Making of the 2011 budget

The Colorado Statesman

The deal may be done, but it’s far from a done deal.

After more than a week of closed-door negotiations and sometimes-hot tempers, the House and Senate have agreed on a budget package for 2011-12, a package that has the seal of approval from Gov. John Hickenlooper.


The Long Appropriations Bill and a package of 19 accompanying budget-balancing bills as well as the School Finance Act were introduced late Tuesday afternoon. But who would sponsor the Long Bill, normally in the hands of the Joint Budget Committee, was in doubt right up to the last minute.

The budget agreement was finalized Tuesday noon by a group that included House and Senate leadership, representatives from the governor’s office and the JBC. But the fight over the budget really began in earnest last February, over a basically meaningless budget resolution that eventually died because of lack of compromise between House Republicans and Senate Democrats.

The consequences over not passing House Joint Resolution 11-1007 were nil, but far more was at stake this week. Whispers about a special session to resolve the budget stalemate were heard in the halls of the Capitol from Republicans and Democrats alike.

The deal

The deal that led to the Long Bill finally getting introduced includes reducing the size of the K-12 cut from $332 million, as was proposed by Gov. John Hickenlooper in February, to $250 million, a big win for Democrats. What the Republicans got: a repeal of 2010 tax legislation on software and agricultural products, and the eventual end to the suspension of a vendor sales tax fee.

The last issue to hold up the package, up to the 11th hour, was the software tax. Last year, the General Assembly passed HB 10-1192, which lifted a sales and uses tax exemption for computer software, enacted under rules issued by the Department of Revenue in 2006. Repealing the exemption meant $23.7 million in revenue for 2011-12, according to the bill’s fiscal note, and more than $24 million next year. Under Tuesday’s agreement, the tax exemption would go back into effect in 2012-13.

Republicans also got Democrats to agree on changes to vendor sales tax fees. Colorado vendors are required to collect and remit sales and use taxes to the state; but at one point they were allowed to keep 3.3 percent of those taxes as payment for doing the paperwork. The vendor sales tax fee was suspended in 2009 by Gov. Bill Ritter, but under Tuesday’s agreement, it will be restored to 2.2 percent for the next two years, and back to its full 3.3 percent in three years.

The budget package also includes suspension of a sales tax exemption for cigarettes, which will raise $31 million in revenue, and transfers of $122.6 million from severance tax and federal mineral lease funds.

What isn’t in the deal: an amendment to Senate Bill 11-076 that would have increased the shift of PERA contributions from the state to state employees from 2.5 percent to 4.5 percent. The House amendment to SB 76, offered last month by House Finance Committee Chair Brian DelGrosso, R-Loveland, would also have allowed school districts and local government to temporarily shift some of their PERA costs to their employees.

The stalemate and ‘moving parts’

The Senate cleared its committee calendar for the week beginning Monday, April 4, in hopes that the Long Bill would be ready, although it was already a week behind schedule. But like a baseball game, the Senate showed up ready to play but the game was called on account of weather (or the lack of a budget deal).

At issue, according to House and Senate leaders during the past week: the DelGrosso amendment to SB 76; cash fund transfers, the software tax, K-12 cuts and just how much to leave in the State Education Fund. Where those issues stood for each chamber became a series of moving parts throughout the past week.

The budget is 99 percent resolved, said Speaker of the House Frank McNulty, R-Highlands Ranch, on Monday.

But oh! The battle over that last 1 percent!

The negotiations over the budget package reached fevered pitch, and occasional stalemate, during the week prior to the Long Bill’s eventual introduction. Much of the negotiations between Senate and House leadership and/or the JBC were held behind closed doors, an apparent violation of the state’s open meetings laws. Senate President Brandon Shaffer, D-Longmont, claimed Monday he was concerned by the lack of transparency.

Monday afternoon, he told the press that he wanted to see a bill introduced “so that these are public hearings, that the public can engage in and the press can observe. That’s a point that has come up repeatedly with folks in my office. If we have disagreements, that’s fine, but let’s have them out in the open.”

But those Monday statements appeared to contrast with Tuesday’s actions, when the press found the entire JBC, Senate Majority Leader John Morse, D-Colorado Springs: Assistant Minority Leader Sen. Bill Cadman, R-Colorado Springs; three representatives from the governor’s office and representatives of House leadership in Shaffer’s office, huddled in an unannounced meeting where they continued negotiations that began earlier in the morning in the Office of State Planning and Budgeting.

The ultimatum

McNulty said Monday that the House Republicans were still open to negotiations. “It’s important no party draw a line in the sand,” he told The Colorado Statesman. “House Republicans remain open to suggestions on how to craft the budget — our only concern, from the beginning, is that we have a responsible and honest budget that doesn’t rely on one-time funds and doesn’t use gimmicks to balance.” McNulty also said that cuts to K-12 were still on the table, and that House Republicans were holding firm on the DelGrosso amendment. “It’s important because it allows school districts flexibility to keep teachers in classrooms. I can tell you, every conversation I’ve had with teachers, educators and administrators, is that they’re willing to pay a little bit more of their benefits to keep teachers in the classrooms. What this comes down to, will we keep teachers in classrooms,” or will the Democrats side with the labor unions and against keeping teachers in the classroom? he asked.

Frustrated with what they perceived as changing requests and an unwillingness to compromise, the Senate, with agreement from both caucuses, was prepared on Monday to introduce its own budget bill. A budget bill that wasn’t under the sponsorship of the JBC hasn’t happened since 1986 (see sidebar).

Negotiations continued throughout the day, with leadership and the JBC continuing to meet outside of the public view and without notice.

