Thanks to an economy that both is growing and expanding to include new revenue sources for the state – namely recreational marijuana – Colorado’s chronically tight budget is feeling some reprieve going into the next fiscal year.
However, the constitutional binds that tie that budget restrict both its growth and its spending priorities. That leaves the state in the position of having collected more money than the Taxpayer Bill of Rights (TABOR) allows it to spend, yet having more spending needs than it is capable of funding. The conundrum is not easily solvable – nor is it altogether negative – but Gov. John Hickenlooper has a plan that would alleviate one of the elements that triggers revenue limits without disrupting TABOR’s intent. It is a proposal worth considering.
Because of the combined boon of marijuana sales tax – a previously non-existent line item – and a generally robust economy that is growing the state’s general fund, Colorado is forecast to hit its revenue limits for this year, triggering refunds to taxpayers in the coming years. Voters would have to grant the state permission to keep that excess to backfill gaping holes in transportation and education budgets formed during the leaner years, but lawmakers are reticent to ask, and there has yet to be a citizen initiative proposing the state keep the money.
Hickenlooper’s suggestion is to keep the projected refunds as-is for this and next fiscal year, while prioritizing their distribution toward lower- and middle-income earners.
Simultaneously, the state would reassign the revenue generated from the hospital provider fee – a fee paid to the state by hospitals in order to help expand coverage for uninsured Coloradans, leverage federal match funding for Medicaid and improve care for those who lack insurance. Currently, the hospital provider fee is lumped into the general fund, where it contributes to the TABOR revenue limits – this despite the fact that it never has been considered a tax and only is paid by hospitals as a means of both offsetting the state’s liability for indigent care costs and securing federal assistance for those costs and Medicaid expansion.
Hickenlooper’s plan would isolate the provider-fee money in an enterprise fund where it would stay out of the general fund limit equation, thereby freeing more of that revenue for needed transportation and education priorities. This is a sensible solution.
Hickenlooper’s budget office estimates that in the next fiscal year, the provider fee will net $688 million – a significant number that, if kept separate from the general fund, would leave real money available for too-long-neglected projects. The transportation budget has not been receiving its legislatively mandated transfers for those priority projects in recent years, and the provider fee’s presence in the general fund means it will receive about half – $102.6 million – of what it could for fiscal year 2015-16, were the money accounted for separately.
Further, the realignment would free money to boost K-12 education funding, which has not received its full constitutionally required increases in per-pupil revenue each year since the Legislature in 2009 adjusted the formula to eliminate key variables, including district size, cost of living, percentage of at-risk students and other critical variables that affect school budgets. That is a critical correction that will not be made easily without some significant shift.
Hickenlooper’s proposal is a good one in that it addresses areas of the state budget that are in need of monetary attention but does not undermine either the intent or the letter of TABOR. The hospital provider fee should have been established as a separate fund from its inception. Making the correction now is an appropriate fix.
