Unemployment Insurance and the Growing List of Colorado Policy Pain Points

Introduction

Colorado businesses face no shortage of challenges. Housing costs, labor shortages, inflation, and economic uncertainty all affect the decisions employers make every day. While some of these issues are born from natural market cycles, others are related to regulatory issues.

Colorado’s unemployment insurance system illustrates this clearly. In the wake of the COVID-19 pandemic, lawmakers took necessary steps to restore the state's unemployment insurance trust fund’s solvency. Those changes, though, also left employers paying substantially more into the system than they did just a few years ago. What began as an emergency response has evolved into a permanent increase in labor costs.

The story of unemployment insurance is not unique. It reflects a broader trend that has emerged across Colorado's economy over the last decade. New compliance obligations rose across industries ranging from energy and transportation to health care and technology. Collectively, these policies are reshaping Colorado’s business climate. Their collective impact bears careful consideration.

Key Findings

Changes to Colorado’s unemployment-insurance program, initiated in response to the pandemic, have led to a doubling of employers' premiums since 2019.

• SB20-207 dramatically raised the wage limits on unemployment-insurance premiums. Whereas employers remitted premiums on just the first $13,600 of each employee’s earnings in 2020, they now owe premiums on the first $30,600.
•  In FY26, employer premium obligations are projected to end 104% higher than in 2019.
•  This cost increase has damaged Colorado’s economy and caused its workforce to shrink. In total, higher unemployment-insurance premiums have generated the following statewide economic impacts since 2024:
  •  575 fewer jobs
  •  $185 million less GDP
  •  $328 million less output

Due in part to recent state policy, Colorado now ranks as the 6^th-most regulated state in the country.[i] The result has been increased costs and added regulatory burdens across every sector of Colorado’s economy. The most expensive and impactful regulations come from new environmental, labor, and health-care policies.

• Energy/environment: The legislature has enacted 129 new bills since 2009, spawning the Greenhouse Gas Pollution Reduction Roadmap, new building codes, sweeping new restrictions on drilling, and hundreds of millions of dollars in fees for businesses and property owners.
•  Labor: Alongside dozens of minor fees and regulations, state policy has contributed to a doubling of employers' unemployment-insurance payments since 2019; meanwhile, the voter-approved FAMLI program costs businesses and their employees approximately $1.5 billion in direct premiums each year.
•  Health care: 182 new health-care bills since 2019 cost the state government $858 million annually and the Colorado Option, a flagship health-insurance law aimed to reduce premiums, has failed to achieve its most ambitious targets and has helped drive insurers out of the state’s markets.
•  Other issues: Policies like retail delivery fees, increased gas taxes, and controversial new AI regulations have raised consumer prices, increased the cost of doing business, and threatened Colorado’s prospects for economic growth.

Unemployment Insurance

Due to the influence of the COVID-19 pandemic and the state government’s policy responses, Colorado’s unemployment levels spiked in early 2020 and caused the state’s Unemployment Insurance Trust Fund (UITF), from which the state awards unemployment benefits, to become insolvent. By the first half of 2022, Colorado was one of only 9 states with an unemployment insurance program in debt to the federal government, which supports overburdened state systems, and had the 6^th-highest debt among those states.[ii] Colorado’s UITF suffered so much through the pandemic years in part because of its precarity in advance of that crisis—in 2019, though functional and solvent, it had one of the weakest reserves of any state and was imminently vulnerable to even a moderate recession. Additionally, the Colorado Department of Labor and Employment’s computer systems “did not have the functionality to conduct…advanced fraud analytics,” resulting in at least $73 million paid out to fraudulent claims during the pandemic.[iii]

SB20-207 and Higher Premiums

The severity of the UITF’s condition prompted the passage of SB20-207, which dramatically raised the wage limits on unemployment-insurance premiums. Whereas employers remitted premiums on just the first $13,600 of each employee’s earnings in 2020, they now owe premiums on the first $30,600. Because premium rates (the shares of those wage limits that the UITF charges employers) vary each year according to the health of the fund, this change had the primary effect of restoring the UITF to solvency, thereby reducing premium rates, faster than otherwise would have been possible. The fund’s balance, however, has now recovered beyond its 2019 level and employer premium obligations remain 104% higher due largely to SB20-207's changes.

Colorado’s Growing Compliance Costs

The increase in unemployment-insurance costs is a useful case study in how regulatory decisions affect business operations. Employers do not experience these policies in isolation, though. Unemployment-insurance premiums are only one of many growing costs businesses must absorb. Energy mandates, transportation fees, paid-leave premiums, health-care regulations, and emerging technology requirements have each taken their respective tolls on the private sector. Along with unemployment insurance premiums, these regulations are beginning to paint a broader picture of accumulating compliance costs.

HB19-1261 and the Greenhouse Gas Pollution Reduction Roadmap

Nowhere are compliance costs more apparent than in Colorado’s energy sector.

The signing of HB19-1261 committed Colorado to some of the country’s most ambitious emissions goals: reducing statewide greenhouse-gas emissions by 26% in 2025, 50% in 2030, and 100% in 2050 relative to the level in 2005. Since then, the state government has enacted 73 new bills and regulations in the pursuit of those ambitions.

CSI estimated that state and local environmental policy stemming from HB19-1261 cost Colorado $13.8 billion of personal income, and $32 billion of output over 15 years between 2009 and 2023. In 2023, it cost Colorado roughly 1% of its GDP and employment—an amount larger than the state’s whole agricultural sector—and $131.7 million in tax revenue from personal income alone. In return, the state fell just short of its 2025 goal to reduce total emissions by 26% relative to its 2005 level.[viii] The following subsections summarize selected findings of CSI’s 2025 study.[ix][x]

Building Energy and Emissions Standards

21 of these new environmental policies serve the purpose of reducing emissions from buildings, which is one of the Greenhouse Gas Pollution Reduction Roadmap’s major objectives. Most of these efforts either impose fees and penalties targeting industrial operations or address energy use by residential and commercial buildings. Out of many such laws passed over the last several years, CSI's 2025 analysis shortlists eight of those policies that have had the most impact on this sector of the economy to date.

