A Long Bill With Shortcomings

(March 23) – The consequences of Colorado’s constitutional constraints on spending were on grim display today as the Joint Budget Committee finalized its work on the 2017-18 state budget, commonly known as the “long bill.”

Under the proposed budget approved this afternoon by a 6-0 vote of the JBC:

  • Hospitals would take the biggest hit, losing $264 million in revenue generated by the hospital provider fee mechanism, which uses hospital fees to draw down matching federal funds, then returns fees and matching funds to the hospitals to cover uncompensated care. The cuts are expected to strain the budgets of hospitals across the state and may force some rural hospitals to close. Efforts to exclude this revenue from the rest of the state budget and shield hospitals from these cuts have failed in the state Senate over the last few years.
  • The state’s transportation budget would take a $110 million cut, leaving only $79 million of general fund money available for transportation. For context, CDOT has estimated the state’s transportation needs at $9 billion.
  • The “negative factor” gap in K-12 education funding, the amount by which state spending on schools would fall short of the Amendment 23 formula, would worsen by $48 million, rising to $879 million and reversing two years of modest improvements. Per-pupil funding would rise slightly, however.
  • State employee salaries would receive a modest bump, but would fall relative to inflation for the fifth year out of the last six.

“In the face of extreme obstacles, we are presenting a balanced and bipartisan budget,” said Rep. Millie Hamner, vice chairwoman of the JBC. “There are a few things to like, but a lot that I’m hoping we can improve on during the remainder of the legislative session. Our cuts to hospitals, especially rural hospitals, and growing the negative factor are tough to stomach.”

The cuts are not driven by revenues, which are robust as a result of Colorado’s relatively healthy state economy. Instead, TABOR and Gallagher, two amendments to the state constitution, are forcing budget-writers to arbitrarily reduce revenue significantly while shelling out at least $150 million to compensate for a reduction in residential property tax rates.

Because the hospital provider fee counts toward the state’s TABOR revenue cap, reducing collection of the fee helps the state budget stay under the cap. But since hospital provider fees are matched by the federal government, every uncollected dollar of HPF means an additional uncollected federal dollar that would have gone back to the hospitals. That in turn leads to significant and painful reductions to hospital budgets, particularly in rural hospitals.

The $150 million estimate is the Gallagher payout to local school districts. Residential property taxes are paid to local governments, school districts and fire and other special districts. Gallagher puts the state on the hook to reimburse school districts for their reduced revenue when the Gallagher formula ratchets property tax rates downward. Because of the revenue cap, the state is simply not able to balance school funding, resulting in the $48 million increase in the “negative factor.” And fire, library and other special districts also will feel the brunt of Gallagher.

“Bills to fix our school, hospital and transportation funding problems are in the works,” said Rep. Dave Young, D-Greeley, who also sits on the JBC. “But we have to budget to existing law, not on measures that may or may not be added later. This is the best we could do.”

The state budget bill is being introduced in the Senate on Monday and will be heard there next week. It will be in the House the week of April 3.

“I look forward to working with the other 94 members of the General Assembly to find ways to ease the pain of this difficult budget,” Rep. Hamner said.

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