The Colorado Department of Labor and Employment (CDLE)’s new report tracking economic data disputes common claims made by opponents of minimum wage increases that they lead to economic stagnation and growth in unemployment. In the three years following an implementation of its own, higher minimum wage, Denver outpaced the rest of the state in jobs, wage growth, and sales tax revenues, indicating that local minimum wages can be a useful policy tool for localities to advance shared economic prosperity. 

For 20 years, Colorado had a law on the books that prevented cities in the state from enacting minimum wages above the state’s level.  In 2019, House Bill 19-1210 gave local governments in Colorado back the authority to establish a local minimum wage above the state’s minimum wage. As part of that 2019 bill, the Colorado Department of Labor and Employment (CDLE) is required to write a report regarding local minimum wage laws in Colorado, including economic data on jobs, earnings, and sales tax revenue in the locality with a higher minimum wage compared to neighboring jurisdictions, which don’t.  

Since 2019, two local governments have enacted a local minimum wage above the state minimum: the City and County of Denver (in 2019) and Edgewater (in 2023).   

In May of this year, the Edgewater City Council approved Ordinance 2023-07, which raised the minimum wage to $15.02 for workers in 2024 and is set to ramp up as it nears Denver’s minimum wage in the out years. When Denver’s minimum wage was raised, the initial CDLE report had to rely on limited data that was also impacted by the pandemic.   

Now that Edgewater recently passed a minimum wage ordinance, CDLE was mandated to update that report. This updated version will provide a first look at Denver’s minimum wage impact, since it includes more years of data than the initial report, and will be a useful guide for other jurisdictions looking to establish their own local minimum wage.  

Denver’s minimum wage schedule went from $12.85 in 2020, to $14.77 in 2021, to $15.87 in 2022, and to $17.29 in 2023 (compared to the state minimum wage of $13.65).

Denver raising its minimum wage creates a natural experiment to compare other parts of Colorado that have kept the state’s minimum wage. CDLE’s analysis takes neighboring cities and comparable localities as the baseline, and then compares what happened to unemployment rates, weekly earnings, and sales tax collections between Denver and the rest of the state. 

Opponents of local minimum wage policies claim that such laws cause businesses to cut jobs, cut hours, and pass the higher costs to consumers in higher prices, which can result in fewer purchases. If those claims are true, we’d likely see a drop in jobs, a drop in hourly earnings, and a drop in sales tax revenue collections in Denver, which increased its minimum wage, compared to other jurisdictions, which haven’t.   

So, what happened? It turns out that Denver did better all in 3 categories compared to the rest of the state. Unemployment was lower, weekly earnings increased, and sales tax collections all outpaced the rest of Colorado. The opposite of what opponents of minimum wage said would happen, happened. 

With a higher minimum wage, Denver’s unemployment rate was better than the rest of the state. 

Denver’s unemployment was 5.45% in 2021 compared to 5.9% in the rest of Colorado. As the report states, “Overall, in both 2021 and 2022, as Denver’s minimum wage rose significantly, its unemployment rate dropped more than any comparator jurisdiction’s.” 

With a higher minimum wage, Denver’s average weekly wage growth outpaced the rest of Colorado.  

In 2020, 2021, and 2022, weekly wages in comparable jurisdictions across Colorado remained stagnant or fell, but in Denver weekly wages grew faster than the rest of the state: by $52.00 in 2020, by $49.67 in 2021, and by $24.67 in 2022. As CDLE notes, “Each of the first three years since its local minimum wage took effect (2020-2022), Denver maintained strong wage growth, and stronger wage growth than Colorado and comparator jurisdictions.” 

With a higher minimum wage, Denver’s sales tax collections grew more than the rest of the state and comparable jurisdictions.  

Between 2020 to 2022, Denver’s per capita sales tax revenues at restaurants and bars increased by 85%, which was double the sales tax increase in Colorado and comparable cities. The CDLE report explains, “These data show that per capita spending at Denver restaurants and bars has outpaced per capita spending at these establishments statewide throughout 2021 and 2022. Denver not only recovered from a greater reduction in spending in 2020 due to the impact of COVID-19, but experienced more spending—and more growth in spending—at restaurants and bars than comparable cities and counties and the state as a whole.” 

If we adjusted for cost of living across counties, what should the minimum wage be? 

The report also highlights the cost of living across counties in Colorado compared to the area’s minimum wage. The counties around Denver, and Colorado’s ski towns, are all in need of adjusting their minimum wage laws to keep up with their cost of living. For example, in 2021, the adjusted cost of living in Pitkin County (Aspen) would require a minimum wage of $16.04, almost four dollars higher than the statewide minimum wage of $12.32.  The map below shows the counties whose minimum wage is below the equivalent minimum wage once adjusted for cost of living.

Counties with high costs of living, including Denver metro counties and outdoor recreation destination counties, can use CDLE’s updated report as evidence to show that increasing local minimum wages does not have disastrous economic consequences; in fact, it has the opposite effect. Boosting income for the lowest-earning people can have rebounding effects for productivity, spending, and tax revenue, making those counties more equitable and prosperous places to live.  

 

By: Caroline Nutter and Ealasha Vaughner 

How the EITC and CTC support Colorado Parents

As we celebrate Parents’ Day this weekend, Colorado should reflect on how our policies can help or hurt families. This includes our tax code, where we have abundant opportunities to make parents’ lives even better.

Colorado parents are struggling. The COVID-19 pandemic highlighted this as an inescapable truth. Despite federal and state relief efforts, caregivers were laid off and household bills piled up. Families rationed necessities like diapers and formula in order to keep a roof over their heads. The percentage of parents lacking secure employment leapt from 26% to 29% nationally from 2019 to 2021. Parents who were fortunate enough to retain their jobs had to balance a full work-day with full-time childcare and virtual school duties. Between 2019 and 2021, the number of children in poverty increased by over 5,000, or almost 4%.

