Gov. John Hickenlooper pitched a fix Thursday to what some call Colorado’s “fiscal thicket,” a complex network of constitutional amendments — most notably the Taxpayer’s Bill of Rights — and state laws that dictate how state government spends taxpayer dollars.
The plan — spelled out in a four-page letter to Democrat and Republican leaders in the General Assembly — hinges on the state keeping an estimated $316.6 million in fiscal year 2016-17 instead of paying it back to taxpayers through a TABOR refund.
That money would instead go to (and yes, this adds up to more than $316.6 million): $215 million for transportation projects, $50 million for common education; $20 million to repay local governments for the impact of oil and gas operations; and $75 million to pay back money borrowed from the Medicaid expansion and increased hospital provider fees.
Under the plan, lower income taxpayers could have their cake and eat it, too. They would receive a share of $85 million in a new state Earned Income Tax Credit.
Henry Sobanet, director of the Governor’s Office of State Planning and Budgeting, said there is enough time remaining this session to address an important question for future budgets.
“Are we sure that the structure we have is providing the resources that all the aspects of the state’s priorities need?” Sobanet asked. “This idea, these conversations have been kind of back and forth for many months, and so we felt it was a good time to try and see if there was some common ground around a vision for transportation, a vision for rebates, a vision for some extra resources for K-12 education.”
Under the plan, voters wouldn’t be asked for permission for the state to keep the increased revenue, a key tenet of TABOR.
Instead, state revenue would be “reduced” below the TABOR limit (a limit on how much state spending can grow in a single year without triggering a refund) by moving hundreds of millions of dollars in hospital provider fees to an enterprise account, which wouldn’t count toward the TABOR limit.
Former state Rep. Penn Pfiffner, now head of the TABOR Committee and TABOR Foundation, called Hickenlooper’s plan a “scheme” that is “improper, unwise and unconstitutional.”
“The reason for the Taxpayer’s Bill of Rights was to allow citizens to have better control over the budgets of all the governments in Colorado, and my initial reaction to the governors plan is that he is trying to move things off budget and redefine them in ways that are entirely inappropriate.”
Carol Hedges, executive director of the Colorado Fiscal Institute and a TABOR researcher, said she was glad to “see such a comprehensive approach being laid out as a means to help work the state’s way through the complications of TABOR.”
“It’s a bold attempt to try to reconcile a lot of interests,” Hedges said.
She said exceptions to the strict TABOR limit on government growth to inflation plus population were put in place for a reason.
One of those exceptions were “enterprise funds.”
“The way I see it, the hospital provider fee is not tax dollars. It’s not dollars that are paid for by the public,” Hedges said. “It is really just hospitals contributing money in a way that can then be used to get federal matching money so that they can be more appropriately reimbursed for the expenses they are undertaking by dealing with the health needs of Medicaid eligible Coloradans.”
Moving that to an enterprise fund could help the state pursue other goals.
“I think the voters and Coloradans, they want a government that works,” she said. “They want government that is effective and capable of providing needed services and I think what the governor is proposing is a legitimate use of TABOR.”
Pfiffner said the classic example of an appropriate use of an enterprise fund is a college dorm on a state university campus that is built using bonds that are repaid using rents charged to students who live in the dorm. When the hospital provider fee was passed in 2009 there was much debate about whether it was a tax or a fee.
Regardless, it is one major driver of the state’s increase in revenue and march past the TABOR limit.
Hickenlooper’s letter says it generated $532.3 million this fiscal year and in 2015-16 could reach $688.5 million.
“This hospital fee is truly more fee like than some of the other things we have in the cash funds,” Sobanet said. “It could have started out as an enterprise fund.”
The plan would still kick in a TABOR refund, however. Taxpayers would receive an estimated $219.8 million in tax refunds in the 2014-15 fiscal year and $205.9 million in 2015-16 fiscal year.
Sobanet said the governor wants a guarantee that part of those TABOR refunds include the Earned Income Tax Credit trigger, which would ensure that low-income taxpayers received a refund in perpetuity of 10 percent of their federal EITC refund. Existing law calls for that to occur when the TABOR refund exceeds roughly $100 million.
“We’re intending for rebates to continue as they would have, at least with respect to the EITC and perhaps with enhancement of the sales tax rebate,” Sobanet said. “That’s an important goal here trying to address working and middle class economic issues and so protecting those and even recategorizing how we do the sales tax rebate.”
Sobanet and Hickenlooper would like to see all this come about in bills in the final two and a half weeks of the legislative session.
This article was written by Megan Schrader from The Gazette (Colorado Springs, Colo.) and was legally licensed through the NewsCred publisher network.