Could Colorado’s hospital provider fee be the key to increased road funding?

Reporter-Denver Business Journal

Some Denver business leaders are pushing a state budget fix that would ensure a boost in transportation funding and could help to increase education spending simply by moving the six-year-old hospital provider fee out of the general fund into what is know as “enterprise fund” status.

However, with the Colorado Legislature’s Joint Budget Committee set to introduce its proposed budget for the 2015-16 fiscal year on Friday, the idea has not gained enough traction yet even to be discussed formally by the committee.

And Democratic and Republican legislative leaders disagree on whether it should be considered, especially since that solution likely would eliminate any Taxpayer’s Bill of Rights (TABOR) refunds to residents statewide in the near future.

However, the same bill says the transfer can be cut in half if TABOR refunds — which are required when state-government revenue grows above a certain cap — are between 1 and 3 percent of the general-fund budget. And they can go away altogether if TABOR refunds exceed 3 percent.

Right now, the TABOR refund is projected to be a little more than 1 percent, which means the $204 million that had been planned for transportation funding would sink to $102 million.

Kelly Brough, president and CEO of the Denver Metro Chamber of Commerce, is among the business leaders who believe the state’s roads are in desperate need of maintenance and expansion. They could suffer extensively, especially if the economy continues to improve and leads to anticipated TABOR refunds that could reach $435 million by the 2016-17 fiscal year and wipe out transportation-funding transfers altogether, she argues.

But she and others believe there is a pot of money that could be removed from the general fund that would reduce or eliminate those refunds and sure up highways and bridges.

That pot is the hospital provider fee, a program created in 2009 that charges hospitals for each night a bed is occupied by a patient and uses the revenue to fund expansion of eligibility for the state Medicaid program.

That fee brings in roughly $600 million per year that is counted against the TABOR cap and uses it to secure a 2-to-1 match in federal funding that provides another $1.2 billion for the state that doesn’t count against the cap.

With that money, the state has gotten more than 305,000 previously uninsured people onto Medicaid, program reports show. And while physicians and hospital leaders complain that Medicaid reimbursements are low enough that they don’t quite cover the cost of giving care, they represent an income stream that is totally lacking for most of the uninsured patients that hospitals are required under law to treat.

Brough argues that the hospital provider fee does not belong in the general fund, which is the pot of revenues legislators can use for any general purpose of state government.

Under the law, she points out, the provider fee comes from a specific group of taxpayers and must be used for a specific purpose — expanding Medicaid eligibility — rather than in whatever way legislators see fit.

Because of the spending limitations, legislators could remove all of that provider-fee revenue from the general fund and place it in an enterprise fund that limits the use of certain fees for certain purposes. Fees placed on motor-vehicle registrations through another 2009 bill, for example, go to a transportation fund that allows them only to be used for road and bridge repairs and transit options.

Were the Legislature to remove the hospital-provider-fee revenues from the general fund, that would free up $600 million of space under the TABOR cap — enough to knock out mandatory TABOR refunds next year and the year after.

And that would ensure transportation gets the full amount it needs and that other priorities, from education to tax breaks for emerging industries, could get funded at a time when legislative leaders say there is almost no money for many of the bills now moving through the legislative process, Brough said.

“A lot of the response has been that it’s just kind of a common-sense pragmatic approach to the challenge,” Brough said of conversations she’s had with legislators, business leaders and members of Gov. John Hickenlooper’s staff. “Every time we fail to invest in transportation, it costs more later.”

Some legislative leaders are intrigued by the idea. House Speaker Dickey Lee Hullinghorst, D-Gunbarrel, said she feels it would be good to free up space and get under the TABOR cap — though she acknowledged that it’s too early to get into any details about discussions that may be happening.

However, others are not fond of the idea.

Sen. Kent Lambert, the Colorado Springs Republican who chairs the JBC, said that moving the hospital-provider-fee money around would be equivalent to a “shell game” where the state would say it’s no longer bringing that money into the general fund but still try to use it to draw down federal funds.

“I think there’s probably some people who are talking about that. I’m not,” Lambert said.

Eliminating TABOR refunds also stands as a potentially unpopular move with some voters who want to get refunds from the state that would average less than $100 per person. Hullinghorst acknowledged as much.

Rep. Dave Young, a Greeley Democrat and JBC member, said such enterprise-fund legislation could move forward even after the Legislature passes the final version of the budget in about two weeks.

The question, however, is whether there is appetite in the 65-member House and the 35-member Senate to proceed with the idea that Brough finds so intriguing.

“We think most Coloradans agree that investments to maintain our roads and bridges are critical to the state right now,” she said. “And we don’t think that a transfer formula that could be triggered should wipe that money out.”

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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