Hospitals and road construction take a hit, but budget writers warn it could have been far worse
DENVER — State revenues have dropped off a bit, enough that it could prevent an automatic refund under the Taxpayer’s Bill of Rights, state economists told lawmakers on Friday.
Projections for the next fiscal year are expected to be down by about $111 million, meaning the state likely won’t reach the revenue cap that automatically triggers a refund under TABOR as had been expected from the last forecast in December, the Colorado Legislature’s chief economist, Natalie Mullis, told members of the Joint Budget Committee.
“We did lower our expectations for general fund revenue,” Mullis said. “In December, we expected that general fund revenue would grow by 1.8 percent this year, which is actually negative if you adjust for population growth and inflation. It’s slowed down a little bit to 1.5 percent in this revenue forecast. That impacts the bottom line.”
In her forecast for the first quarter of 2016, Mullis said that the national and state economies expanded last year, but slowed somewhat in the second half of 2015. Continue reading
House Republican leader Brian DelGrosso of Loveland said it’s time for “honest fiscal policy” and not TABOR accounting gimmicks to pay for Colorado’s roads and bridges.
DelGrosso has penned an editorial laying out his — and presumably the Republican caucus’ — position on a Democratic plan to reclassify the state’s hospital provider fee to get it out from under a revenue cap voters approved in 1992 when they added the Taxpayer’s Bill of Rights to the state constitution.
The move also would negate state refunds worth between about $37 up to $111 per taxpayer next year.
“Taking more money from taxpayers without their consent will not solve our challenges,” DelGrosso writes. “We have the money and our budget is growing, but using some budget maneuver is definitely no substitute for honest fiscal policy.”
Tax refunds or more money for schools and roads? That’s how a coalition frames a debate it hopes to spark in Colorado.
A group of bipartisan civic leaders announced Friday that it’s starting a campaign to get a measure on the 2016 ballot asking voters to ease a revenue cap on state government.
“We are really determined to get something done about this,” said Dan Ritchie, co-chair of Building a Better Colorado, a nonpartisan coalition that toured the state having conversations about Colorado’s political system and constitution.
If passed, the measure’s backers say state funds could be spent fixing potholes and reducing class sizes in schools instead of being refunded to taxpayers.
“Our education needs are not being met and we are not maintaining our road system and streets,” said Ritchie, after making the announcement at Great Education Colorado’s annual conference. “We should be planning for the future in 20 years and that applies to our kids, not just our roads.”
Supporters acknowledge that such a measure wouldn’t fix an underlying structural problem with Colorado’s budget.
“[But] the first rule of getting out of a hole is to stop digging,” said Lisa Weil, who directs Great Education Colorado, a non-profit that advocates for more funding for public schools.
The ballot initiative will likely draw opposition from advocates of small government who support the revenue cap. And backers will need to collect 98,000 signatures to get the measure on the 2016 ballot.
That group’s leaders say the state’s financial future is at stake.
At meetings held across the state last summer, they focused on problems they see with the Taxpayer Bill of Rights — TABOR. Voters enshrined the measure in the state constitution in 1992 as a way to limit the growth of government.
If you are looking for an opportunity to pay higher taxes, this is your year.
Already on Colorado’s 2016 ballot is a single-payer health plan that would boost the state income tax rate to 14.63 percent, highest in the nation.
On its heels comes a planned initiative sponsored by the Colorado Contractors Association, which wants more money to build roads and mass transit projects.
Not by increasing the state gasoline tax, now 22 cents a gallon, but by increasing the state sales tax, now 2.9 percent, by up to three-quarters of a cent.
The final figure has yet to be determined, said Bill Ray, spokesman for the planned initiative. The organizers have until March 25 to propose their final ballot language.
They are working backwards from a goal of raising $500 million to $600 million more per year, which under the Taxpayer’s Bill of Rights (TABOR) has to be listed on the ballot question. They will consider the state’s current revenue stream and then figure out how much higher the tax rate must be to raise the money.
If taxes are a must, user-pay levies are generally considered the fairest. Those who drive their cars over the roads pay their taxes at the pump. Those who don’t drive don’t have to pay.
But earlier polling by the CCA determined that an increase in the gasoline tax would be “roundly rebuffed” by voters, said Ray.
The good news is that the Colorado state-run hospital provider fee program brought in just less than $700 million last year.
The money, which was matched almost dollar-for-dollar by the federal government, is targeted to increase funding for hospital care for Medicaid and uninsured clients, improve care for clients serviced by public health insurance programs and reduce cost-shifting to private payers.
As a state program, the hospital provider fee (HPF) requires hospitals to pay in an amount that’s based on the number of overnight patient stays and how many outpatient services they were provided.
Even though revenue generated through the HPF program is a welcome addition to the cause of keeping Colorado healthy, it’s creating a controversy in the capital for other impacts it has and could have on the state.
Fee tips TABOR scales
Weighing in as high as it does, revenue from the HPF program adds a generous amount to the state’s revenue. And although that sounds like a good thing, the program is raising issues about how that amount will negatively impact other state spending.
