Colorado Capitol Report

Governor Issues 2016-2017 Budget with $373 Million in Cuts–and $189 Million in Taxpayer Refunds

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State Policy News

Governor Issues 2016-2017 Budget with $373 Million in Cuts--and $189 Million in Taxpayer Refunds

The daunting political challenge of the Colorado fiscal conundrum leaped forth from Governor John Hickenlooper’s proposed $26.98 billion budget for fiscal year 2016-2017 that he sent Monday to the Joint Budget Committee of the Colorado General Assembly.

The State General fund (mainly income and sales taxes) is projected to increase 0.9 percent above the current budget level to $10.36 billion.

On the one hand, the Governor proposes cutting $373 million as the state’s economy has slowed.  The cuts would hit higher education, maintenance of state buildings and hospitals most severely.

The Governor’s proposal would cut spending from the current fiscal year’s level by 0.4 percent.

The beneficiaries of the cuts would be Medicaid, K-12 schools and patching up a projected deficit of $160.3 million in the current fiscal year’s budget.  The Governor proposes taking money from the State’s reserve fund to cover the deficit and then using money from the 2016-2017 budget to replenish the reserve.

On the other hand, TABOR, the State Constitutional Amendment that limits the percentage of additional tax revenue that the State can retain each year to inflation plus population growth, will result in the State refunding $189 million to taxpayers.  Rebates to individual taxpayers will range from $34 to $108, with the average being $51.

Such is the budgetary paradox of Colorado’s tax system because of conflicting, voter-approved, Constitutional amendments.  Resolving the paradox during the 2016 legislative session will be exacerbated by the intense, partisan politics of a critical election year.

Amendment 23

On September 21st, the Colorado Supreme Court narrowly ruled that that multi-billion dollar cuts to K-12 public education funding since 2010 do not violate Amendment 23 of the State Constitution.

Amendment 23—passed by voters in 2000 as a ballot initiative–mandates an annual increase (enrollment plus inflation) of the “statewide base per-pupil funding for public education.”  The K-12 school cuts–or “negative factor” as it’s called under the Gold Dome—amount to $905 million.

The Governor’s budget includes $301 million to cover the enrollment-and-inflation factor of Amendment 23.

The Hospital Provider Fee

Clouding the budget picture is the issue of the hospital “provider fee.”  In 2009, the legislature approved a bill, HB-1293, to charge a hospital a fee for each night a patient occupies a bed.

The revenue from the fee is then used to obtain matching Federal dollars to fund the expansion of eligibility for the state Medicaid program under the Federal Affordable Care Act (ACA), more commonly known as “Obamacare.”  The result has been the addition of more than 300,000 people to the Medicaid program.

Although the fee (aka cash-fund revenue), which amounts to about $600 million annually, is not funneled into the State General Fund, the TABOR rebate liability that the fee generates is a General Fund obligation.  The Governor’s Office says “ . . . the TABOR rebates in the General Fund are the result in growth in Hospital Provider Fees . . .”

An attempt to exclude the provider fee from the TABOR revenue limit to free up funds for transportation, advocated by the Governor, failed in the Republican-controlled Senate during this year’s legislative session.  The Governor proposed transforming the provider fee into an “enterprise fund.”

The Governor proposes cutting the fees paid by hospitals by $100 million for the 2016-2017 budget.  Cutting the provider’s fee by $100 million also means reducing taxpayer refunds by $100 million, which makes it a juicy target for those who fervently support TABOR and taxpayer refunds.

Hospitals would, therefore, lose not only the $100 million from the provider fee but also the $100 million match from the Federal Government, resulting in a net loss of $200 million.

Further complicating the provider fee issue is a lawsuit filed last summer in Federal District Court by the Tabor Foundation, which argues that the fee should be declared unconstitutional and that the State should refund the billions of dollars that have been collected since the 2010-2011 fiscal year.

Next Step: The Joint Budget Committee

Next Thursday, the legislature’s influential Joint Budget Committee will hold the first meeting to begin its months-long process of reviewing the Governor’s proposal and drafting the budget to be submitted to the legislature during its 2016 session.

The bipartisan JBC is comprised of three Democrats and three Republicans.  The chair is Senator Kent Lambert (R-Colorado Springs) and the Vice Chair is Representative Millie Hammer (D-Dillon).  In 2016, Representative Hamner will chair the JBC.

