Mid-Session Legislative Update: Fiscal Policy, Taxes, & the Budget

Believe it or not, the 2020 legislative session is approaching its midpoint. While headlines have been passing by fast and furiously, it is important to take stock of what has happened and what is on deck for the second half of the session. 

The Bell Policy Center has been laser focused on moving Colorado forward toward greater economic mobility. That means addressing our upside-down tax code, lowering barriers to important programs — like health care, retirement savings, child care, paid family and medical leave, and higher education — and working toward an equitable and adequate budget that helps all Coloradans. 

Because there are so many pressing issues our legislature is focusing on this session, we will have multiple blogs focusing on specific pieces of legislation, as well as broader topics, in front of legislators. 

Part 1 below will dive into the ever-present fiscal, tax, and budget topics legislators are debating and how they can work to make lives for working Coloradans better. For Part 2 on retirement savings, health care, and paid family and medical leave, click here. For Part 3 on educational issues, click here.

Fiscal Issues

As it is during most sessions, discussions about the fiscal picture in our state is bubbling underneath the surface of most policy discussions. The discussions generally center around how our state can deliver services needed by Coloradans with a very finite amount of money, and how do we do it in an equitable way that serves the people who need it most?

A couple of bills presented during the legislature have attempted to address these fiscal concerns. One is HB20-1203. This bill would close a loophole from the 2017 Tax Cuts and Jobs Act that primarily goes to high earners and use the revenue to fund an expansion of the Earned Income Tax Credit and fund the Child Tax Credits. Those tax credits would go to low- and middle-income families to help with rising costs of child care, housing, health care, higher education, among other surprise costs that all families encounter. Making the tax code fairer, by making sure the wealthy pay their share, should be the goal of any real tax policy.

On the flip side, there was an old standby tax bill that reared its head again. SB20-020: Reducing the State Income Tax Rate was introduced and immediately defeated in committee. This bill would have reduced the income tax rate for all Coloradans, giving the wealthy a significant break on their taxes, while reducing revenue available to fund programs for all Coloradans. This tax cut would have given more than 20 percent of the tax cut dollars to the top 0.9 percent of earners. That would have tilted an already lopsided state tax code even more towards the wealthy.

Transportation

As usual, how to increase transportation funding has been a large point of discussion during this session. The governor asked for more than $600 million in transportation funding from the General Fund in his budget request. While that is certainly needed to keep up with growth in our state, one year of funding is just not sufficient for the needs of Coloradans. As legislators and policymakers discuss deals in how to ensure transportation funding, it is crucial we make certain we have sustainable funding sources that can be relied upon every year. 

That means not raiding General Fund revenues when we don’t have enough money to adequately fund education and health care. To build sustainable revenues to really deal with our underfunded transportation and transit infrastructure, it is going to mean more revenues coming into our state in a fair and equitable way. We need to look to the November 2020 ballot initiatives to really find truly fair ways to get it right.

Budget

The Bell has spent some time writing about real choices Colorado’s budget writers face this year. While many commentators like to cite the total number of dollars Colorado spends — currently around $32 billion — it is very misleading to use that when talking about what legislators can do. That’s because much of that is made up of federal funds and user fee funds — money that is earmarked for specific purposes.

But when looking at the governor’s budget request from late last year, it is very clear we will need to prioritize how to spend the dollars up for grabs. As the Joint Budget Committee wrote in late January of this year, our budget would be more than $100 million in the red if legislators were to enact the entirety of the governor’s budget and legislative requests. That means there will have to be tough choices between setting more aside for rainy day funds, pumping money into K-12 education to reduce the current $500 million IOU, putting hundreds of millions more into desperately needed transportation and transit improvements, and millions to bring down the high costs of health insurance — not to mention other investments and programs upon which many Coloradans rely. 

The discussions over the budget are sure to consume the legislature over the next four to six weeks. But it is important to remember our state has a very finite amount of money and many programs on which to spend it. Without an influx of new revenue, there will be many hard choices made and many important constituencies left out. But that is the hand that the legislature has been dealt and they will do the best they can to move this state forward.

Financial Empowerment

Many Coloradans continue to lack access to affordable, safe credit. Nearly 22 percent of Coloradans — and 49 percent of households of color — are either unbanked or underbanked, relying on predatory financial services because mainstream banking fails to meet their basic financial needs.  While Colorado has made progress in banning certain predatory loan products, Coloradans are still financially vulnerable. The best way to guard against the expansion of predatory financial services is to ensure broad access to safe and affordable banking and credit, tailored to better serve underbanked and unbanked Coloradans, and enhanced financial management skills.

Communities around the country are taking action to increase access to safe and affordable credit, help people avoid high-cost banking products, and build financial well-being. They’re having a significant impact on reducing debt, increasing savings and raising credit scores. The most effective combination for building wealth and establishing financial stability has been: 

  • Expanding safe and affordable banking products with low fees and easy account access 
  • A backstop fund to lower the rates on credit-building loans 
  • Increasing consumer protections and enforcement
  • Strengthening the two-way dialog between local communities and the protection and enforcement offices of the Colorado attorney general’s office and Department of Regulatory Affairs
  • Free one-on-one financial coaching to center clients’ goals and skill building 

SB20-193 is a bill that would implement a statewide Office of Financial Empowerment that will be a champion for expanding access to safe and affordable banking and credit, financial coaching, and supporting communities as they tailor innovations to meet their local needs. Just two full-time staff could have a significant statewide impact on increasing access to free one on one coaching, safe and affordable banking, low-cost credit rebuilding loans, and consumer protections. Colorado has a wide variety of organizations and agencies investing in financial education and access to credit. These two staff would support and align those resources while empowering local communities to expand those strategies to best meet local needs.

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