Colorado state budget clears conference committee, but disagreement remains over how to spend some of the money

This story was updated on May 1 to state that Gov. John Hickenlooper signed the state budget into law. 

Lobbyists, politicos, aides and interns filled the Joint Budget Committee room in early April, spilling out into the hall and taking seats on the floor — all eyes on state budget writers this week as they put some of the final touches on the $28.9 billion Colorado budget.

The six-member conference committee passed the budget unanimously after rejecting several House and Senate amendments that threw it out of balance by tens of millions of dollars. 

But in doing so, the committee kept $4.8 million to help ex-offenders with mental health disorders get housing assistance, and $35 million for school security upgrades and staff training to help students who may be a danger to themselves or others, among other amendments. 

To pay for these school security measures, the committee members tapped a fund used for education spending rather than the General Fund. They also reduced proposed spending on housing assistance for middle-income homebuyers and affordable housing construction grants from $5 million to $1 million, slashed $294,646 to pay for additional intensive residential treatment beds for inmates transitioning out of prison with mental health or drug addiction issues, and eliminated $500,000 that would pay for another state official to monitor air quality near oil and gas wells.

When the dust settles, the committee hopes there will still be about $20 million left over for lawmakers to divvy up in the remaining 28 days of the legislative session on their other policy priorities that did not make it into the budget, such as money to help cover the cost of reduced price lunches for middle schoolers and other programs— like one that aims to bring net-neutral service to rural Colorado—that require new staffing at state agencies.

Gov. John Hickenlooper signed the budget into law on April 30. 

“The current economic vibrancy we are experiencing allows us to allocate new resources to several important priorities and initiatives,” Hickenlooper said in a statement. 

Yet to be decided is how lawmakers should spend hundreds of millions of dollars already set aside to pay for transportation projects and buy down some of the state’s public pension plan’s unfunded debt to retirees, among other priorities.

There is bipartisan support that this money should be spent, and the money — $495 million — is there to spend in a year with a $1.3 billion surplus. The question is how. Deep partisan divides exist between the Democratic-controlled House and the Republican-controlled Senate.

More lanes vs multimodal

Republicans want the money to go to Department of Transportation for new construction projects like adding a lane to Interstate 25 and Interstate 70 west through the mountains. These projects, they say, will ease traffic congestion and patch up potholes that are costing commuters time and money on the road.

Democrats, however, want a chunk of this money —15 percent — to pay for multimodal projects across the state, such as bike lanes in rural resort communities to help with recreational tourism demands and shuttle services for seniors.  

The conference committee is expected to take up the proposed legislation this week.

At the start of the session, Senate Republicans proposed a bonding package that would raise $3.5 million for transportation projects. A compromise reached with Democrats would put this on the ballot in 2019. That would allow outside groups to ask voters to approve a new revenue source for transportation projects this year without splitting votes on the ballot; business groups, including the Denver Metro Chamber of Commerce, are pushing for a sales tax increase.

Public employee pension fund gets a boost  

Lawmakers agreed to set aside $225 million to help pay down an estimated $32 billion unfunded debt to retirees who are on the state’s Public Employees’ Retirement Association, or PERA, pension plan.

The unfunded liability means PERA currently does not have enough money to pay out current and future benefits to all its members. And in the event of another economic downturn, PERA could be unable to pay benefits to retirees.

As part of a reform package proposed by Republicans, all public employees would have the option to put their retirement savings into a 401(k)-style plan offered by PERA, which is currently only available to state employees — other employees, like teachers, can have this kind of plan, but they must make contributions on top of what they have to pay into the defined benefit plan.

Republicans say this will reduce the liability of the fund because fewer employees will be relying on the pool of money reserved to retirees. But Democrats say this strikes at the heart of the defined benefit plan, which ensures an adequate retirement savings for about 585,000 members—including teachers, city workers and state employees — who do not have social security.

There are other austerity measures as part of the package. This includes a two-year freeze on the cost of living adjustment for current retirees followed by a drop in the COLA from 2 percent to 1.25 percent. And all workers will be asked to pay an additional 3 percent of their paycheck into the fund.

Paying for environmental programs

Lawmakers have approved a plan that could transfer up to $40 million from the general fund over the next two years to help pay for environmental conservation and regulatory programs, including staff at the Colorado Oil and Gas Conservation Commission.

These are programs that would otherwise be paid for through a tax on oil and gas production, known as the severance tax. But due to the boom and bust cycle of the market and deductions that these companies claim, environmental programs that rely on this money could run out of cash next year without a bailout of taxpayer money.  

The conference committee also approved an amendment asking the Department of Revenue to report back in the fall with an estimate for how much it will cost to figure out how much money oil and gas companies are deducting from their state severance taxes. Currently, companies can deduct the cost of capital and 87.5 percent of their prior year’s property taxes. They also pay no state taxes on low-producing wells, known as stripper wells.

As a result, Colorado has the lowest effective severance tax rate of the western states, according to Legislative Council, and lawmakers hope that next session the state may find out why. 

Spending on schools

The budget includes $150 million to help pay down the state’s debt to schools, known as the budget stabilization factor, which is currently at $822 million. The School Finance Act, which was introduced on Wednesday, will determine how available money is spent on Colorado’s K-12 schools.

There is also a placeholder in the budget to spend $18 million to reduce higher education tuition costs.

 Photo by John Herrick

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