Prominent Denver business groups urge legislators to tweak hospital provider fee, fund roads

Colorado business groups are ramping up the debate over the state’s hospital provider fee, warning that if lawmakers don’t change how the state accounts for the money the fee generates, they’ll “almost certainly force” a tax increase to address Colorado’s crumbling roads instead.

The letter was sent to leaders of both chambers of the Legislature on Wednesday, calling on lawmakers to set revenue from the hospital fee aside in a so-called “enterprise fund” that wouldn’t be subject to limitations imposed by the Taxpayers’ Bill of Rights.

The letter is mainly directed at Senate Republicans, whose opposition killed a bill on the provider fee in the last session of the Legislature after it had already cleared the Democratic-majority House..

The business groups constitute a crucial support sector for GOP-sponsored legislation. The letter to leadership on the hospital fee is meant to give cover to Republican leaders who are feeling pressure from more conservative elements of the party that want to block the enterprise fund idea — or who want to repeal the fee altogether.

“Republicans are certainly sensitive to the needs of the business community. The Senate Republicans have a track record of fighting for businesses,” said Tony Milo, executive director of the Colorado Contractors Association, one of the organizations backing the request. “We want to point out this is something important to businesses.”

In 2009, state lawmakers adopted the hospital provider fee, which assesses a surcharge on hospitals for each night a patient bed is filled. The state then takes that money, leverages it to get an equal amount of matching funds from the federal government and uses those revenues to expand the eligibility pool for Medicaid. That leaves hospitals with fewer patients who are uninsured and unable to pay anything for their care.

The fee is expected to generate $1.2 billion in combined funds for the program this fiscal year.

That same year, legislators also approved Senate Bill 228, which created a formula to fund roads for five years but only after personal income in the state grew by more than 5 percent in a year. But the formula also called for reducing or eliminating access to that money if total state-government revenue were to exceed the Taxpayer’s Bill of Rights cap by more than 1 percent, in which case refunds have to be given to Colorado residents.

While more than $200 million will be transferred from the general fund to transportation funding in this first year of the five-year period, TABOR refunds are expected to cut that hospital fee transfers in half next year and imperil it altogether going forward.

House Speaker Dickey Lee Hullinghorst, D-Gunbarrel, offered a bill during the 2015 legislative session that would have removed the hospital provider fee from the TABOR revenue cap by making it an enterprise fund, as the Legislature has done to more than 20 other sources of revenue that benefit specific targets and do not go into the general fund. But the effort, backed by some business groups like the Denver Metro Chamber of Commerce, died after Republicans characterized it as an end run around TABOR rules and one that would cost taxpayers a rebate.

Business leaders in the Dec. 16 letter emphasize that they are supportive of the spending and taxation limitations of TABOR but they argue that the hospital provider has had unintended consequences — most notably, the threatening of funding for the highway system that had received no general-fund money for almost a decade before. SB 228 represented was a way to fulfill the Legislature’s bipartisan promise to designate more money for state roads, the letter continues, at a time where there are more than $3 billion in road projects that are backlogged.

“While the crowd-out of transportation dollars by the HPF will generate a small [TABOR] rebate in the short term, the loss of transportation funding will almost certainly force state policy makers to ask for either a tax increase, new tolling on existing lanes or other new fees or taxes that would easily outstrip the small rebate they would receive because of the crowd-out,” the letter reads.

Neither Senate nor House Republican leaders responded on Thursday to requests for comments on the letter.

This new effort is backed by groups ranging from business titans such as the Denver Metro Chamber to construction specialists like the Associated General Contractors to highway-dependent organizations like the Colorado Wheat Growers Association. It echoes a similar request that Gov. John Hickenlooper made of legislators in his 2016-17 fiscal year budget proposal.

It comes as other business coalitions are putting forth separate road-funding plans, such as a push for a $3.5 billion bonding plan unveiled Friday by northern Colorado chamber leaders. But it also comes as the TABOR Foundation, a non-profit group, has filed a lawsuit asking a judge to nullify the hospital provider fee by saying it is a tax that should have been approved by voters rather than a fee that the Legislature could put into place.

This new effort, to fix the negative impacts of the hospital fee, is not exclusive of a bonding plan or the rumored effort to seek a sales-tax hike for transportation funding via a ballot initiative, said Loren Furman, senior vice president of state and federal relations for the Colorado Association of Commerce and Industry. But the 17 signers of the letter feel that a legislative solution gives the most security for road funding, especially after multiple attempts at other solutions over the past five years have yielded no general-fund money at all for roads, she said.

“If we don’t do something now, I’m going to be talking to you about this for the next four years, and we’re going to have the same problem year after year,” Furman said. “I think the average person is tired of driving over potholes and poorly maintained roads, and the state has not spent an adequate amount on transportation over the last few years.”

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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