Gov. John Hickenlooper on Thursday asked leaders in the Legislature to back a plan that would ensure years of increased funding for transportation and K-12 education in exchange for lowering the amounts of refunds going back to Colorado residents under the state constitution’s Taxpayer’s Bill of Rights.
In a letter, Hickenlooper endorsed a five-point plan that involves removing the six-year-old hospital provider fee and the nearly $600 million in revenues it brings in annually from the general-fund portion of the budget, a move that would reduce revenue that is considered to be under the state’s TABOR cap.
Bringing that revenue below cap levels would trigger full transfers of transportation funding — more than $200 million a year for the next four years — under a complex 2009 bill that tied that funding to personal-income growth and the amount the state budget could stay under the TABOR cap.
Business leaders have pushed the idea of relocating the hospital provider fee for months in an effort to get desperately needed money for the state’s aging and overcrowded roads, which have not received general-fund repair money since the 2007-08 fiscal year.
The move would not affect the amount of money generated for hospitals.
The plan, which would require introduction and passage of multiple bills with less than three weeks to go in this year’s legislative session, could face problems in the Republican-controlled Senate, where Joint Budget Committee Chairman Kent Lambert, R-Colorado Springs, compared the idea last month to a “shell game.”
Senate leaders have said all session as well that they want to protect TABOR refunds that are set to go to state residents. And Senate President Bill Cadman, R-Colorado Springs, noted on Thursday how much action the plan requires in just a short time.
But the Democratic governor’s support for the proposal will only up the pressure on legislators to find some sort of solution that does not cut in half — or cut out altogether — the money that is slated to go to transportation.
“We have an incredible opportunity to invest in our state by better accounting for hospital provider fee dollars,” said Kelly Brough, president and CEO of the Denver Metro Chamber of Commerce, after Hickenlooper distributed his letter. “Without the action of moving the hospital provider free into an enterprise fund, our state simply will not have access to critical funds needed to invest in bridges, roads and schools.”
Hickenlooper’s plan revolves around two bills signed into law by former Gov. Bill Ritter in 2009 at the height of the Great Recession.
One created the hospital provider fee — a fee assessed on health facilities for each night that a bed is occupied. That money is leveraged to receive twice as much funding from the federal government, and it all has been put together to expand Medicaid eligibility and get 305,000 formerly uninsured patients — patients who are very unlikely to pay any hospital bills — on Medicaid instead.
The other bill set up a funding formula under which general-fund money would transfer again to transportation once personal income grew by more than 5 percent in a calendar year — as it did in 2014 — and keep those transfers going for five years.
If revenues exceeded the TABOR cap and the TABOR refund were equal to between 1 and 3 percent of the $10.25 billion general fund budget, those transfers would be cut in half, however. And if the refund exceeded 3 percent, the transfers would be eliminated altogether.
Because the TABOR refund is expected to be about $117 million next year, the transfer to transportation for the 2015-16 budget would be cut in half, to roughly $102 million. For the following year, however, state economists have estimated the transfer could exceed $400 million, meaning the flow of new money to roads would stop altogether.
Under Hickenlooper’s proposal, the Legislature would convert the hospital provider fee to an enterprise fund. Such funds receive no general state tax revenues — as the fee does not now — but they also don’t count against the TABOR cap.
With the hospital provider fee projected to generate $688.5 million in the fiscal year beginning on July 1, that would bring the general fund well under the TABOR cap next year and in the next few years, and it would ensure that transportation gets its full $205 million next year and $215 million in 2016-17.
And that also would free up space under the TABOR cap that the Legislature could use to put new revenues to other areas, like K-12 education.
Meanwhile, the governor would push the Legislature to enact an Earned Income Tax Credit and another new credit so that middle- and lower-income taxpayers would still see the benefits of a TABOR revenue without the state having its hands tied to give away a certain amount and deny new money from going to transportation, he wrote.
“As we have evaluated these interactions and researched the legislative history of these laws, it has become clear that we can do better as a state to provide for key priorities such as transportation, education and supporting the middle class, while still respecting the will of the voters to limit state government revenue,” Hickenlooper wrote in the letter to the leaders of the House and Senate legislative caucuses.
As House Speaker Dickey Lee Hullinghorst, D-Gunbarrel, has said before that she favors the idea, it is clear that its fate now seems to rest clearly in hands of Cadman and his caucus.
Reporter- Denver Business Journal
Ed Sealover covers government, health care, tourism, airlines, hospitality and restaurants for the Denver Business Journal and writes for the “Capitol Business” blog. Phone: 303-803-9229.