In 2023, three years after the pandemic began, working families are still trying to catch up in an economy that has not been built for them. The average cost of childcare in Colorado is $16,333, the fifth-highest in the nation. Infant care in Colorado costs more than in-state tuition in 34 states. Nationally, 13% of families had job changes between 2020 and 2021 due to childcare costs. Childcare expenses are especially burdensome to mothers, and mothers of color often feel the struggle most. Sixteen percent of families with single mothers had job changes due to childcare costs. 

Over the last 20 years, CFI, Clayton Early Learning Community Ambassadors, and countless other partners and organizations, advocated for changes in the tax code to provide targeted relief to parents and their kids through low-income tax credits. 

Two in particular, the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC), are critical safety net policies for parents. In 2018, the EITC lifted about 5.6 million people out of poverty, including about 3 million kids. In 2021, the Biden administration expanded the CTC to the lowest earners and expanded the credit amount under the American Rescue Plan Act (ARPA), cutting child poverty by 30%.

Colorado has its own EITC and CTC, both of which are modeled on the federal credits. During the 2023 tax season, families with children under the age of six who met the income requirements received a state-level CTC from Colorado for the first time, thanks to work done in the legislature in 2021. This year, the legislature passed a bill that will further expand the Colorado CTC, as well as increase the amount of the Colorado EITC. Families who qualify will see an increase in the EITC from 25% to 38% of the federal credit when they file their 2024 taxes, and the CTC to between $200 and $1,200 per child, depending on the income of the taxpayer. The changes made to the Colorado CTC in 2023 will also include or increase the benefit for 65,000 kids across the state that had previously been excluded, putting an additional $45 million into the hands of families earning the lowest incomes.

A Testament to the Impact of Tax Credits

EITC and CTC are crucial for strengthening families and community members in Colorado. These benefits not only encourage people to work but also boost their self-confidence, thereby leading to an increase in the economy. Additionally, they promote workforce participation and encourage low-wage workers to get additional education or training to improve their employability and earning potential.

As a single mother of two, I understand the challenges of keeping up with a monthly budget. Unfortunately, things do not always go as planned. Unforeseen circumstances tend to arise, such as my kids outgrowing their clothes and shoes, or unexpected car repairs. These are the obstacles working families face daily. That is why receiving tax credits like the EITC or CTC is a huge help for parents and families like mine. They can help us stay afloat, avoid debt, and even help reduce debt we already have.

The EITC and CTC effectively lower poverty rates, while aiding families who experience the Cliff Effect. The Cliff Effect refers to the unintended consequence of a pay raise resulting in a significant reduction of government assistance. Even a minor increase in income can cause some to lose access to subsidized benefits such as healthcare, housing, or childcare. This sudden loss can leave families worse off than they were before. These tax credits provide a lifeline for families like mine who are currently experiencing the Cliff Effect, or simply struggling to make ends meet. They enable us to purchase necessities, such as food and housing.

Studies have shown that utilizing certain tax credits can not only enhance a child’s immediate state of well-being, but also result in positive long-term effects, such as improved health and increased earnings during adulthood. As someone who has personally benefited from this, I can attest to its effectiveness. With my EITC and CTC, I was able to enroll my two daughters in extracurricular activities, thereby boosting their self-assurance, social skills, and knowledge in areas they might have otherwise missed due to financial barriers.

Getting an extra few hundred dollars from my EITC and CTC makes a significant difference for my family. These credits are essential for families to make ends meet. They improve economic security, enhance children’s educational performance and attainment, and promote better health outcomes. Moreover, they provide a short-term safety net to help families achieve sustainability.

The tax code can be a powerful tool for lifting struggling parents and their children out of poverty. Data and stories from parents continue to show the tremendous impact the EITC and CTC have on Colorado families. With the recent expansions of these credits during the 2023 legislative session, Colorado now has one of the most generous CTCs in the country, a true testament of the power of collective advocacy on proven tax policies. Colorado must continue to pass tax policies that uplift working families and our economy, ensure protection of these recent gains, and work to expand the EITC and CTC even further.

 

About the Authors:

Caroline Nutter is the Legislative Coordinator at the Colorado Fiscal Institute. Caroline researches and analyses state fiscal policy issues and advocates for policies that bring equity and prosperity to all Coloradans.

 

Ealasha Vaughner is the Manager of Policy and Advocacy at Clayton Early Learning. A Colorado mother of 2, Ealasha is a recipient and longtime advocate of targeted tax credits like the EITC and CTC. 

 

Via Tenor

#1: No New Money Projected for the Out-Year Budget

The out-year’s budget (FY2024-25, which starts July 2024) is projected to have an extra $1 billion within our revenue limit — but that’s before accounting for caseload growth, inflation, and other scheduled payments on the books.

Keeping up with inflation (i.e. more students and Medicaid enrollees) requires $372 million to stay even in real terms. Add reserve requirements, controlled maintenance, and inflation adjustments for state employee compensation, and that “extra” $1 billion is used up. In fact, after staying even in real terms, the state is projected to be $78 million short of its 15 percent reserve requirement, despite sending back almost $3.3 billion in TABOR rebates.

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#2: Inflation Slowing, but Still Elevated

After a very high 8.5 percent inflation rate last year, prices aren’t rising as fast this year. Colorado is looking at a 5 percent inflation rate through May 2023. Home prices and energy prices have dropped recently, contributing to the decreasing rates. For example, Denver’s home prices are down 6.1 percent from the peak last year. Still, 5 percent inflation is above where it has been in the last 15 years.

The slowing inflation rate is good news for the economic growth forecasts, as the Federal Reserve is expected to pause interest rate hikes. Wages are starting to catch up with inflation, too. After two years of aggregate wages being outpaced by inflation, it seems we may finally see positive real wage growth in 2023.

