State Senate approves 'negative supplementals'

By Marianne Goodland
THE COLORADO STATESMAN

The Senate Wednesday gave preliminary approval to 32 so-called “negative supplementals” that would shave $475 million from the state’s 2009-10 general fund budget. The bills reduce general fund appropriations to state agencies and enact a series of cash fund transfers to the general fund.

Final Senate votes were held Friday, Feb. 26, and all supplementals were approved.

But amidst the gloom of cutting the budget, there were a few winners.

Last week, the House voted to eliminate a $19.6 million cut to the Colorado Water Conservation Board’s construction fund, which funds operations and loans for water projects. That action was part of HB 1327, which contains cash transfers to the general fund from 12 funds. “These are water projects and jobs we can generate,” said Sen. Abel Tapia, D-Pueblo, a member of the Joint Budget Committee. Tapia said the cut was a “placeholder” and they had no intention of reversing that amendment.

JBC Vice-chair Sen. Moe Keller, D-Wheat Ridge, said Monday the JBC initially planned to cover the $19.6 million by delaying a Medicaid payment from June to July, into the next fiscal year. However, Keller said the state was notified over the weekend that the federal government would allow states to get federal medical assistance percentage payments (FMAP) to match their contributions to the Medicare Prescription Drug Improvement and Modernization Act of 2003 (MMA), and that meant $42 million to Colorado over the next two years, with $24 million of that available in 2009-10.

While the JBC didn’t attempt to return HB 1327 to its original version, that didn’t mean anyone else wouldn’t attempt to go after those funds.

Sen. Keith King, R-Colorado Springs, introduced an amendment to HB 1327 that would reverse a cash transfer of $5 million from an employment support fund from the Department of Labor and Employment. King pointed out that taking the $5 million would put the fund into insolvency in two years, and that the department would have to go back to the small businesses that pay for the fund to double or even triple their fees to keep it solvent. Heath said he agreed with King on not raiding the employment fund and asked the JBC members to find another way to cover the $5 million.

That request led to a brief recess where as many as 16 senators discussing the matter in the well of the Senate.

The Senate amended HB 1327 and another bill, HB 1339, to take $2 million from the CWCB construction fund, $2 million from a limited gaming impact fund and $1 million from the Innovative Higher Education Research Fund.

And that prompted two Western slope senators to fight back on the CWCB fund. Sens. Gail Schwartz, D-Snowmass Village and Bruce Whitehead, D-Hesperus, suggested instead that the $2 million come from a different CWCB fund, the perpetual base account that draws some of its money from repayment of principal and interest on water loans. That amendment was successful.

But the smiles of the day belonged to Sen. Mark Scheffel, R-Parker and Rep. Carole Murray, R-Castle Rock, who both represent Teller County.

Scheffel helped craft the amendment to take the $2 million from a limited gaming impact fund, which he said would help his district.

The limited gaming impact fund provides grants to communities to offset the effects of gaming related activities in neighboring communities, like higher crime. The City of Victor, in Teller County, uses the funds to support three police officers, street maintenance and emergency vehicle repairs, which is intended to mitigate impacts from its neighbor, Cripple Creek.

HB 1339 sought to transfer $14.2 million in limited gaming funds to the general fund, and $19.9 million to other cash funds.

According to a Feb. 10 letter to Scheffel from Victor City Clerk Sandy Honeycutt, the city has experienced a 200 percent increase in population with no increase in revenues. The loss of gaming impact funds, estimated for Victor at almost $300,000, would impact the city’s ability to provide essential public safety services, Honeycutt wrote.

So how did taking $2 million from the fund help Victor? Scheffel explained that $5.1 million from 2008-09 has been “frozen” in the office of the executive director of the Department of Local Affairs (DOLA), under an executive order that Scheffel said expired last November. That money was to be used in 2009-10. Another $5.9 million in new money is available in 2009-10 for use in 2010-11. By getting the Senate to agree to take the $2 million from the $5.9 million pot, the Senate also agreed to free up the $5.1 million that had been frozen in DOLA.

Scheffel and Murray said they had been working to unfreeze the money in the executive director’s office, and the amendment gave them that chance.

In other news at the capitol:

The effort to get Senate Bill 133 to the governor’s desk before March 1 isn’t going to happen, but its Senate sponsor is still hopeful that it will be out of the Senate in the coming week.

Under SB 133, beginning January 1, 2010, businesses that hire workers they laid off in 2009 would get a two-thirds FICA credit for re-hiring those workers through April 30. On May 1, that credit would drop to one-third of the FICA through August 31. The laid-off employee must have worked for the employer for a full year prior to being laid off, and once re-hired, would have to work for that employer for a full year. In addition, the employer would have to sign an affidavit stating that without the credit the employer would not have re-hired the laid-off worker within the time frame specified in the bill.

The credit would apply only for the income tax year beginning January 1, 2011, so the tax credit would not be applied until income taxes are filed in 2012.

SB 133 passed the Senate Business, Labor and Technology Committee last week and one of its sponsors, Sen. Rollie Heath, D-Boulder, had hoped to get it through the Senate and the House by the end of this week. But the Senate this week cleared its calendar to work on negative supplemental bills. SB 133 is awaiting action from the Senate Appropriations Committee.

