Bipartisan legal opinion surfaces regarding Colorado’s hospital fee and road funding

Feb 11, 2016, 2:56pm MST Updated Feb 11, 2016, 3:53pm MST

Ed Sealover Reporter Denver Business Journal

Former legal counsels for the past two Colorado governors opined Thursday that the Legislature can turn the hospital provider fee into an enterprise fund and create more room in the general fund for transportation and education spending — a development that business leaders hope will convince some Republicans who may be sitting on the fence to back the move for such a change.

The release of the opinion came just hours after Gov. John Hickenlooper told a meeting of the Colorado Municipal League that if he can convince legislators to back his idea about turning the fee into an enterprise fund, he would like to use some of the newly freed revenue stream to sell bonds and raise $4 billion to $5 billion for immediate transportation solutions.

Colorado Gov. John Hickenlooper speaks to a Colorado Municipal League meeting on Feb. 11,… more

Ed Sealover | Denver Business Journal

Republican legislative leaders did not react immediately to either the opinion or to Hickenlooper’s bonding plan.

But Kelly Brough, president and CEO of the Denver Metro Chamber of Commerce, said that GOP leaders to whom she has spoken in favor of the enterprising plan have promised her to keep an open mind. And if the constitutionality of the enterprise plan was the tipping point for anyone to oppose the idea, she thinks the new arguments might be enough to push them the other way.

“For those for whom this truly is a legal issue, it could make a big difference,” Brough said. “Now we have two additional attorneys coming out and saying that they feel that the enterprise fund is legal.”

The hospital provider fee charges medical centers for each night a patient spends in a bed. The state then leverages the revenue to get a matching amount from the federal government, and it uses the money to expand Medicaid eligibility and get more adults off the roles of the uninsured.

Because the money — more than $550 million is expected to be generated this fiscal year — counts against the state’s Taxpayer’s Bill of Rights revenue cap, it pushes the state more quickly toward having to give a TABOR refund to residents and threatens to limit or eliminate new transportation funding.

Hickenlooper and legislative Democrats believe the solution is to exempt the money from the TABOR cap by turning the fee into an enterprise fund, but Senate President Bill Cadman, R-Colorado Springs, received a memo from the nonpartisan Office of Legislative Legal Services before the start of the session saying that such a move is unconstitutional.

That memo argued that enterprise funds can be set up only to operate like state-owned businesses, receiving revenues for a specific service they offer. Unlike universities that offer an education and living space to students in exchange for tuition and fees and are considered enterprise funds, the hospital provider fee does not offer a specific good or service, the memo said.

However, Trey Rogers and Jon Anderson — who served as legal counsels for former Democratic Gov. Bill Ritter and former Republican Gov. Bill Owens, respectively — wrote that the OLLS was incorrect in its conclusions about the ability to categorize the money as an enterprise fund. The provider-fee fund would offer the service of helping hospitals defray the cost of providing care to patients and should not be considered as general revenue that can be used, like other pots in the general fund, for any service the state offers, Anderson said.

“Our courts have said that statutes enacted by the General Assembly enjoy a strong presumption of constitutionality and will not be overturned unless the statute is unconstitutional beyond a reasonable doubt,” Rogers added. “It is hard to imagine a court would find a provider fee enterprise to be unconstitutional beyond a reasonable doubt.”

Hickenlooper has received opinions from current Colorado Attorney General Cynthia Coffman’s office and former Attorney General John Suthers that the proposed fund would be constitutional as well.

On Thursday, he added a new wrinkle to his push for the use of the enterprise fund. The Democratic governor said that if the Legislature agrees with his plan, he would like to take about $220 million of annual revenue created under the TABOR cap by the move and use it as a revenue stream to pay back a bond sale — a move that could allow the state to move immediately on major projects such as Interstate 25 and Interstate 70 expansion.

About the only road-funding alternative would be to seek a gas tax hike for roads from voters, Hickenlooper said. And that would not pass, he said.

“When we go out and poll the voters about whether they want to raise taxes, we get a resounding ‘no,’” Hickenlooper told the CML meeting at the History Colorado Center. “Without the hospital provider fee … sooner or later we will kill the goose that lays the golden egg.”

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.

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