Provider fee deal falling apart, rural schools say “leave us out.”

State lawmakers were within handshake’s reach of a long sought-after bill that would free up millions of dollars to save hospitals, help rural schools and begin to pay for at least some of the state’s $9 billion backlog of transportation, but with nine days to go in the legislative session, its viability is again in doubt.

Republicans and Democrats working on the deal are at odds again, though it was not clear at press time where the differences lie. In addition, on Monday, representatives of rural schools, saying they feel they have been used by both Democrats and Republicans to push the deal, said there is not enough in it for them. The dollars, the Colorado Rural Schools Alliance said, should go to the state education fund instead.

The collapse of the deal came in a very public way: with Republican Senate President Pro Tem Jerry Sonnenberg of Sterling presenting the numbers as fait accompli to a room full of media. But during the presentation, he was interrupted by someone who handed him a note relaying a message from Democratic Senate Minority Leader Lucia Guzman* of Denver, telling him the deal was off and not to talk to the press. Too late.

The deal now hanging in the balance comes through a rewrite of a bill sponsored by Sonnenberg and Guzman that would reclassify the state’s hospital provider fee, moving roughly $600 million to $700 million out from beneath state constitutionally-mandated revenue limits set by the Taxpayer’s Bill of Rights (TABOR). With that reclassification, the state can collect more revenue to spend on roads, education and other projects. It also would have spared hospitals from the budget chopping block this year. Hospitals pay into the provider fee program based on the number of overnight patient stays and outpatient services. Those dollars are matched with federal funds and then redistributed to hospitals to pay for health care for low-income Coloradans. Hospitals are facing a $528 million cut beginning July 1.

Republicans have characterized reclassification as an end-run around TABOR. But, for months now, Sonnenberg, Guzman, Democratic House Majority Leader KC Becker of Boulder and Jon Becker, a Republican from Fort Morgan, have been working on a deal that would allow reclassification, with some perks thrown into the satisfy Republicans.

Republicans have argued that if the provider fee moves out from beneath state revenue limits, that limit — this year estimated at just under $13.3 billion — should be lowered accordingly so as to keep state spending on a tight leash. The Democratic response to this proposition initially went along the lines of no and hell, no.

Sources tell The Colorado Independent that after much back-and-forth and a few temper tantrums, a compromise was reached late last week that lowers the state spending limit by $200 million in exchange for reclassification. That $200 million number was presented to the media by Sonnenberg this morning. 

But, in the most recent round of negotiations, rural schools lost major ground. Originally, the bill set aside $79 million in 2017-18 for rural schools, and $160 million a year for the next two years. But as the various iterations of the deal progressed, those amounts got smaller. A draft amendment would have increased the state’s sales tax on recreational marijuana from its current 12.9* percent to 15 percent, with that money going to rural schools for the next three years. As of Friday, rural school funding was down to $21 million per year for three years.

By Monday, it was even less  – $10 million each year for three years – to be spread out among 147 school districts classified as rural by the state Department of Education.

“We’d rather have the money go to the state education fund than to spread it out,” said Michelle Murphy, executive director of the Colorado Rural Schools Alliance, one of the parties negotiating the deal. “We’re grateful to the sponsors in their effort to relieve pressure on rural schools,” Murphy told The Independent this morning. But putting such a small amount toward rural schools “might give policymakers the idea they’re doing something for us.”

Perhaps the biggest change from the original version of the bill called for using marijuana tax revenues to also cover business personal property tax credits. Businesses annually file with the state Department of Revenue a list of personal property, which can include almost anything the business uses: desks, computers, file cabinets, and the like. The list must include the year the property was acquired, and then the state levies a tax, which depreciates every year, based on the value of that property. The deal would exempt the first $25,000 of assessed value, and was a major concession to Republicans who have long sought to kill the tax.

The deal also included transportation funding, at around $1.8 billion, with 25 percent going to transportation needs in rural communities, defined as counties with populations of 50,000 or less. That would be paid for under a lease-purchase mechanism, where the state sells off its buildings, leases them back and uses the proceeds to pay for maintenance of those buildings and for the transportation projects.

State agencies would also have to submit a budget for 2018-19 that includes a 2 percent across-the-board cut, based on their 2017-18 appropriations. The departments of education and transportation would be exempted.

At this hour, lawmakers are attempting to find a way to rescue the deal.

*Clarification: an earlier version identified the sender of the note as House Minority Leader KC Becker; the sender was Senate Minority Leader Lucia Guzman. Also, the state’s marijuana tax is 10 percent, with another 2.9 percent for the state sales tax, for a total of 12.9 percent. An earlier version left out the state sales tax portion.

Photo credit: Intiaz Rahim, creative commons license, flickr

has been a political journalist since 1998. She covered the state capitol for the Silver & Gold Record from 1998 to 2009 and for The Colorado Statesman in 2010-11 and 2013-14. Since 2010 she also has covered the General Assembly for newspapers in northeastern Colorado. She was recognized with awards from the Colorado Press Association for feature writing and informational graphics for her work with the Statesman in 2012.