In the meantime, the U.S. Senate has passed a bill that would also set up incentives for hiring unemployed workers, a bill Heath said would complement his legislation.

The Hiring Incentives to Restore Employment (HIRE) Act passed the U.S. Senate on Wednesday, 70-28 with 13 Republicans voting with 55 Democrats and two independent Senators. Under the bill, employers who hired unemployed individuals after Feb. 3 and before Jan. 1, 2011 would not have to pay Social Security taxes for that employee for 2010. The employee would have to be unemployed for 40 hours or less during the previous 60 days prior to being hired, and if the new employee were retained for a year the employer would get a $1,000 tax credit.

Similar ideas contained in the HIRE Act were suggested by legislative Republican members of the Senate Business, Labor and Technology Committee during hearings on SB 133 last week.

Sen. Ted Harvey, R-Highlands Ranch, said he liked the tax credit but dismissed the Social Security idea, stating that system is already bankrupt and this would hasten it. Sen. Shawn Mitchell, R-Broomfield, said he liked the Social Security and tax credit ideas. Any broad-based incentives “can only help,” Mitchell said Wednesday, adding that he still wants to do a separate bill incorporating Republican ideas.

Gov. Bill Ritter Wednesday signed into law a controversial package of tax exemption and income tax repeal bills that could raise $15.5 million in state sales and use tax revenues for 2009-10 and $132.6 million in 2010-11.

The nine bills end income tax credits for certain types of alternative fuel vehicle purchases and net operating losses or repeal exemptions on state sales and use taxes on cooperative direct mail, industrial and manufacturing energy use, candy and soda, certain types of software, online purchases, agricultural compounds and non-essential food containers used in restaurants.

Ritter spoke to reporters Wednesday after the bill signing, stating the bills were “appropriate” given the need to close shortfalls in the 2009-10 state budget and into the next two fiscal years, when five of the bills expire and the exemptions or tax credits resume. Phil Horowitz of the Department of Revenue said letters were sent out Wednesday to 140,000 holders of sales tax licenses notifying them about the changes in tax policy. Announcements are also being made on the department’s website.

Ritter also said he is continuing to meet with Republicans and “happy to entertain suggestions” on budget cuts and that the Long Appropriations Bill is still an avenue for those actions.

One proposal, to enact a 0.24 percent across-the-board general fund appropriations cut, is contained in SB 168, and is scheduled for the Senate State, Veterans and Military Affairs Committee on March 3.

Ritter pointed out that state employees, who have not gotten pay raises in two years and won’t get one next year, are taking a 2.5 percent pay cut in 2010-11 to make up a 2.5 percent general fund reduction for employer PERA contributions. “That is an across-the-board pay cut,” Ritter said.

The sponsor of SB 168 is Senate Minority Leader Josh Penry, R-Grand Junction. He told The Statesman that when Republicans propose cuts, “the Democrats become the ‘party of no.’ We have to do across-the-board budget cutting,” Penry said. As to the across-the-board pay cut taken by state employees, Penry said it “rang hollow,” because all that did was shift the money from salary to total compensation; those employees would get those dollars back in their pensions.

House Minority Leader Mike May, R-Parker, scolded Democrats for the action. “Once again I find myself in the position of watching Colorado Democrats make incredible mistakes for our economy against the warnings of citizens, consumers, and the business community,” May said in a press release. “Even as Coloradans continue to lose their jobs to the recession, Democrats have chosen government bureaucracy over the health of Colorado’s economy.”

Senate Republicans said that Ritter effectively ensured the destruction of thousands of Colorado jobs when he signed the nine bills into law.

“A tax hike on energy, for example, will cost Evraz Rocky Mountain Steel Mill an estimated $2 million annually and put 1,000 jobs at risk. Pepsi officials told lawmakers that a new soda tax would jeopardize as many as 800 jobs. A new tax hike on candy threatens 150 workers at Grand Junction confectioner Enstrom’s, and the more than $3.3 million the company spends each year with more than 300 Colorado vendors,” Republicans pointed out in a press release.

“It is appalling that Democrats can’t find a way to balance the budget that doesn’t involve raising taxes by hundreds of millions of dollars,” decried Sen. Greg Brophy, R-Wray.

“Last year, Gov. Bill Ritter and majority Democrats levied $1 billion of new taxes and fees on Colorado families, including a $90 million property tax increase on Colorado seniors; a $30 million tax hike on small businesses; a $225 million-a-year car tax that will raise registration fees by up to $70 per vehicle; a new half-billion dollar tax on the state’s hospitals, and a $40 million tax increase on capital,” Republican legislators added.

“We offered an alternative proposal that would have spared Colorado families and businesses from the latest slew of tax hikes by implementing across the board cuts for all state departments and agencies. Democrats elected not to take up the GOP proposal until after the tax hikes had been signed into law, delaying consideration of the bill until March 3.

“It has been sent to the Senate State, Veterans and Military Affair Committee, which is used by leadership to kill legislation,” GOP lawmakers added.

Marianne@coloradostatesman.com