Updated: 05/09/2013 12:20:05 AM MDT
Coloradans receiving unemployment benefits as part of a federal extension are beginning to see an 18.2 percent reduction in compensation as a result of the across-the-board U.S. government spending cuts.
The cuts apply specifically to federal extensions known as Emergency Unemployment Compensation (EUC), which is a tiered system for paying the unemployed once their state unemployment benefits expire. The extensions were created in the depths of the economic downturn and are based on a state's overall unemployment rate.
"As of April, there was about 21,000 EUC claims in Colorado. We were given guidance by the U.S. Department of Labor to implement a reduction in those federal benefits and the reduction amount was based on how soon we could implement those cuts," said Cher Haavind, director of government, policy and public relations for Colorado Department of Labor.
An unemployed person in Colorado can access up to 63 weeks of unemployment insurance — 26 weeks are state-funded and the remaining 37 are part of federal extensions.
In Colorado, those 37 weeks are made up three tiers, Haavind said. The first two tiers last for 14 weeks and the third tier provides nine weeks of compensation. Payment amounts typically do not change as a recipient transitions between the federal tiers.
But as of April 28, the 18.2 percent reduction is being applied for individuals as they move on to a new tier.
The department of labor has been sending out letters to each individual notifying them of the changes about four weeks in advance of the reduction.
Colorado has an unemployment rate of 7.1 percent. The average
duration for unemployment in Colorado is 16 weeks, which means the average unemployed person would not ever make it into tier 1 of the federal extension program.
According to a report last month by the The Pew Charitable Trust's Fiscal Federalism Initiative, just about 1 percent of Colorado's labor force receives federally-funded unemployment insurance with an estimated $2.3 million cut to the state's federal grants.
The amount that each unemployed person receives varies depending on his or her wage history, but the average weekly check for state funds is $345, while the average federal weekly check pays $340.
With the cuts, the paycheck of a person making the average weekly federal amount would decrease to $278.
According to Haavind, the U.S. Department of Labor told the Colorado Department of Labor that if they could make the changes in the system by March 31, they would only have to cut benefits by 10 percent.
"The problem is that this involves extensive reprogramming and that takes time," Haavind said. "The longer it took you, the greater the cut would be. We implemented fairly quickly and had ours reprogrammed by April 28th."
Kelly Wiedemer, who recently spent time on unemployment but has since landed a job, says the 18.2 percent cut will hit people hard.
"It is huge — for no other reason than unemployment already doesn't even cover two-thirds of your income and expenses," she said. "It is often the difference between gas and food."
Number of weeks of unemployment insurance a person in Colorado can have
Number of weeks funded by the state
Number of weeks under the federal extensions