Colorado’s Fiscal Time Bomb | The Bell Policy Center

Colorado’s Fiscal Time Bomb

Date: May 10, 2017
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Here in Colorado, we’re no strangers to the fiscal time bomb. We know well the eleventh-hour financial crisis that results from butting up against an impending, artificial public spending limit. At least a few times over the past 25 years, our state lawmakers have had to become expert bomb technicians, carefully rewiring the inner workings of our complex budget moments before catastrophe strikes.

This year, following two years of tense negotiations over a funding mechanism called the hospital provider fee, state lawmakers have been able to reset the clock once again with SB 17-267. (For a quick primer on the hospital provider fee, click here.) This new law will give us a few more years to meet Coloradans’ most basic needs.  But this is a temporary solution that will last only until around 2020 or 2021, when we will have to consider cuts to vital services again.

At the Bell, we support this year’s compromise. It gives Colorado some breathing room. But once again, we are spending too much political energy standing still rather than harnessing Colorado’s considerable fortunes to support vital needs. Ultimately, we are failing to invest enough in our state. Barring some change at the ballot box, we won’t help more parents afford child care or better schools or more accessible college and post-secondary programs. We’ll continue to scratch our heads at why we don’t have nicer services and infrastructure. Our state will continue to spend too little to help working families succeed.

Here’s what this year’s compromise on the hospital provider fee does:

  • Counts revenue from the provider fee as an “enterprise” and not toward our Taxpayer’s Bill of Rights (TABOR) cap calculation. Rural hospitals that rely on this revenue will escape fatal cuts and we’ll now have more room between current spending levels and the Referendum C cap that voters approved in 2005.
  • Reduces the Referendum C cap by $200 million. While shrinking the current cap, the state still has room to retain increased revenues for the next few years.
  • Allows lawmakers to pay for the homestead exemption — a property tax break for seniors — out of TABOR rebates rather than general funds.
  • Authorizes the legislature to obligate as much as $100 million in general funds annually to pay for bond-like financing mechanisms called “certificates of participation” intended to start fixing our transportation infrastructure.
  • Eliminates the sales tax on marijuana (which counts toward the TABOR cap), and increases marijuana tax rates (which are not counted toward the cap) to pay for a reduction in the business personal property tax and put additional dollars toward education.     
  • Increases Medicaid co-pays for prescription drugs and outpatient services.

2021 may sound far off, but by the time our next governor approaches the end of his or her first term, our state will once again face a fiscal crisis. With the time we’ve gained this year, we must figure out how to disarm this time bomb for good.