Senate approves tax exemption repeal bills
By Marianne Goodland
The Senate Wednesday passed nine of the tax exemption repeal and income tax policy change bills requested by Gov. Bill Ritter to help balance the 2009-10 and 2010-11 budgets. Eight of the bills were amended in their passage through the Senate and will have to go back to the House for concurrence.
The bills that received final votes Wednesday deal with lifting state sales and use tax exemptions for certain agricultural products, online software, out-of-state retailers, candy and soda, cooperative direct mail, non-food items used by restaurants, and use of fuel for industrial purposes. Also approved Wednesday were changes to state income tax policy on net operating losses and vehicles that use alternative fuels.
Two more income tax policy bills in the package are still in the House as of press time Thursday: HB 1200, which deals with enterprise zone credits, and HB 1197, on conservation easements. HB 1197 was scheduled for a final House vote on Thursday; HB 1200 is still awaiting its first hearing from the House Appropriations Committee.
The tax package moved through the House during the week of January 25 with long hours and often acrimonious debate. Senate President Brandon Shaffer, D-Longmont, told reporters on Feb. 1 he believed the Senate would be more collegial and civil in its review of the bills.
It took more than 20 hours for the nine bills to move through the Senate Finance Committee, with the last bills coming out of the committee on Feb. 5. The Senate spent Friday afternoon debating the bills on second reading, but finished only one.
On Monday, the second-reading debate lasted 12 hours, concluding just before midnight. Those late hours included lengthy time spent on approving the committee of the whole report — Republicans offered nearly two-dozen amendments to the report, which required a roll call vote for every one. Just one, offered by Sen. Al White, R-Hayden, passed. It dealt with HB 1192, which lifted the state sales and use tax exemption on purchase of online software. The amendment struck language that stated that 40 percent of the revenues produced from the taxes would be directed to K-12 education, a change put on the bill in the House.
It was during the late night session that the collegiality hoped for by Shaffer briefly ended. After the defeat of one Republican amendment, Sen. Shawn Mitchell, R-Broomfield, twice loudly called Shaffer a “coward.”
During discussion of an amendment to the committee of the whole report on HB 1194, the bill on lifting states sales and use tax exemptions on non-food items provided by restaurants, Mitchell pointed out that during the earlier second reading debate, amendments offered by Republicans were defeated along pure party lines, but not with recorded votes. Now that recorded votes were being taken on the same amendments, the votes were largely 18-17, with several Democrats voting with the Republicans, he said. “Two or three votes are rotating around the majority party,” Mitchell complained. He asked that all Democrats vote for the Republican amendments — “not just the two or three people who are dodging accountability.” That drew protests from Shaffer. Mitchell continued, calling out Sens. Whitehead, Linda Newell, D-Littleton, and Gail Schwartz, stating, “The choreography at this hour is a bit much.”
A few minutes later, Mitchell attempted to be recognized to address a Republican amendment dealing with HB 1199 but Shaffer denied him that opportunity. “By what rule do you ignore a legislator?” Mitchell exclaimed, and then walked off to the back of the room, twice calling Shaffer a coward.
Both men later apologized.
On Tuesday, cooler heads prevailed — the Senate put off until Wednesday action on the nine bills up for final votes. Mitchell also appeared contrite — during initial roll call for attendance on Tuesday, instead of saying “here,” he said, “repentant.”
Shaffer on Tuesday attributed the rancor to the late hour and said that everyone was tired. He said he and Mitchell are good friends with a “healthy competition.”
Senate Republicans were not done trying to get their plan for balancing the budget to the Senate prior to the final vote on Wednesday. Tuesday afternoon, Sen. Josh Penry, R-Grand Junction, introduced SB 168, the “Taxpayer Protection Act of 2010.” The bill would direct the governor to reduce state personnel expenditures by .24 percent of general fund appropriations, about $17.8 million, for 2009-10. For 2010-11, the reduction in general fund would be 4.39 percent of the general fund appropriation, or about $306.5 million. The reductions would be enacted through cuts to state personnel expenditures and nonessential state programs, although the bill does not say where those nonessential programs exist.
A minority press release issued Tuesday demanding an immediate hearing on a bill to enact the Republican plan, stating the hearing needed to take place before the Senate took final action on the tax package. But at the time the press release was issued, the bill had not yet been introduced.