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#3: Corporate Income Taxes are Way Up

Corporate income taxes are up 145 percent between 2023 and 2019 — that’s double and a half above the pre-pandemic levels. Corporations seeing record profits means more tax collections for Colorado, but it doesn’t necessarily mean more revenue for schools and roads. Why? The extra $1.3 billion that corporations paid between the pre-pandemic levels and now just means more TABOR revenue will be sent back to taxpayers since we are over our revenue cap. Even with record corporate profits, we still won’t be able to pay down what the state owes to schools (Budget Stabilization Factor) while only budgeting to the current TABOR revenue cap.

Via Tenor

#4: TABOR Rebates Revised Upward For This Year

The state is projected to return $3.3 billion in TABOR revenue this year and $2 billion next year. Compared to the March forecast, TABOR revenue expectations were increased by $560 million in FY22-23. These are historically large TABOR rebate amounts. Before last year, when Colorado returned $3.7 billion, the largest TABOR rebate was less than $1 billion.

There are currently 3 rebate mechanisms in law that are used to refund surplus dollars above the revenue cap. About $3 billion will be returned via the six-tier sales tax rebate mechanism and $394 million will be used to fund the Senior Homestead Property Tax Exemption, along with some other property tax breaks from Senate Bill 22-238. The $3 billion returned via the six-tier mechanism means between $587 and $1,854 will be returned per tax filer depending on their income. The current way the six-tier mechanism is set up gives higher rebates to those with higher income. High-income taxpayers making over $279,000 annually could get as much as $3,000 more than the lowest-earning Coloradans, depending on filing status, at a time when many families are still struggling.

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#5: What does this mean for Prop HH, which voters decide on this November?

This year, Colorado voters will decide on Proposition HH, which gives property tax cuts by lowering assessment rates, backfills some local governments for the lost revenue of those property tax cuts, and allows the state to keep more TABOR revenue by growing the revenue cap by an extra 1 percent each year for 10 years.

A yes vote on HH would also change the six-tier rebate mechanism to an identical rebate for all tax filers for one year only. Instead of between $587 and $1,854 for tax filers depending on their income, this would give everyone $809. The effect of allowing the revenue cap to grew by an extra 1 percent is more pronounced several years from now, but it would mean an extra $166 million above the current cap this year.

Stay tuned for further Prop HH details from CFI this summer!

Via Giphy

The Rent is Too Damn High

On average across the state, a person must work 92 hours a week at minimum wage to afford a two bedroom apartment at the statewide average Fair Market Rent, which is about $1,500. For comparison, spending around $800 on rent is considered affordable for a Coloradan who earns 30% AMI––that’s almost half of the Fair Market Rent rate. Across Colorado, people on fixed incomes, working people, and their families struggle to afford to remain housed. Essential service workers, teachers, and nurses often cannot afford to live close to where they work. A single mother earning an average teacher’s salary in Colorado cannot afford to house and support her family without a second job.

The hourly wage needed to afford a two-bedroom apartment at Fair Market Rent and work a 40 hour week is $28.94, but the average hourly renter wage in Colorado is $23.55. A $1,225/month rent is considered affordable for someone earning around the state’s average renter wage of $23.55/hour, compared to the average Fair Market rent of $1,505/month for a two bedroom apartment. Affordability is defined as spending no more than 30% of a household’s income on housing costs. Colorado ranks eighth in the nation for most unaffordable housing costs, according to research from the National Low Income Housing Coalition.

Across Colorado Counties, the Cost of Housing Outpaces Wages

The affordable housing shortage is more severe for Coloradans with low incomes: for every 100 renter households, there are only 29 housing units available and affordable for Coloradans with extremely low incomes (at or below 30% local AMI). There is a shortage of over 114,000 affordable housing units for Coloradans within this income range and a deficit of more than 142,000 units for those with very low incomes (between 31-50% AMI), compared with a shortage of 27,000 for those with low incomes (between 51-80%). To restore the healthy balance between supply and demand in the housing market, Colorado’s State Demographer estimates that over 485,000 additional units must be added to the market by 2030.

Over 1 out of 3 Coloradans are renters, and half of renters are cost-burdened, which means a household spends more than 30% of its income on housing costs. Nearly one in four Colorado renter households are severely cost-burdened, which means a household spends more than 50% of its income on housing costs. Compared to people with middle incomes, Coloradans with low, very low, and extremely low incomes are increasingly more likely to be cost-burdened or severely cost-burdened. 

When developing affordable housing policy, it’s important to target Coloradans with the lowest incomes who face the most severe shortage; simply adding to the housing supply is not enough.

Options in the Tax Policy Toolbelt to Address Housing Affordability

TABOR is a major hindrance to directly funding the expansion of affordable housing through the budget, which is why tax expenditure mechanisms are often used as a work-around for funding programs in Colorado, via credits, deductions, or exemptions. However, housing affordability policies should be targeted to support those who are struggling the most to make ends meet. Additionally, affordable housing policy should include a funding mechanism that raises revenue dedicated solely to investing in new and increasing housing needs.

Targeted Relief Through Tax Policy

Property Tax Circuit Breaker 

Residential property tax relief can take two forms: across-the-board tax cuts for taxpayers at all income levels and targeted tax breaks that are given only to particular groups based on income. One common type of targeted property tax relief program is known as a “circuit breaker.”  Like an electric circuit breaker, a tax circuit breaker protects taxpayers from an overload.  That is, when a taxpayer’s property tax exceeds a certain percentage of income, the circuit breaker reduces the property taxes in excess of that level.  Consider a simple property tax circuit breaker set at 4% of income. Mary makes $20,000 and owes $1,400 in property taxes. The circuit breaker allows her to pay 4% of her income ($20,000 X 4% = $800).  But she owes more than $800, so Mary would get $600 in property tax relief from the circuit breaker ($1,400 – $800 = $600).  

