DENVER – The mammoth compromise effort of the 2017 legislative session, Senate Bill 267, went into effect Saturday.
Commonly referred to as a casserole or Christmas tree bill, meaning it has a little something for everyone, SB 267 is focused on the “sustainability of rural Colorado.” It was a bill that was criticized as a violation of the single subject rule for Colorado legislation, which prevents omnibus bills with multiple provisions that are unrelated to the legislation.
The most significant provision of the bill is reclassification of a fee assessed on hospitals. Money generated by the Hospital Provider Fee will not count toward the state’s revenue limit under the Taxpayer’s Bill of Rights.
The revenue generated by the fee is federally matched and returned to hospitals using a formula that favors rural providers and those that service a large number of Medicaid dependent and uninsured patients.
To balance the state budget, the fee was scheduled to be cut by $264 million, which would have left rural hospitals in dire budgetary situations and caused some to close their doors.
By reclassifying the fee as an enterprise, the funds it generates are no longer considered state revenue or count toward the TABOR limit, giving the state room to hold onto hundreds of millions of additional tax dollars to fund state departments, such as Transportation and Education.
The impending threat to hospitals brought Republicans and Democrats to the table to craft SB 267, but it required a number of other compromises to pass the bill. This included reducing the revenue limit under TABOR by $200 million; doubling Medicaid copays for medication, outpatient and emergency services; raising the special sales tax on marijuana to 15 percent to send $30 million to rural schools; and extending a tax credit for small businesses.
SB 267 also authorizes issuing of Certificates of Participation amounting to $2 billion over the next four years to fund transportation and other construction projects across the state. These certificates are the equivalent of taking out second mortgages on state-owned buildings. Of this $2 billion, the Colorado Department of Transportation will receive $1.88 billion. The remaining $120 million will go toward maintenance and construction of state buildings.
Twenty-five percent of the money CDOT will receive must be used for projects in rural Colorado, and an additional 10 percent must go toward transit projects.
Initially, the money appears to be a large investment. But it isn’t when considering that CDOT is required to allocate $50 million from its budget each year to repay the Certificates of Participation, said Amy Ford, spokesperson for CDOT.
“That means somewhere from our existing budget, likely surface treatment and that kind of thing, will have to be put on hold while we then go forward and build new projects,” Ford said.
The certificates will be issued one at a time over the next four years and each will have a 20-year lifespan, meaning CDOT will end up paying $1.2 billion. The net gain will be $680 million.
The remaining $2 billion needed to repay the certificates, with interest, will come from the state’s general fund.
Despite the $680 million, it falls well short of the estimated $24.9 billion funding shortfall CDOT anticipates over the next 24 years.
“Effectively, what 267 is is a low interest loan, and so we have to think carefully about how we finance new projects,” Ford said.
Because of the limiting nature of this funding and the scale of projects, not all will receive CDOT funding.
In La Plata County, $121.3 million in priority projects have been identified. But because the county does not meet the requirements for rural designation, which is defined as having a population less than 50,000, it does not qualify for the 25 percent set aside for rural projects and will have to compete with metro areas on the Front Range for funding.