At the base of the controversy is the fact that HPF funds are slated for a particular purpose, and yet they can substantially reduce the amount Colorado will have available for many other projects.
Background to the concern goes back to 1992. At that time, Colorado voters approved the Taxpayer’s Bill of Rights (TABOR), a constitutional amendment designed to keep growth in the hands of the people rather than in the hands of the government.
• What is it?
The hospital provider fee (HPF) requires hospitals to pay in an amount that’s based on the number of overnight patient stays and how many outpatient services they were provided. It raised almost $700 million in 2015.
• What is its current status?
Funds from the hospital provider fee currently count against spending limits imposed by the Taxpayer’s Bill of Rights. That status will force tax refunds, thereby mandating cuts in other programs.
• What is the proposal?
Gov. John Hickenlooper proposes reclassifying the hospital provider fee as an “enterprise,” thereby removing it from counting against TABOR spending limits.
• What are the arguments against this proposal?
Opponents argue that the hospital provider fee does not meet the definition of an “enterprise,” that tax refunds should go forward, and that the state pursue budgetary efficiencies and cost-cutting to pay for the refunds.
TABOR prohibits tax increases without a vote of the people and places strict limits on how much revenue the state can keep and how much it can spend. Under TABOR, state spending is only allowed to increase at the rate of population growth plus inflation.
If the state collects revenue that exceeds TABOR’s revenue limits, that amount must be refunded to taxpayers, according to the amendment.
At this point, the HPF is tipping the scales in favor of exceeding those limits.
It’s not that taxpayer refunds — estimated to be in the range of $25 to $125 per individual — would be a bad thing.
Those in favor of the reclassification, however, are looking at rerouting funds as a way of filling in gaps of the 2016 state budget. They see the result of that as being of a greater benefit to all.
The projects that would escape cuts and be allowed to continue moving forward include education, transportation and road maintenance.
Workaround and end-around?
In an attempt to balance the issues — HPF revenue, TABOR limits and the state budget — Democratic Gov. John Hickenlooper has set forth a legislative action that would reclassify how HPF is legally regarded.
The intent is to reduce the amount of budget woes the state will have to reconcile.
In response to the initiative, Republican Senate president Bill Cadman and other conservatives have taken the stance that the reclassification is unconstitutional and an effort to water down TABOR.
At this point, opposing parties are at a standstill. It’s been more than a month since Hickenlooper requested that Republican attorney general Cynthia Coffman decide about the constitutionality of reclassifying the billion-dollar hospital-fund program.
The current response from Coffman’s office is that the decision still is under review.
While the wait continues, other voices are weighing in on the subject.
On Feb. 11, legal counsels for two former governors released a legal brief that said reclassification of the HPF would be legally sound and fiscally responsible.
Jon Anderson and Trey Rogers, former counsels to Republican Gov. Bill Owens and Democratic Gov. Bill Ritter, completed the legal analysis at the request of a coalition called Fix The Glitch.
The coalition, a group of Colorado business organizations, is requesting that the Colorado General Assembly move forward on the reclassification.
“Regardless of our differing political views on the HPF, we are all strongly supportive of legislation that places HPF funds in an Enterprise Fund. The original law comingles HPF funds with general State revenue, inaccurately impacting revenue growth and creating significant unintended consequences that limit the state’s ability to meet core infrastructure investment priorities,” the group states.
The group’s petition said that HPF funds have begun “to crowd-out road and bridge funding. CDOT right now has more than $3 billion in backlogged road projects.”
On the other side of the controversy is the conservative political advocacy group initially funded by the Koch brothers — Americans for Prosperity.
Standing in opposition to making the HPF an enterprise, the group’s state director, Michael Fields, responded to Hickenlooper’s challenge for a better solution to close state budget gaps in January.
“With the state budget for next year adding up to an astounding $27 billion, the state should have more than enough money to take care of its core responsibilities.
“By cutting waste, finding efficiencies and re-examining priorities within the budget, we will be able to find more than enough money for important projects like fixing roads, building bridges and adequately funding our schools — without the need for Hickenlooper’s illegal plan to dismantle the Taxpayer’s Bill of Rights.”
The expected revenue from HPF in 2016 is $756 million, according to the economic outlook reported by the Governor’s Office of State Planning and Budgeting.
In contrast, the state fiscal year budget shortfall is $373 million.
In his 2015 State of the State Address, Hickenlooper said that our budget rules aren’t working.
“Coloradans know we’re not fully funding education. They’re fed up with traffic congestion, they’re fed up with potholes and they’re fed up with our inability to expand our highway system,” he said.
“Virtually every chamber of commerce and editorial board across the state … all agree that fixing the Hospital Provider Fee makes sense.”
TABOR practicality challenged
Changing the fee to an enterprise was actually laid out in the TABOR constitutional amendment, according to individuals and groups that see the change as a good one.
The TABOR Amendment defines an enterprise as “a government-owned business authorized to issue its own revenue bonds and receiving under 10 percent of annual revenue in grants from all Colorado state and local governments combined.”
Proponents of the reclassification argue that the action has already been used to the benefit of the state.