This allows property tax relief to be means-tested and targeted.  In other words, a homeowner paying $4,000 in property taxes that makes $250,000 a year wouldn’t trip the circuit breaker, but a homeowner paying $4,000 in property taxes that only makes $15,000 would. 

Expand Renters’ Circuit Breaker 

Thirty states in the U.S. currently have some kind of housing circuit breaker program in place, and over two-thirds of those states––including Colorado––extend their programs to at least some renters. Since at least a portion of property tax liability is passed on to tenants, it is important to extend the savings of property tax relief to include renters, but like any equitable affordable housing policy, a Renters’ Circuit Breaker should target tenants who are cost-burdened and need relief the most. 

Renters’ Circuit Breaker programs (sometimes called a “Renters’ Credit” or a “Renters’ Property Tax Refund”)––are implemented in a variety of ways in different states. In Colorado, there is a limited Renters’ Circuit Breaker available in the form of a rent rebate for older Coloradans with low incomes and people with disabilities, and the rebate is refundable up to a maximum of $1,000 per filer. Minnesota is one example of a state that has a more expansive Renters’ Property Tax Refund; to receive this rebate, a tenant must have lived within the state for over 183 days, paid rent for housing that has property tax liability, received income under a certain threshold, and cannot be claimed as a dependent. In Minnesota, the refund amount that tenants may receive increases based on the number of dependents in the household as well as if the tenant or their spouse is 65 or older, or disabled.

In Colorado, expanding the state’s rent rebate to include renters with low incomes regardless of age is one strategy for advancing targeted affordable housing policy.

Raising Revenue Dedicated to Sustainably Affordable Housing Investment

Attainable Housing Fee

2023-2024 #3 – Establishment of a New Attainable Housing Fee is an initiative that has been titled as a potential ballot measure for November 2023, if sufficient signatures are collected. This measure would establish a Community Attainable Housing Fee, which would be leveraged on real estate transactions at the rate of 0.1% of the value of the property.

Revenue from the proposed Community Attainable Housing Fee would be directly funneled into the Colorado Attainable Housing Fund, and would only be used for certain purposes related to affordable housing. Those purposes include the construction, maintenance, rehabilitation, or repair of attainable housing for both rental and ownership purposes; the provision of financial assistance for individuals, nonprofits, and localities to purchase, refinance, rehabilitate, or repair attainable housing; and any new or existing programs that the Colorado Division of Housing determines appropriate to expanding the availability of attainable housing.

Establishing a Community Attainable Housing Fee provides an opportunity for Colorado to make sustainable, equitable, and economically efficient investments in developing housing that is affordable for more people at various income levels, which supports those with low and fixed incomes as well as middle income workers like teachers, nurses, and firefighters. 

Repealing the Real Estate Transaction Tax Ban

In 2022, CFI published a report on a potential Real Estate Transfer Tax (RETT) in Colorado. A RETT is paid when the title of a property is transferred between owners, separate from property taxes and recording fees. These taxes are often based on the value of a property, with a base amount exempted, making them a means-tested policy. Thirty-seven states levy a RETT. Colorado does not because RETTs are banned under TABOR. Many states use their RETT revenue to fund affordable housing. Despite being banned, CFI analyzed how much revenue a real estate transfer tax could bring to the state.

In Colorado, a 0.5% real estate transaction tax that exempts the first $200,000 of value of a home could generate $375 million into the State Affordable Housing Fund.  (This would be $2,000 on a $600,000 home sale). This funding mechanism is sustainable, as opposed to the current State Affordable Housing Fund mechanism established under Proposition 123, which would not yield any dedicated housing revenue in years that Colorado revenue falls below the TABOR rebate cap. 

Implementing a real estate transfer tax is equitable and efficient because it allows the state to invest this revenue dollar-for-dollar into expanding the availability of affordable housing for people who fall into a diverse range of income levels. This funding mechanism could also generate revenue to fund means-tested economic relief for homeowners and renters with low incomes.

Repealing the RETT prohibition would require a vote of the people at the ballot, brought either through signature gathering or legislative referral. 

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These are fiscal strategies to address the housing crisis — but there are many other policy tools as well. In the 2023 legislative session, we were disappointed to see state lawmakers vote down bills that would have implemented stronger eviction protections and allowed local districts the option to implement rent stabilization. Moving forward, we hope to see more support amongst legislators for targeted strategies that expand the accessibility of affordable housing for those who are struggling to make ends meet the most. Furthermore, Colorado needs a sustainable source of revenue that is solely dedicated to investing in a broad range of resources that promote housing affordability, accessibility, and security.

 

Every year, the Colorado Fiscal Institute (CFI) takes a moment to look back at the 120 days of legislative work accomplished by our Colorado Legislature. For the 2023 legislative session, we put together the 2023 Colorado Legislative Session Report Card, an assessment of the legislature’s work on four key subject areas – fiscal policy, worker justice, housing, and environment. In particular, CFI evaluated these areas based on their effectiveness in passing policies that 1) centered the needs of workers and working families, 2) aligned with CFI’s tax principles, and 3) moved the needle forward on true fiscal reform.   

Hot topics this session, including the rising cost of housing, the possibility of a looming recession, and the whopping $2.47 billion expected to be returned to taxpayers, dominated the conversations within the Capitol halls. But even with big topics to address, CFI was hopeful that legislators would advance policies that uplifted working families and our economy.  

Midway through the session, it was clear that CFI’s legislative policies were going to face a tough battle. With popular big-monied business groups stealing the show and community and stakeholder voices being left out of important decision-making conversations, many CFI and partner bills were taking the back burner.                     

