Small businesses in Montezuma County already struggling to keep their doors open in the economic downturn are now faced with paying the costs of higher unemployment insurance rates.
In January 2010, the state of Colorado joined 30 other states in borrowing money from the federal government so unemployment benefits could still be paid from the states Unemployment Insurance Trust Fund. During 2010, the federal government waived the interest on these funds.
According to a letter from the Colorado Department of Labor and Employment received by local business Stone Sand & Gravel, beginning in January, interest began to accrue on all outstanding loans, so rates for all businesses with employees who pay into the fund have gone up.
The letter stated: Because of the unprecedented demand for unemployment benefits in Colorado and across the country, the state has had to increase the rates for unemployment insurance. Adding to that, money borrowed from the federal government by the state to continue to pay benefits from the states Unemployment Insurance Trust Fund is now accruing interest.
For local small businesses, the increased rate means tightening their belts a little more with less wages for employees and most likely increased costs for customers.
Its a hardship, said Vic Vanik, owner of Four Seasons Greenhouse and Nursery, who also received a letter from the state.
Its another thing I have to squeeze either customers or sharpen my pencil even more, and Ive sharpened my pencil a lot in the past couple of years.
Employees can be doing a great job and be a great asset to the business, but some of them havent had a raise in three years because of the tough economy and low sales, Vanik said.
Four Seasons increased cost for unemployment insurance is not as bad as some other businesses such as those in construction, Vanik said.
Im paying about $9,000 to $10,000 a year without the increase, Vanik said. Its not going to be huge, but its probably going to be $400 or $500 more every quarter.
Construction companies have been hit the hardest because there are so many unemployment claims from that industry, said Joe Keck, director of the Southwest Colorado Small Business Development Center. Keck said the rate for those companies has gone through the roof.
The way the unemployment tax is set up, for every dollar of wage that is paid to the employee, there is a rate for that industry that the state has set up, Keck said.
Its a real concern for small businesses because things are lean to begin with, he said. The construction industry, the home builders, probably experienced the biggest hits in terms of tremendously reduced economic activity.
L&L Construction owner Loren Workman said hes been paying into the states Unemployment Insurance Trust Fund for 18 years and though he has to lay off some employees in winter months, his business has only used the insurance a couple of times.
Weve used it twice in the last two years, and now were going to have to pay back this interest that (the state) had to borrow and I feel thats not our fault, he said.
Workman also runs Baker Sanitation and acknowledges the increase rates are a bad deal for all businesses, not just construction. He said without the increase his business has to pay almost 8 percent to the insurance fund out of the total wages paid to employees.
Kathy Stone, owner of Stone Sand & Gravel and board member of the Four Corners Builders Association, said members are considering writing letters to state representatives in protest of the increased fees.
The home builders association wants to take a look at it, research it and see what its going to do to small businesses, Stone said.
For more information on the states Unemployment Insurance Trust Fund assessment, business owners can call the Colorado Department of Labor and Employment at 800-480-8299.
Reach Paula Bostrom at [email protected]