These policies fall into two broad categories: laws that impose fees for pollution directly (HB18-1400, SB20-204, HB21-1266, SB22-193 and SB22-051), and laws that change building codes (HB19-1260, HB21-1286, and HB22-1362), which either require local governments to adopt new international energy codes or establish state-level bodies to develop building codes designed to reduce carbon emissions. In total, the eight policies have reduced employment by almost 1,800 and cost Colorado $524 million of GDP since 2018.

SB19-181

SB19-181 imposed a diverse set of restrictions on well permitting, siting, and maintenance. This drastically reduced the numbers of Colorado drilling permits and well completions. Two years ago, a legislative attempt to ban future drilling outright narrowly failed. These efforts have already manifested as a reduction in output that, given the lagged relationship between well starts and production, is set to grow much larger in coming years.

Colorado oil and gas production fell off the national pace in 2021, when many of the most onerous drilling regulations came into force. The productive decline is most evident in Weld County, most likely because of how much of its territory was rendered inaccessible to drilling by new setback rules. Because Colorado’s oil-and-gas operations are cleaner than the national and global averages, these policies may have actually caused a slight rise in global emissions while shrinking the state’s economy.

Between 2019 and 2023, Colorado’s crude oil and natural gas production fell by 13.3% and 8.3%, respectively. Unlike our declining coal production, this phenomenon cannot be linked to an obvious national trend; over the same period, New Mexico’s oil production rose by 97.7% and its natural gas withdrawals grew by 75.2%. Texas, likewise, added 7.9% more oil and 18.4% more gas despite its long history of high production. If Colorado had continued to extract the same share of its reserves since 2021 as it had in the years prior, it would have produced 16.6 million barrels more of oil and marginally more natural gas worth a combined value of $1.3 billion.

SB19-181 is not the only recent state policy with disruptive effects on the oil-and-gas industry, but its regulatory costs are by far the largest. The Colorado Oil and Gas Association estimates that the industry incurs about $500 million in direct costs each year from regulations imposed by SB19-181’s directives and another ~$100 million to other regulatory costs.[xi]

Clean Energy Plans and Future Electricity Prices

Between 2021 and 2023, state energy and environmental policy caused consumers to spend $791 million more on electricity and consume 617 million kWh less, which cost Colorado more than 7,000 jobs and $1.4 billion of GDP. According to another CSI study, and based on the state government’s own numbers, the electric capacity and generation changes required of utilities to meet HB19-1261's and its successors’ standards will cause consumer electricity prices to rise through the next decades at unprecedented speeds:

• Future electricity prices are projected to rise at more than three times the rate of inflation and nearly 13 times the average annual rate of growth between 2010 and 2020.
•  Between now and 2040, these price increases will create large additional costs for consumers of electricity:
  •  $16 billion to $23 billion for residential consumers ($6,400–$9,280 per household).
  • $16.3 billion to $23.5 billion for commercial consumers ($41,700–$60,200 per business).
  • $11.6 billion to $16.8 billion for industrial consumers ($770,000–$1.1 million per facility).

More evident is the law’s effect on consumer choice in the health-insurance market, which may be keeping prices higher. By 2022, four insurers representing tens of thousands of covered Coloradans had left the state's individual market, small-group market, or both. Since then, even more carriers have left local and national markets and one of the state’s largest insurers, Anthem, withdrew its plan to exit only after the state allocated $100 million in emergency funding to stabilize the individual market. Market entries and new plan offerings have not offset these departures.

The disruption that the Colorado Option has caused the state’s health-insurance markets may not even be enough to secure compliance with the premium-reduction mandates. Whereas it was more transparent in previous years, the state did not announce in 2025 how many standardized plans achieved the 15% premium-reduction target; in whatever cases insurers failed to reduce prices by that amount, the difficulty of doing so under present market conditions surpassed even the government’s powers of enforcement.[xxiii] Those failures, wherever they’re found, emphasize the arbitrary quality of HB21-1232's original targets.

Conclusion

Year after year, the Colorado legislature adds new laws, rules, and costs across the state economy. There is no sector of the economy untouched by legislative intervention. This report highlights just a fraction of these effects with a focus on some of the biggest sectors and most impactful regulations, including those affecting the costs of energy, health care, technology, and labor.

This information represents a key insight into the actual impacts of overregulation captured, in part, by other recent Common Sense Institute reports. As Walter Wriston put it, “capital goes where it is welcome and stays where it is well treated.”

Due not only to a rapid increase in the regulatory burden (in both time and cost) imposed by the state legislature in recent years but also, critically, the widespread expectation that the pace of regulatory growth will not slow, Colorado feels less and less like a place where business investment is welcome or treated well.

Regulations increase both the cost of running a business and the cost of living; some have more direct impacts on one or the other, but eventually businesses’ costs get passed on to consumers and employees as higher prices and lower wages. Another recent CSI Colorado study, Colorado’s Waning Popularity: Census Figures Show Domestic Outflow, reinforces this notion.[xxiv]

Policymakers would be wise to make cost/benefit analysis a much larger part of the process when deciding whether to sponsor or vote for more regulation. If a policy does not offer benefits that clearly and significantly outweigh costs—in private compliance as well as public enforcement—it should be discarded. The proverbial camel’s back is bending under the weight of the last decade’s new regulations. One never knows which will be the regulatory straw that breaks it.