Ultimately, the legislative class of 2023 failed to meet expectations. There were individual legislative champions who stood out and centered Colorado families, stood up for workers, and fought for a fair tax code, but in the end, CFI had to give this legislature an incomplete for their work during the legislative session.

Read the full report: CFI’s 2023 Legislative Session Report Card

Ever been in a home built in the 1970’s where everything — the toilet, tile, sink and tub — are all bubble gum pink? In the same way, our social safety net programs here in Colorado should be updated for the economy of 2023.

Specifically, it’s time we modernize the design of our Unemployment Insurance (UI) system. The goal of the UI program, which is nearly 100 years old, was intended to provide enough wage replacement so that a worker could continue to pay for basic needs while they were unemployed and looking for another job. This both boosts the labor market and the local economy.  UI also prevents people from turning to public benefits, like welfare, when they lose their job.

For much of the program’s history, 50 percent of a worker’s wages was an adequate UI benefit. It could cover housing, food, and gas in order to bridge that worker over until the economy recovered and they found another job. Fifty percent of wages might have worked 50 years ago, but that’s not the case anymore. In the world of 2023, 50 percent isn’t enough to cover basic needs. Housing alone takes up more than half of many people’s budget today. In addition, when UI was created, the workforce looked a lot different.  The design of UI never contemplated covering childcare or healthcare costs. Back then, when a man lost his job and he had kids, UI assumed he likely had a wife at home to take care of them. 

Today, families with children have higher housing, food and healthcare expenses relative to their income. And working people today, particularly single parents, have childcare expenses.  None of these costs go down when a worker loses their job; in fact, they often go up when they lose access to employer-sponsored health insurance. To be effective for these workers, meaning sufficient to cover basic needs while unemployed, UI must be enough to help families retain housing and childcare while they look for new work. It currently does not meet that standard, and workers with kids are hit hardest.

Childcare issues are cited as the number one reason that women take longer to become re-employed, work part-time rather than full-time, and leave the workforce altogether. The loss of childcare can be devastating, forcing sole breadwinners to rely on other forms of public assistance, impacting their lifetime earnings and employment.  The average monthly cost of childcare  in Colorado would take up nearly all of the average UI benefit for someone who had previously been making Colorado median wage.

One of the first steps states have taken to address the inadequacy of the UI benefit  has been to implement a dependent allowance, an additional weekly benefit added to the regular UI payment for parents and caregivers.

This year, CFI and partners ran HB23-1078, which would have implemented a dependent allowance of $35 per child per week in Colorado, to help update our UI system to match our modern workforce. And the bill’s fiscal impact would have been small — 2 percent the size of the trust fund by the time it would have gone into effect in 2026 — in comparison to its impact. HB-1078 would have helped thousands of parents across our state while not changing the amount that employers pay into the system or what employers must do. 

Colorado has updated and modernized our UI program before. Specifically, we’ve modified the rules for specific kinds of workers and created different rules for how long someone can claim UI if the region’s unemployment rate is higher than the national average. In the past, we have even exempted job search requirements for people who leave their jobs and look to start a business, and exempted certain kinds of income when calculating a worker’s benefit. We have changed quit provisions for workers who leave their jobs due to the deployment of a military spouse, a spouse that is transferred, domestic violence, severe illness. So small tweaks aren’t unusual. 

HB23-1078 would have been another small fix with a big payoff. Though it failed this year, CFI and partners will continue to fight for this change until our UI system works better for all Colorado workers.

Fall is one of the best seasons to experience Colorado with the changing of the leaves, the warm days and nights to experience camping, hiking and enjoying local and national parks. In 2022, high ozone levels and pollution took away the joy of the fall season. State officials recommended that residents stay inside and avoid any activities or prolonged exposure to the atmosphere.

Colorado administrators took action to bring ozone levels down and began to curb the damage of our state’s pollution problem. The same administrators decided to encourage public transit to get cars off the road, and they launched the Zero Fare for Better Air Program, which made services from Colorado’s Regional Transportation District (RTD) and other transit services free in August. Colorado’s legislature took action and passed (Senate Bill 22-180), which grants the Department of Transportation to provide free transit during high ozone seasons through 2026. 

Resulting from the success of the program and the need to respond to high ozone levels in Colorado –  especially along major corridors like the Front Range – a new bill was introduced, House Bill 23-1101, to increase the flexibility of the ozone season grant program by updating the eligibility requirements of the program. It allows any eligible transit agency to designate an alternate period different from June 1 through August 31 for its “ozone season.” The bill also establishes that if a transit association or regional transportation district receives a grant less than the maximum amount allowed in a year, in the following year, it may receive the total amount plus the difference between the full amount and the amount received the prior year. 

Large areas of Colorado, from the northern Front Range to Denver, experience “ozone nonattainment,” which means that ozone pollution contaminating the air we breathe exceeds federal safety standards. In the summer of 2021, Colorado recorded some of the worst air quality in the world. In Colorado, the transportation sector is the number one source of greenhouse gas emissions, and cars are the number one mode of transportation for most people. Public transportation is an excellent solution to reducing air pollution, road congestion, and greenhouse gas emissions.

High-quality and affordable public transit systems also help people find and keep jobs, conduct essential household trips (like going to the grocery store or doctor’s office), and participate in activities supporting local economies. Without access to affordable public transit, low-income residents begin to ration essential trips, which limits out-of-home activities that improves health, economic security, and mobility. 

CFI conducted research to evaluate the program’s effect on improving air quality in three of the counties that adopted the program. Overall, the program has reduced NO2 pollution by more than seven percent in Denver and Jefferson Counties and about four percent in Weld County. Denver and Weld counties have a more significant proportion of Hispanic residents and a larger share of the population who live in poverty compared to the state average. Improvement in air quality means health cost savings for these communities. 