Here is the news release from the Governor’s Office:

state seal


Office of Gov. John Hickenlooper

Kathy Green | [email protected] |303-550-9276


Gov. Hickenlooper proposes FY 2016-17 State budget; plan calls for a drop in spending and accounts for TABOR rebates

DENVER — Monday, Nov. 2, 2015 — Gov. John Hickenlooper today delivered the FY 2016-17 proposed budget to the Joint Budget Committee (JBC) as required by law. Prepared by the Governor’s Office of State Planning and Budgeting (OSPB), the requested budget totals $26.98 billion, a drop of 0.4 percent from the current year with $10.36 billion coming from the General Fund (mostly State income and sales taxes). The General Fund increase is 0.9 percent above the current year’s budget.

The FY 2016-17 General Fund request includes $189 million in rebates required by the Taxpayer’s Bill of Rights (TABOR). At this level, rebates will range between $34 and $108, with an average of $51.

“This proposed budget strikes a balance between the contradictory rules in the Colorado Constitution, funding for essential State programs, and an unclear revenue picture,” said Hickenlooper. “We had to make difficult decisions to find this balance that will affect health care providers, students from kindergarten through college, and State workers. We look forward to working with the General Assembly and the Joint Budget Committee on the final plan.”

Though economic conditions in Colorado remain among the most favorable in the United States, the budget required numerous balancing measures. In the current year General Fund outlook, the LCS forecast shows a $215.4 million shortfall (35.2 percent of the required reserve), while the OSPB forecast is $28.7 million (4.7 percent) below the required reserve. For FY 2016-17, the forecasts are closer in terms of growth rates, and the available money differs mostly by the gap in the current year.

The General Fund budget request uses the midpoint of the two available forecasts. Through the first quarter of the fiscal year, growth in the General Fund was 5.9 percent above the same period in 2014 and major sub-components of various taxes are performing consistent with the September 2015 OSPB forecast, notably wage withholding and estimated payments. However, as a measure of prudence, a lower assumption of available revenue was used for the request. With this assumption the current year General Fund budget is short by $160.3 million.

Colorado’s statutes and State constitutional provisions that govern revenue and spending are influencing features of the request. At the present time, both available forecasts show that the State will not be able to retain all of the revenue available and the excess revenue is a rebate liability in the General Fund. However, the rebates under the TABOR revenue limit are the result of cash fund revenue collected outside the General Fund, notably the Hospital Provider Fee established in House Bill 09-1293. Without these collections, State government revenue has grown slower than population and inflation since the revenue base was set in FY 2007-08.

Against available new revenue of $457 million and before balancing measures, OSPB identified $830 million in primary cost drivers in the General Fund:

  • $ 301 million for enrollment and inflation in K-12 schools
  • $ 289 million for TABOR rebates
  • $ 160 million to restore the 6.5 percent reserve level
  • $   80 million for new Medicaid clients

Thus, the budget request closes a $373 million gap.

Large growth areas in the budget include:

In K-12 education, a 2.6 percent ($162.6 million) increase from State and local funding sources. With this request, per pupil funding will grow to $7,397.52 from $7,294.40.

The State expects the Medicaid population to increase 4.7 percent to 1.35 million Coloradans. Though the overall appropriation to the Department of Health Care Policy and Financing will be flat, the General Fund to the department will increase by $135.6 million or 5.4 percent.

Several important requests in the Department of Human Services including: 1) $6.7 million to hire an additional 100 child welfare caseworkers. This in addition to the 100 new workers approved for this year;  2) $4.75 million for 125 additional workers in the Division of Youth Corrections (75 workers were approved for this year); 3) $4.1 million to address court-ordered competency evaluations and restorations, the demand for which has been increasing significantly; 4) $3.8 million to increase funding in the Early Intervention program, serving an additional 467 children.

Based on the forecast assumptions, under the provisions of Senate Bill 09-228, transportation will receive $201.9 million in FY 2015-16 and $107.4 million in FY 2016-17.

The budget required significant balancing measures to match spending and revenue. These include:

Reduction of Hospital Provider Fees. As noted earlier, the TABOR rebates in the General Fund are the result of growth in Hospital Provider Fees, which are not collected in the General Fund.  However, the rebate liability they generate is a General Fund obligation. We propose a $100 million reduction in the expected collections in FY 2016-17.

