, and Italy. Less than a week later, Governor Jared Polis declared an official state of emergency and began announcing a series of sweeping public health policies designed to curb the spread of the virus. In addition to limiting public gatherings to 10 people or fewer, Polis ordered everything from the state’s ski industry to public dining in bars and restaurants to close. By March 25, Polis had issued a statewide “stay at home” order which, among other restrictions, limited business operations to those deemed essential.  

While public health officials across the world call these steps necessary to save millions of lives, they come at a massive cost to the livelihoods of workers and business owners. And though the true effects of this situation will not be known for some time, recently released data leads economists to believe the US is already in a recession, and the continuation of the outbreak is expected to have unprecedented economic consequences. As we wait for the full picture of the COVID-19 containment efforts and the breadth of the subsequent recession to become clearer, the data from past recessions can serve as a benchmark for comparisons to the one that lies ahead.

During a typical recession, economic growth slows because consumers take home less in their paychecks (or receive only a partial wage replacement through unemployment insurance) and subsequently spend less money on goods and services. In turn, businesses require less labor to produce products or provide services, and often lay workers off to cut costs associated with decreases in demand.

While economy-wide recessions can result in all businesses receiving less revenue, and workers losing their jobs as a result, some industries are more prone to changes in employment than others. Industries like construction, luxury goods, leisure services, and hospitality often experience the largest drop in sales. For example, US industries as a whole experienced a 5.7 percent drop in employment during the Great Recession, but employment in the construction sector decreased by 21.4 percent — a substantially sharper decline than any other industry. Likewise, trade and transportation experienced a 7.1 percent decrease in employment. In Colorado, workers in the sales and personal care and service industries were much more likely to lose their jobs than the average worker in those industries.

Past data show the scale of a recession may vary, and which workers and industries are most affected depend on the economic climate and the root of reduced economic behavior. The chart below shows how three key sectors of Colorado employment faired during and after the Great Recession and subsequent recovery:

In the immediate wake of the COVID-19 outbreak, workers in Colorado and across the country have filed a staggering number of unemployment claims as virus-related layoffs and business closures mount. On March 20, the number of new unemployment claims was estimated to hit more than 2 million nationwide by March 26. In fact, that estimate proved to be roughly more than 1 million claims too low, according to new numbers from the US Department of Labor. In Colorado, nearly 61,000 workers filed new unemployment claims from March 21-26, nearly five times the increase from March 23-25, following a boost in capacity by the Colorado Department of Labor and Employment to process claims after the system was overloaded in the initial wave of layoffs. Workers in the leisure, hospitality, retail, and food service industries represent the vast majority of that first wave of jobs lost due to efforts to curb the spread of the virus. After the broader stay-at-home directive from Gov. Polis, it’s possible the next wave of claims will come from a broader group of workers.

Given the unprecedented surge in unemployment claims, many predict the effect of the outbreak-induced recession on Colorado’s leisure, hospitality, and retail sectors will be larger than effects of the 2008 recession. The Economic Policy Institute (EPI) estimates 26.5 percent of Colorado workers are employed in these industries, slightly higher than the nationwide average of 25 percent.

Our analysis of labor data comparing 2008 to 2018 estimates food service workers will likely make up a significant number of jobs lost. Jobs in that industry make up a sizable share of the economy, totaling over 9% of all employment in the Denver-Aurora-Lakewood metropolitan statistical area in 2018. Of these food service workers, waitstaff and bartenders — the vast majority of whom are currently unable to work — represent more than 35 percent of food service workers in the area.

Because workers in the leisure, hospitality, and food service industries are often most likely to lose their jobs during any recession, and because those jobs were already among the fastest-growing occupations in Colorado, job losses will almost certainly be unlike any in modern history. Overall, EPI estimates Colorado will lose around 261,000 jobs statewide, or an 11.2 percent drop in total employment.

Whether the coming recession is v-shaped or u-shaped (i.e. a sharp economic contraction followed by an equally sharp uptick in growth, or a sharp contraction followed by a more prolonged recovery) is dependent on a number of factors, some of which we have more control over than others. It will be difficult to control the extent to which we are able to contain the spread of the virus through social distancing measures that require millions of people to adhere to drastic changes in our way of life. However, changes to laws and policies at the federal, state, and local level are well within our control and offer solutions that could help ensure a quicker recovery — though achieving them may be more difficult for political and other reasons.

As of late March, little is certain about the COVID-19 outbreak and the recession it is still spawning. One thing, however, is clear: there is a massive, ongoing disruption in our way of life. Large swaths of workers are losing their jobs, either due to efforts to curb the spread of the coronavirus or extreme reductions in demand related to those efforts, and the economy is reeling.

All signs point to us still being in the early stages of an unfolding event, so in addition to lacking a full picture of the overall economic impact, we also lack critical information about how the impact of this disruption will be distributed across Coloradans of different races and income levels. Historical data show that pandemics tend to disproportionately affect those who work jobs that pay low wages, older people, and those who lack health insurance. Because of systemic bias, people of color tend to be overrepresented in the categories of those most affected. We must use data and common sense to craft recovery policies that help those most affected and most in need. 

With the crisis deepening seemingly by the hour, it will be critical for Congress, state lawmakers, and other policymakers to make sure the costs of recovering are spread in a fair and just way. If we meet this challenge with the same unprecedented speed and tenacity shown by the virus, Colorado and the country can emerge with a more sustainable and more equitable economy.