CFI also surveyed 160 Coloradans using both email and some in-person surveys. Overall, travel time, reliability and cost are the significant barriers to public transit for our survey respondents. Most Coloradans rely on cars as their primary mode of transportation and most spend less than 30 minutes daily driving. Likewise, a lack of walkable and bike-able roads forces people to use cars even for short trips.

Despite these barriers, 65% of survey respondents say they would use public transit more if it were free, and this figure is higher among respondents with low and moderate incomes (those who earn under $80,000 a year). People with low and moderate incomes are also more likely to take public transportation, so expanding transit infrastructure and making it more affordable will benefit these groups most. 

 

 

Every day as Coloradans are warned about fire and ozone hazards, we are reminded of the critical role of public transit in reducing our carbon footprint. Available and accessible public transport systems help reduce the number of cars on the road ultimately reducing carbon emissions and air pollution. By supporting affordable and accessible public transport, we reduce our environmental impact and contribute to building a more inclusive and connected community.

 

Noncompete agreements create barriers to fair job opportunities and economic mobility for all workers, and have proven to be disproportionately harmful to Colorado’s working women– and most particularly for women of color.

CFI and WFCO have been policy partners for many years, and our shared commitment to reforming Colorado’s economic policies to promote equity at the intersection of gender, race, and economics makes for natural collaboration. While a strong body of research suggests that noncompete agreements are an anti-competitive practice that harms all Coloradan workers, we joined forces to examine this issue because we are particularly concerned about the impact of noncompetes on working women, workers of color, and Coloradans earning low wages. 

CFI and WFCO strongly support the Federal Trade Commission’s proposed rule banning noncompetes for all workers, which would promote competitive labor markets and economic opportunity for all workers by filling existing gaps in state policies. There is still time to submit a federal comment using this template from the National Employment Law Project; comments can be submitted here and are due April 19th. 

What’s a Noncompete? Why Have They Proliferated?

Noncompete agreements prohibit employees or contractors from sharing proprietary information or working with a competitor. They were intended to protect innovations in highly skilled or creative industries with trade secrets or intellectual property that was individually generated, but owned by the company. However, in recent years they have become ubiquitous across all fields and salary ranges. 

The purpose of noncompetes in fields outside those with trade secrets or intellectual property concerns is questionable; they have locked employees into poorer worker conditions by diminishing workers’ leverage to seek out better opportunities or bargain for higher wages. Moreover, the fundamental intent of noncompetes, to protect a firm’s innovations, can be carried out through alternative policy remedies (such as nonsolicitation agreements), which accomplish the same goals without harming competition and creating racial and gender inequities.

A Patchwork of State Policies: States Like Colorado Leave Some Workers Unprotected

The FTC’s recently proposed a full-federal ban, which is a critical step forward if Colorado and the nation hope to close gender pay gaps, ensure fair competition and economic dynamism, and encourage entrepreneurship amongst women and other historically marginalized groups. The proposed rule would build on the progress that Colorado has already made by limiting the enforceability of noncompetes for workers making under $101,250. 

However, states like Colorado still fail to protect women earning incomes over the determined threshold from the pervasive, chilling effects of noncompetes. This is particularly concerning since the most anticompetitive effects across industries occur at the high end of the income distribution, as a result of the higher propensity of these individuals to pursue entrepreneurship, particularly females earning higher incomes. A full ban would expand protections to those at the high end of the income distribution promoting female leadership entrepreneurial ventures and emerging industries in Colorado. 

A full ban for all states is necessary, and making non-competes unenforceable under state law does not prevent the harms outlined above because even if it has no real standing in the court, most workers aren’t lawyers; signing away your right to seek out other opportunities has a chilling effect on labor markets. Even in states like California where noncompetes are not enforceable, evidence suggests that when workers sign them, they still perceive them as binding and cannot afford the risk and costs of litigation. One study shows noncompetes are still used in 45.1% of establishments in California, allowing businesses to pressure employees into not seeking out better opportunities with competitors.

Why Are Noncompetes Harmful?

1. They Exacerbate Gender and Racial Wage Gaps, and Have Explicitly Racist Roots

The wage gap that exists in our country is only further expanded by inequitable tools that hold women, and other individuals, back from being economically successful. The wage gap in Colorado is evidenced by a research brief released by The Women’s Foundation of Colorado (WFCO) in partnership with the Institute for Women’s Policy Research. It found that “the average earnings for women in Colorado who work full-time, year-round are 83% of men’s average earnings for full-time work.” Moreover, “the gender wage gap persists in sectors where women are the majority of the workforce and the gap is even wider in sectors where most of the workers are men.” Given that a paper published in the SSRN discovered that “higher (noncompete) enforceability diminishes workers’ earnings and job mobility…and…exacerbates gender and racial wage gaps,” it’s vital that this rule is passed to address the harmful nature of non-compete agreements. 

Historical systems of gender, racial, and economic oppression have perversely impacted the ability of women, in particular women of color, and women with other marginalized identities to achieve economic success. A study conducted by NELP found that “banning non-competes would help alleviate racial and gender wage gaps because the underpaid workers who are most affected are disproportionately women and people of color.” In fact, Ayesha Bell Hardaway’s The Paradox of the Right to Contract: Noncompete Agreement as Thirteenth Amendment Violations asserts, “noncompete agreements for low-wage, unskilled labor are reminiscent of the Reconstruction Era’s wage-contract system that former slave owners used to exploit and subjugate African Americans.”

2. They Suppress Wages for Low-Wage Workers 

Noncompete agreements harm all Coloradans by suppressing macroeconomic growth and productivity, depressing wages for workers of all income levels, and stifling entrepreneurship. A full ban of noncompetes results in higher wages for workers in states leveraging this policy to ensure fair, competitive labor markets. Hourly workers in Oregon saw a 2-3% wage increase on average after the state banned noncompetes. 