The alternative budget bill was the Long Bill already completed by the JBC. Had it been introduced in the Senate, the Long Bill would have been sponsored by the three Senate members of the JBC. But it’s not a step they would have taken lightly. “The path we were about to embark on would have undermined the institution of the JBC,” said Sen. Pat Steadman, D-Denver. “We were mindful of it.”

The private negotiations largely came to an end mid-morning Tuesday, when both caucuses met in the open to discuss the status of the negotiations. It quickly became clear that no one was happy, but that there would be grudging acceptance of the budget package, although at that time it still wasn’t clear whether it would be a full JBC-sponsored package or one carried only by the Senate.

The vendor fee got no love from Sen. Irene Aguilar, D-Denver, who said Democrats had talked about protecting small business. The fee as proposed in the deal would have generated millions of dollars for large corporations like Wal-Mart, she said. But Steadman explained the fee was structured as an equal percentage of all vendors, despite his own preference for a fee that should have been capped for larger vendors. It’s easier for larger vendors to deal with the forms than it is for smaller ones, he said, but the equal percentage was an agreement made with Senate Republicans.

The size of the cut to the K-12 budget and the amount left in the State Education Fund also gave Senate Democrats heartburn, as did reversing any of the 2010 tax legislation. Sen. Rollie Heath, D-Boulder, noted that he still had “air holes in his back” over last year’s battles on the tax exemptions. “This was $140 million we kept from being taken out of education, and to give up any of them now seems to be heresy.” But Heath also said he would vote for the budget package, albeit reluctantly, a sentiment echoed by Aguilar and others.

The K-12 cuts also worried Senate Republicans. Sen. Kevin Lundberg, R-Berthoud, said during their caucus the state is on a “train wreck and the metal’s starting to hit the floor.” The vendor fee wasn’t where Senate Republicans wanted it, either, and Lundberg later said he wouldn’t vote for the budget.

Aftermath, and the day after

Once the deal was announced, Hickenlooper made a speedy trek across the street to the JBC to congratulate them for their hard work. “No one’s happy, but everyone’s relieved,” he told reporters. The package addresses half of the billion dollar structural deficit, and more cuts will be coming in November, he said. But making sure there’s at least $100 million in the State Education Fund is “a further buffer” against downward changes in the economy. “We wanted to cut education as little as possible and make the cuts as least disruptive as possible,” he said.

The relief felt by JBC members over the resolution of the stalemate was palpable Wednesday, especially in the House where it had been the most contentious. Jokes among the JBC members and relieved laughing could be heard throughout the day.

Press releases flew after the announcement from leadership of both chambers as well as outside groups. “Reducing cuts to education has been our mission since the first day of the legislative session,” Shaffer said late Tuesday, and while the budget has “real sacrifices,” he also praised the bipartisan work that led to the deal.

House Majority Leader Sal Pace, D-Pueblo, also applauded the bipartisan work, saluting the JBC for its efforts. It’s not a perfect budget, Pace said, but it “puts something on the table that we can debate publicly and in good faith.”

Rep. Cheri Gerou, R-Evergreen, a member of the JBC, also called the budget deal less than perfect. The deal “includes some very difficult choices,” but it also includes “Republican measures to help the state’s employers” by restoring the vendor fee, she said.

Cadman has been the Senate Republicans’ point man on the budget in the absence of Senate Minority Leader Mike Kopp, R-Littleton, who had to take care of urgent family business this week. “I believe the citizens of this great state are going to be well served by this truly bipartisan budget process,” he said, a hint that Republicans will actually vote for the budget bill, something most of them haven’t done in years; and some have never voted for it. “I commend my colleagues in both chambers and in both parties for working in good faith and with great resolve to accomplish this task,” and Cadman also commended the governor and his staff for their efforts in brokering the deal.

The Colorado Education Association said students, families and teachers should “breathe a small sigh of relief” over the reduced cut to K-12. However, “it still swings a heavy axe at K-12 public education,” according to a Tuesday statement.

The Colorado Association of Wheat Growers cheered the restoration of the ag tax exemption, calling it “very important to rural Colorado.”

The Long Bill, the School Finance Act, and the 19 accompanying bills went through Senate Appropriations on Thursday. They are scheduled for second reading debate on Friday and a final vote on Monday. Then it’s off to the House.

The schedule, although tight by some estimates, is set up so that the package is on the governor’s desk no later than April 29. That’s in order to preserve the right of the General Assembly to override any vetoes from Hickenlooper.

But the trip through the House may not be so easy. Both sides have indicated they are unhappy with the deal, and several House Democrats have already threatened to vote against it. No Democrat has voted against the Long Bill since 2004, when eight in the Senate voted “no.” In the House, Democrats have unanimously supported the Long Bill since 2004.

Rep. Daniel Kagan, D-Cherry Hills, on his way to London for his mother’s funeral, tweeted Thursday that “Budget not done deal. I won’t sign on with K-12 slashed $250m yet big handouts to business. I’ll improve bill by amendment: if not, vote no.”

Rep. Andy Kerr, D-Lakewood, said that’s a view growing among House Democrats and said he also may vote no. “I don’t see this as being a budget I can support. The cuts to education are horrendous.” Kerr also said that Republicans are insistent on “special-interest giveaways,” which he said takes money directly away from school finance. “I’m inclined to vote no on the budget without changes.”

Pace indicated he isn’t ready to go down that road, he’s waiting to see what happens when the Long Bill comes up for second reading in the House. Democrats want to minimize the cuts “to our kids’ future,” Pace said Thursday.

So will House Republicans be forced to take responsibility for the budget and vote for it? “There are a lot of ways this will play out,” Pace said. “It depends on what happens in the amendment process.”

As of press time, House Republicans were caucusing on the budget package.