Reduce Appropriations to Higher Education. This request reflects a continuation of financial aid programs at the FY 2015-16 appropriation level, but $20 million, or 3.1 percent, is reduced in the General Fund request for public colleges and universities.

Allow the “Negative Factor” to Increase.  For K-12 education, FY 2016-17 enrollment is expected to increase by 1.2 percent and inflation will be 1.8 percent. In this request, though per pupil funding will increase by $103.12 (1.4 percent), the negative factor in this request will grow by $50 million to $905.2 million.

Allow the State Education Fund Balance to Drop. As part of minimizing the increase in the negative factor, this request allows the ending balance in the State Education Fund to drop to $102.8 million, from a projected ending balance of $342.7 in FY 2015-16.

Reduce Most Provider Rates by One Percent. Based on current appropriations a one-percent across the board provider rate reduction would equal $52.6 million total funds. However, we propose this reduction excluding primary care physicians under the federal “1202” designation and those providers to the developmentally disabled. With these exclusions, the reduction totals $19.6 million net General Fund and $45.6 million Total Funds.

The request also used an updated forecast of local property taxes for school funding, which added $72 million over two years.

Meanwhile, though there is no statewide raise for State employees, health insurance contributions should keep take home pay even with the current year.

Click here for the entire budget transmittal letter and summary slide presentation from OSPB. Click here for all of the components of the budget request.

For news media coverage of the Governor’s proposed budget, read:

Lawsuit over Colorado’s providers fee could complicate budget debate,” by Ed Sealover, The Denver Business Journal, November 3rd.

“$373 million in cuts,” by John Frank, The Denver Post, November 3rd.


Rocky Mountain Prestress Hosts CACI Manufacturers Meeting

Rocky Mountain Prestress

Dave Holsteen, President of CACI member Rocky Mountain Prestress, left, shows CACI manufacturing leaders around the company’s architectural plant Thursday in north Denver.  About two dozen CACI members attended the CACI meeting to discuss such issues facing manufacturers as the lack of qualified workers, the effect of Colorado’s legalization of medical and recreational marijuana on the workforce and the onerous effect of the state’s local business personal property tax on companies.

Federal Policy News

Congress Takes Big Step Toward Final Approval of Long-term Highway Bill, Ex-Im Bank Reauthorization

This week, the U.S. House of Representatives passed its version of the Highway Bill, which included nearly $340 billion for highway and transit spending over the next six years.  Under the leadership of newly sworn-in Speaker of the House Paul Ryan (R-WI), the House passed the measure by a vote of 363-64, considering more than 100 amendments during Floor debates regarding the legislation.  Although the House bill still needs to be reconciled with a version of the Highway Bill previously passed by the Senate, this week’s vote marks a significant step toward Congressional approval of the first, long-term transportation spending bill in more than a decade.

Current authorization for Federal transportation spending expires on November 20th, giving lawmakers about two weeks to conduct a conference committee to reconcile the House and Senate-passed bills and repass the final legislation or face the need for yet-another continuing resolution to allow for a short-term continuation of existing statutory and funding authority until the final details can be worked out.

Congress has been forced to rely on a seemingly endless stream of short-term continuing resolutions for the majority of the last decade as Congressional debates regarding the Federal budget and national debt forced substantial cuts to non-entitlement, discretionary spending for a wide range of programs, including transportation.

Notably, the House version of the Highway Bill included a five-year reauthorization of the Export-Import Bank.  Pro-business Republicans joined with nearly all House Democrats to use a rare procedural tool known as a “discharge petition” to force a vote to reauthorize the Ex-Im Bank during the Floor debates leading up to the passage of the Highway bill.  The measure easily passed, 313-118.  Because the Senate version of the Highway Bill included a similar reauthorization, it is highly likely that the Ex-Im Bank will regain the authority to restart operations once Congress passes a final compromise version of the Highway Bill, and it is signed into law by the President.

For more information regarding the passage of the Highway Bill or the reauthorization of the Ex-Im Bank, read the following:

Ryan notches a transportation win,” by Heathy Caygle with Lauran Gardner, Politico, November 5th.

Export-Import Bank c lose to reopening after House includes authorization in highway bill,” by Jim Puzzanghera, The Los Angeles Times, November 5th.

House Passes Highway Bill With Export-Import Bank Renewal,” by Siobhan Hughes, The Wall Street Journal, November 5th.