A frustrated Shaffer on Tuesday told The Colorado Statesman he found it ironic that the Republicans were asking for an immediate hearing when he said they had plenty of opportunity to put forward their plan earlier. He explained that in June, Gov. Bill Ritter had taken the step of cutting $320 million from the state budget through executive order. Shaffer said he encouraged the governor to make a public presentation to the entire General Assembly. Shaffer said he believed the only senator who showed up for that meeting was Sen. Ted Harvey, R-Highlands Ranch. In October, the governor cut another $240 million, and again made a public
Prior to the beginning of the session, Shaffer said he sat down with Sen. Penry, Assistant Minority Leader Greg Brophy, R-Wray, and Senate Majority Leader John Morse, D-Colorado Springs, to work out a schedule on the tax package. At that time Shaffer said he granted late bill status to Penry and Brophy for the Republican plan and said he was eager to see it. Instead, Shaffer said, the Republicans waited until the tax package had cleared the House and was scheduled for debate in the Senate before they introduced their plan. “This proposal is about politics, not solving problems,” Shaffer told The Statesman. “We have an obligation to govern and look for a solution. They haven’t brought anything forward,” and are now demanding a hearing even before the fiscal note has been produced. “We’re not getting their best effort,” Shaffer said.
Mitchell acknowledged that the effort to defeat the bills on Wednesday would probably fall short. “We will make our arguments and let the votes fall where they fall. Then we will take our case to the public” in November, he said.
On Wednesday, the Senate took its final votes on the nine bills, passing six of them on one-vote margins. Sen. Gail Schwartz, D-Snowmass Village, up for re-election this fall in a swing district, voted with the Republicans against all nine. Sen. Paula Sandoval, D-Denver, also voted “no” on five; Sen. Bruce Whitehead, D-Hesperus, also in a swing district and up for election in November, voted against seven of the nine.
Sen. Morgan Carroll, D-Aurora, said the tax exemptions being repealed represent only five percent of the exemptions that exist in state law. She said her constituents were not happy about the large number of exemptions and wanted businesses treated like everyone else.
“The balance is between preserving jobs and not devastating the core of our society — transportation and education,” said Sen. Rollie Heath, D-Boulder, who sponsored the bills in the Senate. “These are the core functions of government.”
Brophy pointed out that the Senate would be voting on bills that would cause layoffs, and at the same time senators have a bill in their bill folders that would incentivize businesses to hire laid-off workers. Mitchell joked that Brophy was missing the point. “This is part of green government and recycling,” he said.
During the final discussion on HB 1195, regarding state sales taxes on agricultural chemicals, Harvey apologized to several wheat farmers who were visiting the Senate floor during the vote. Brophy said some farmers could lose $2,000 to $6,000 from their family income if the bill passes.
Sen. Michael Johnston, D-Denver, a member of the Senate Finance Committee, said he was proud that the state was able to protect $136 million in the Dept. of Agriculture budget, that they were able to amend another of the tax bills, HB 1190, to exempt agriculture on taxes related to energy use. But he was not proud, he said, to cut 18 percent from the agriculture department’s budget or 7 percent from K-12 education.
Morse said he could not guarantee that the tax exemption bills would not cost jobs. But if the bills don’t pass, “we will absolutely lay off 2,600 teachers,” he said. “We made difficult decisions to stop subsidizing soda, mailbox advertising and software; and keep teachers, prison guards and state troopers.” Regarding HB 1191, which lifts state sales tax exemptions on candy and soda, Morse said if people want more soda workers, “just drink more soda and they will come!”
While senators voted on the bills throughout Wednesday afternoon, their press offices were busy cranking out dueling press releases.
Democrats fired first, with a press release cheering the passage of the first five bills. “No one wants to do this, but these are the types of difficult choices required when you are in leadership,” said Morse. “The minority party has the luxury of opposing these budget balancing plans without offering any real solutions, but we, as leaders, can’t sit back and simply say no. We must act."
The Republican press release countered with Democrat claims that the bills were necessary to avoid further cuts to K-12 education. “Democrats know full well that K-12 education won’t see an extra dime from these tax increases,” said Sen. Nancy Spence, R-Centennial. “It’s time for the Democrats to stop lying to the public about where this money will go.”
The press release pointed out that Penry had offered amendments on second reading that would have allocated 40 percent or more of the money to K-12 education funding, but none of those amendments were adopted. “All we’re asking the Democrats for is truth in advertising,” Penry said. “For goodness sake, don’t say this is for the kids and teachers when your votes prove all you want is another slush fund of cash.”
In addition to the amendments put on some of the bills by the Senate Finance Committee, the full Senate further amended several bills. The finance committee amended HB 1191, the bill on candy and soda, to end the repeal of the exemption in 2013. However, the full Senate took that three-year time limit out.