Current Colorado enterprises include the state lottery and Colorado Parks and Wildlife.
Keeping the money generated from the HPF out of state revenues would allow it still to be used in the way it was initially intended while keeping TABOR intact and money available to put into other state programs.
If the HPF stays as it is, and TABOR caps are reached, however, the overflow will by law go toward taxpayer refunds, and the budget will demand cuts.
“We have enterprises that run lotteries, and build bridges and manage state parks. The one we propose provides services to our health care system that it can’t provide on its own — and they want to pay us for them,” said Hickenlooper in his state of the state address.
“If we can’t make this very reasonable change — like many already allowed under TABOR — then what choice do we have but to re-examine TABOR?”
Mayors from across the Denver metro on Tuesday railed against gridlock at both the state and federal levels while discussing local and regional solutions to problems such as affordable housing and transportation, and called for the “de-Brucing” of state finances in the way many municipalities that have done already.
Five metro mayors gathered at the Denver Business Journal’s annual State of the Cities event to field questions on topics ranging from education funding to construction defects laws and the effect it’s having on construction of mid-priced condominiums
State of the Cities 2016: Neil Westergaard, Denver Business Journal editor-in-chief,… more
MONICA MENDOZA | DENVER BUSINESS JOURNAL
Asked about proposed state-level measures including a $3.5 billion bonding effort and moving revenue from the state’s hospital provider fee to an enterprise fund, both with the goal of boosting funding for roads, mayors said that bigger, constitutional issues need to be addressed first.
“It has to be said. Before we address bonding, we need to de-Bruce. Period. And allow, without raising taxes, for the state of Colorado to take the revenue they receive and to begin to invest in important programs like transportation, roads and education,” said Denver Mayor Michael Hancock.
De-Brucing is a reference to tax activist Douglas Bruce, author of the 1992 Taxpayer’s Bill of Rights constitutional amendment. TABOR placed limits on the amount of tax revenue that can be collected by governments in Colorado and mandates tax rebates in some cases when revenues exceed limits tied to population growth.
The term “de-Brucing” refers to ballot measures that allow governments to opt out of the revenue limits and keep amounts raised by existing tax rates. Tax rate increases have to be approved by voters under TABOR. Continue reading
Colorado’s unique tax law — the Taxpayer’s Bill of Rights, or TABOR — will likely become a point of conversation and contention during much of 2016 in both the legislative session and at the ballot box.
Gov. John Hickenlooper’s budget request attributed some of the need for millions of dollars in cuts to the constitutional amendment that is seen by some as too restrictive a way to govern Colorado’s spending.
Movement is already afoot to make change. As an example, a nonpartisan group of state leaders called Building a Better Colorado has been traveling Colorado this year to find consensus on a possible ballot initiative in November to change parts of TABOR.
In addition, state Democrat lawmakers have said they plan to bring back last year’s failed hospital provider fee bill, a potential work-around TABOR to create wiggle room in the state’s budget. The hospital provider fee, which is assessed on hospitals to help pay for indigent health care, has raised so much money that it has bolstered state budgets past TABOR limits, requiring the state to issue taxpayer refunds. Continue reading
Here is the newly released Fraser Institute study (attached) titled Economic Freedom of North America 2015. In the event that you can’t open the attachment, you can find the report here: http://www.freetheworld.com/2015/efna/economic-freedom-of-north-america-2015-us-edition.pdf. It examines the freedom rankings by state based upon government spending, tax policy, and labor market freedoms. It reflects data through 2013. The lead investigator (Dean Stansel) is a Ph.D. economist (educated at George Mason University) and former Cato Institute research analyst. He is currently a Research Associate Professor at the O’Neil Center for Global Markets and Freedom in the Cox School of Business at Southern Methodist University.
The Fraser Institute is a Canadian public policy think tank. It has been described as politically conservative and libertarian. The Institute is headquartered in Vancouver and ties to a global network of 80 think-tanks through the Economic Freedom Network. According to the 2014 Global think tank index report, Fraser is number 23 (of 100) in the “Top Think Tanks Worldwide (non-U.S.), number 19 (of 150) in the “Top Think Tanks Worldwide (U.S. and non-U.S.) and number 1 (of 30) in the “Top Think Tanks in Mexico and Canada”.
You should be encouraged in our fight to preserve TABOR. The data (Table 3.2c on page 37) shows that, as of 2013 (the last data set available) Colorado is tied for 9th in economic freedom within the 50 United States. In amount of government spending, CO ranks 12th (behind, FL, ID, KS, MO, NE, NH, OK, SD, TX, and VA). We don’t fare as well in taxes as CO ranks 19th behind AL, AK, AZ, FL, LA, MI, MO, MT, NV, NH, OK, OR, SD, TN, TX, VA, WA, and WY. Labor market freedoms finds CO ranked 12th behind FL, GA, MD, MA, NH, ND, PA, SD, TN, TX, and VA. According to the report, CO should learn something about freedoms from New Hampshire (ranked alone as #1 whose motto is “Live Free or Die) as well as FL, MO, NE, SD, TN, TX, and VA.