3. They Discourage Female Entrepreneurship 

When workers are bound by noncompetes, they are less likely to go out on their own and start their own business, and women are disproportionately discouraged from entrepreneurship when bound by non-competes. One study shows that noncompetes increase the risk of entrepreneurship; for women, this acts as a “sharper break on startup activity than for men.” The gender gap in access to venture capital was closing prior to the pandemic, but COVID put a damper on this progress, which makes it all the more critical to ensure policies break down barriers to diversity in entrepreneurship. 

This is especially important for the economies of states like Colorado in light of the growing body of evidence showing that organizations with a higher percentage of women in leadership roles outperform male-dominated companies. Colorado, and in particular the Denver-Boulder region, has one of the highest startup-density rates in the country, meaning that our state is a growing hub for venture capital and new business. Simultaneously, only 5% of Colorado’s 122 public companies have a female CEO, and women’s leadership on corporate boards has stalled in recent years. Capitalizing on the growth of emerging sectors requires policies that support competition across industries and diverse leadership, not inhibiting female-led innovation.

Coloradan women are key in promoting sustained economic growth in our state, but our state’s newest revision of its noncompete statute does not reduce barriers to innovation for all women. Lower-wage women across our state cannot be legally bound by noncompetes under the current statute, which is critical to expanding entrepreneurial opportunities to lower-income women and women of color, who are starting businesses and creating jobs at high rates despite facing barriers to accessing startup capital. However, entrepreneurship is most prevalent at the lowest and highest income levels, and Coloradan women at the higher end of the income distribution can still be legally bound by noncompete agreements under current Colorado law.

4. They Are Anti-competitive, Creating Barriers to Shared Economic Growth 

The evidence suggests that economic dynamism and efficiency across our state’s economy also took a hit due to the proliferation of noncompetes. Not only do workers bound by non-competes stay in their jobs 11% longer, with no offsetting increase in pay or satisfaction, but they also slow the pace of innovation and force workers to seek jobs in industries outside their fields of expertise. Noncompetes not only reduce knowledge leakage across firms, but also lead to the stagnation of industries by discouraging “within-industry spinouts” that spur competition and innovation.

Advancing shared economic prosperity in Colorado requires a strong workforce and policies that create opportunities for mobility and entrepreneurship. While noncompetes may have the original intention of promoting innovation, by protecting trade secrets or encouraging investments in workforce training, many economists have argued that other policy options, like targeted nonsolicitation agreements or copyright rules, are more efficient tools to encourage firms to innovate. 

Scholars at Brookings have noted that by improving the ability of workers to switch jobs, policies banning noncompetes can produce both wage and productivity gains. It’s clear that the costs of noncompetes vastly outweigh their intention to protect trade secrets, which other policy approaches can more efficiently achieve. While Colorado’s existing statute has taken important steps to prevent noncompetes from suppressing dynamism and growth for low and middle-income residents of the state, a more robust federal ban would unlock our state’s full economic potential by dismantling unfair barriers to opportunity for all Coloradan workers and innovators, particularly female entrepreneurs and women of color. 

Take action now; submit a federal comment using this template from the National Employment Law Project by April 19th. Comments can be submitted here. 

 

The last time I flew out of DIA, my Uber app showed a fare just short of 80 dollars for the 30 minute ride to the airport; my driver only kept 30 dollars of that fare, pre-tip. But neither the driver nor me knew the full story here. Until I asked him how much he was paid, I didn’t realize that over 60% of my money went to Uber’s corporate profits, not to the person who helped me with my luggage and got me to the airport on time.

If I hadn’t asked (risking my partner ditching me to make our flight on time) I wouldn’t have seen how little the driver actually kept; he probably would have thought I got a cheap ride, and I would have assumed he made a hefty profit off my 30-minute trip. The sliver of data that the rideshare platform lets us see paints a very different picture than the dirty truth of this app-based work. Drivers work around the clock to get us home safely when it’s 2am, or help us get where we need when our car unexpectedly gives out. Yet, their employers provide little to no transparency or accountability for them. Instead, big gig companies harvest on-the-job data to deploy algorithms and coercive incentives that deprive drivers of stable income, job security, discrimination protections, or informed consent when agreeing to the next gig.  

CFI’s recent analysis of local data, and a growing body of national studies, affirm that Colorado drivers and their families face high rates of economic insecurity and material hardship as a result of opaque, exploitative policies used by rideshare corporations to spike your fare while suppressing driver’s earnings. 

While platforms like Uber and Lyft promise drivers high pay, a recent CFI study found that Denver drivers make an average wage of just over $10.50 an hour once we account for the out-of-pocket expenses like gas and car maintenance, and uncompensated working time when drivers head to the next gig, or “deadheading time.” This runs contrary to the $30/hour in potential earnings touted by the industry, and a fraction of the state and local minimum wage. 

Most drivers aren’t part-time workers or college kids earning extra beer money; a 2022 survey found that 6 in 10 drive to support a child or adult at home. Drivers receive just under 80% of their weekly income from app-based work on average, and work a median of 38 hours a week; despite driving full-time, hourly wages fall woefully short of what’s necessary for a family to achieve economic self-sufficiency. 

A “take rate” is the portion of what consumers pay that goes directly to rideshare platforms. These can be between 50-70% of the rider’s fare, but this data isn’t publically available. Using local trip data, CFI’s new analysis estimates that if current take rates were 25% lower in the state, a rounding error relative to the rideshare company’s international profits, Colorado drivers would earn over $10 more per hour- that’s $20,000 more each year to care for their families and $769 million more in economic value that’s currently leaking out of our state.

