More state revenue, more debate about budget cuts

The Colorado Statesman

Republicans on Monday said they remain set on fully restoring a property tax break for seniors related to the 2012-13 fiscal year budget, even in the face of Democrats saying they are open to restoring as much of the Senior Homestead Exemption as possible.

The comments regarding the property tax exemption from both Republicans and Democrats came following March economic and revenue forecasts — presented to the Joint Budget Committee separately by both Legislative Council staff and the Governor’s Office of State Planning and Budgeting — that projected Colorado will have more dollars to spend in the upcoming fiscal year that begins in July. The governor’s budget office projects that the revenue forecast for this fiscal year will increase by $26.3 million — $164.5 million higher than the previous December forecast — with an additional $149 million available to restore $188 million in proposed cuts.

State economists agree that the increase is mainly attributable to a projected higher rate of revenue growth from individual income tax collections as a result of an improving job market, as well as improvements in the industrial, manufacturing and construction industries.

The positive revenue forecast — seen as a sign that the economy continues to gain strength following a dark recession — allows lawmakers to re-examine controversial cuts to education, local governments and seniors that have become a polarizing debate at the Legislature, with Republicans drawing a clear line in the sand over continuing to suspend the property tax break for seniors. The issue was expected to be the biggest sticking point between Republicans and Democrats as the JBC and the Legislature tackle the all-important budget known as the Long Bill.

The Senior Homestead Exemption costs the state $98.6 million per year, but it has been suspended for the past two years over concerns with the troubled state budget. Colorado voters in 2000 added the measure to the state constitution, allowing seniors 65 or older to claim the exemption from property taxes, up to 50 percent for the first $200,000 of the value of their home. Seniors must have lived in their home for 10 years. As part of the amendment to the Constitution, voters gave lawmakers the power to suspend the tax break in troubled economic times. Since 2000, the exemption has only been in place for four years.

Some believe the exemption is unfair, pointing out that many seniors downsize in their golden years, moving to smaller homes that they have not lived in for the required 10 years. Other critics argue that there is no means test for the tax break, allowing the very rich to claim the exemption on mansions in Cherry Hills Village and ski homes in the mountains, while poor seniors struggle to pay their rent.

But Republicans have remained committed to fully restoring the tax break in the upcoming budget. Supporters of a continued suspension would need to draft a bill to do so, and it remains unclear whether House Speaker Frank McNulty, R-Highlands Ranch, would sign off on introduction of a late bill to suspend any portion of the program. Republicans insist that the exemption is not an option, but a requirement set forth by voters.

“I don’t know whether it’s that people don’t like seniors, maybe that’s why they’re trying to take the money away from them, I don’t understand what the issue is?” said Rep. Cheri Gerou, R-Evergreen, chair of the JBC.

“The Senior Homestead Tax Exemption, that’s in statute and that’s law; that’s a part of the Constitution,” she continued. “I guess I’m not really sure, it’s almost sounding to me like people are after seniors to take away that right.”

At a media availability following the revenue forecast, Gov. John Hickenlooper, who has proposed scaling back the exemption, chuckled when asked whether he doesn’t like seniors. “Questions that one has no answer for,” he joked. The governor assured the public that his proposal is simply about trying to balance the budget while minimizing as many cuts to education and local governments as possible.

“What we’re trying to do is take very good news, that our economy is coming back and that people are making money… and all that good news allows us to have really much more constructive decisions on where do we put this money to have resources in return?” said Hickenlooper. “And we went through so many gyrations to find the appropriate compromise… we can’t quite get all the way there to returning the entire Homestead Exemption.”

The governor’s office has proposed restoring $63.4 million to the exemption program following the March forecast, after having originally proposed cutting $80 million from the program. Hickenlooper’s office says that money would be applied to the “neediest seniors,” though details and a formula are still being worked out.

“Certainly we may not get to the really biggest mansions in Cherry Hills, or the largest homes in Aspen, but we’re going to get to most, the vast majority of seniors homes will get their exemption back,” the governor continued at Monday’s meeting with the Capitol press corps.

House Minority Leader Mark Ferrandino, D-Denver, said Democrats will allow the JBC to conduct its negotiations and work, but he said the House caucus is open to a partial restoration of the Homestead Exemption fund given the latest projections.

“Our goal the entire time has been to help the most needy seniors who are out there, if there are more resources to do more, then I think we’re open to that conversation,” said Ferrandino.

But signaling continued concern from Republicans, Sen. Greg Brophy, R-Wray — who sat in on Monday’s JBC briefing out of sheer interest since he is not a member of the committee — questioned whether the governor’s office was still considering suspending the exemption, despite the positive forecast. “It looks like you guys still want to take away the Senior Homestead Exemption for this year, is that correct?” he asked Henry Sobanet, director of the Office of State Planning and Budgeting.

“Our proposal is still for that to be the case,” Sobanet responded. “The issue is, as we still see cuts across education and other areas, the first place to help seniors would be in the means-tested program, and that re-mains our recommendation for ‘12-‘13.”

Restoring other proposed cuts

The governor’s office has also suggested restoring proposed cuts to education and local governments in the wake of the positive revenue forecast. In addition to cutting the senior homestead fund, the governor had originally proposed cutting:

• $48 million from K-12 education;

• $30 million from higher education;

• $30 million from local grants.

Hickenlooper’s office is now proposing to restore:

• $38.1 million to K-12 education;

• $23.8 million to higher education;

• $23.8 million to local grants.

“What we are really focused on is to try and return the state to a robust economy and a strong, well-situated foundation the best way we can,” said Hickenlooper. “That means that we continue to try and invest in higher education, we continue to try to invest in county infrastructure, and that we continue to invest in seniors.”

Meanwhile, Gerou is concerned that the positive revenue forecast will prompt lawmakers to ask for additional funding for policies and projects that have been off the table due to the down economy. She commented during Monday’s JBC hearing that strangers to the committee’s regular hearings were suddenly popping in to take a listen. “I’m seeing faces here that I’ve never seen at any Joint Budget Committee meeting, so that’s very interesting,” commented Gerou.

“I was trying to keep them from going shopping,” she told The Colorado Statesman after the meeting.

Gerou’s Democratic colleague on the powerful JBC, Sen. Mary Hodge of Brighton, agreed with her Republican friend. “They think there’s money to be had,” she said.

Both lawmakers joked that if proposals for additional funding come up as legislation, “We’ll kill their bills in Appropriations.”

“These are smart people, they understand that’s why I brought it up,” said a more serious Gerou. “They know what we can do, and so hopefully they’ll be smart about it.”