High take rates and out-of-pocket costs eat away at drivers’ earning opportunities, but riders only see the total amount they pay. This creates an information gap that harms drivers when it comes time for consumers to decide how much to tip. Tips have a large impact on a driver’s ability to put food on the table; over one-fifth of the typical Denver driver’s income came from tips. 

Researcher Veena Dubal shows that corporations like Uber and Lyft use coercive incentives and hidden algorithms to differentiate fares and suppress wages in ways unknown to workers and riders, while the apps hide data to prevent consumers and workers from seeing the other side’s perspective so the public won’t catch onto the exploitation going on behind the curtain of these apps. The result is what scholars have called a “tacit oligopoly of high prices and low pay” that harms drivers and consumers alike, and we also know that the rideshare companies are claiming an increasing share of workers’ earnings. Coloradan workers and riders deserve full information, so they can decide for themselves if they’re getting a fair deal. 

In addition to the income volatility that drivers see as a result of high take rates, bearing the brunt of out-of-pocket costs, and the company’s covert methods of algorithmic wage discrimination, drivers are also at risk of being “deactivated” from the app (and therefore losing their livelihood) over discriminatory complaints, with no process for recourse. Over 1 in 5 Denver drivers report being discriminated against on the basis of their identity, and the majority of drivers are workers of color. We also know that 15% of Denver drivers report being terminated, with many facing predatory or unexplained termination from the platforms, and two-thirds of those drivers rely mainly on gig income to make ends meet. In other words, we may see that riders might rate drivers of color with lower stars or raise arbitrary complaints rooted more in biases than the realities of their service, which can result in unjust terminations. 

SB23-098 corrects the information asymmetry that is harming working families and consumers and stymying the potential of our state’s economy. I know exactly my salary at CFI and you probably know yours too. There isn’t any black box that dictates how much you make each day. If there was, you’d want to know how that black box works.

#1 — Is the Economy a Top Seed or an Underdog?

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In part due to high rates of inflation and interest, the US and Colorado continue to see positive, but slowing GDP growth. The slowdown in growth can be attributed to declining investment in residential real estate and business. The pace of business spending slowed from 9% in 2021 to about 4% in 2022, mostly as a result of significant decreases in residential investment because of high mortgage rates from the Fed.  Additionally, the pace of consumer spending slowed from 2021 to 2022 — particularly in goods. During the pandemic, consumers were spending more on goods, rather than services, which were largely shut-down or limited as a result of COVID-19. The balance of spending is returning to pre-pandemic ratios, when consumers spent more on services.  The Silicon Valley Bank failure raises some concerns about financial stability, which increases our risk of recession. However, Silicon Valley Bank is an outlier in the banking sector for many reasons, including niche clientele and its over-reliance on low-interest bonds that have suddenly become more expensive as the Fed continues to raise interest rates. It is unlikely that the Silicon Valley Bank run will have reverberating effects throughout the industry.

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#2 — Labor Market Going Hard in the Paint

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Colorado’s unemployment rate sits at a very low rate of 2.8%, and is one of thirteen states that has an unemployment rate below the national average.   Colorado has the third highest labor force participation rate at 68.1%,  which is well above the national rate of 62.4%, and job openings still remain historically high. There were two job openings per person seeking employment in Colorado from March to December 2022. Rising job-quits and elevated job openings still means a strong labor market despite signs of a recession and tightening monetary policy. The leisure and hospitality sector led the way in job growth since last January.

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#3 — The Budgeting Playbook under TABOR is Simple, Yet Very Difficult

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Revenue projections were revised upward since the December Forecast, but that doesn’t mean more money for the General Fund– simply, it means higher TABOR rebates. Relative to the December forecast, revenue above the Ref C Cap has been increased from $2.47 billion to $2.75 billion in FY2022-23 and from $1.53 billion to $2.02 billion in FY2023-24.  Ironically, the TABOR revenue cap (Ref C), which makes it very difficult to adequately fund schools, roads, higher education, and healthcare, actually makes it very simple to plan since legislators can only budget to the Ref C cap. Because of this, we can already look at the budget picture for 2024 and 2025: and it doesn’t look good. Just maintaining current spending levels (i.e. keeping up with inflation and caseload growth) looks ominous in the out years.  The extra revenue available this year makes it a good time to do one-time budget spending, like capital construction, but adding on-going expenses (like hiring another teacher) is challenging this year since it’s unlikely it will be available the next year.

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#4 — Have You Saved Anything for the Second-Half?

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Household personal savings jumped almost 30 percentage points during the pandemic as a result of federal and state action through direct cash transfer payments, as well as Colorado’s advanced rebate checks sent out last fall. As those transfers dwindled, household savings rates have fallen quickly from almost 35% in 2020 to 4.7% now. This is below the historical average rate of 7.5%; dropping savings rates indicate just how much high inflation is eating into household budgets.   As a result, many individuals and families are turning to credit cards to supplement their income and pay for necessities. Credit card payments as percent of disposable personal income increased in the first quarter of 2023 after falling year after year since the Great Recession. As far as savings goes for the state budget, it looks like we will finish this year’s budget (FY 2022-23) with a 16.6% General Fund Reserve.

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#5 — Home Field Advantage?

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Colorado’s home prices peaked midway through 2022 as high household savings and low interest rates fueled the growth. But both interest rates and savings have quickly swung the other direction in 2023.  Home prices in the Denver Metro area are down 15.7% since the May 2022 peak. Two factors will moderate further drops in home prices though: new home listings are falling and new home construction is slowing. Colorado’s homebuilding permits are down 30% from the year prior. The average 30-year-mortgage rate jumped from 3.8% in March 2022 to 6.7% in March 2023 driven by the Federal Reserve’s eight interest rate hikes. This has had a huge impact on what homebuyers can afford. To put that into perspective, a $2,050 monthly mortgage got you a $550,000 home. Now that same monthly mortgage gets you a $427,500 house.

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