House passes budget without Pinnacol raid

By Jason Kosena
THE COLORADO STATESMAN

The Pinnacol plan is dead, but even without taking $500 million from its reserves, Colorado House members found a way to pass a bipartisan balanced budget Thursday afternoon on second reading.

Republican Rep. Cory Gardner speaks out against using Pinnacol funds to balance the state budget at a protest on the West steps of the Capitol on Monday morning.
Photo by Jason Kosena/The Colorado Statesman

On Friday, it passed out of the House by a 51-13 vote, a stark contrast from last year when the Long Bill was approved on a party-line vote.

Although the legislators made no cuts to higher education — the state’s favorite go-to place for budget balancing — the pain is being felt in other areas.

State employees will be forced to take eight furlough days this year, some water projects will be halted, state rates for private prisons and medical providers will be cut, and the cost of tobacco and vending machine products will increase.

In addition, the Colorado Commission on Higher Education will take cuts to its operating budget, a judicial e-filing system will disappear, cash funds will be depleted, and the state will rely on federal stimulus dollars to backfill many programs.

When the dust settled, the Long Bill passed with overwhelming bipartisan support.

“I appreciate the majority listening to our ideas as we tried to balance the budget,” House Minority Leader Mike May, R-Parker, said of the process. “We made some difficult decisions together, but this is a responsible budget.”

The Long Bill that passed out of the House looks very different from what passed out of the Senate last week. The Senate version relied on a $500 million raid on the surplus of Pinnacol Assurance, a quasi-governmental worker’s compensation insurance company. Senate Republicans said such a raid would be illegal, while Senate Democrats said if they couldn’t get the money that way, their only option would be to take $300 million from the higher education budget.

On Wednesday, as Gov. Bill Ritter threatened to veto the budget if the Pinnacol plan remained, House Democrats pulled Senate Bill 273, which authorized the budget move, and began looking for other solutions.

They found them deep in the state budget Thursday morning. Unlike many Democratic solutions this year, which have relied on additional money gained through fees, the cuts Thursday came from existing spending programs and through eliminating some tax exemptions. Republicans were happy the Legislature was reducing the size of government to balance the budget rather than resorting to what they said was an illegal raid on private funds.

“It’s the right direction to head in,” said Cory Gardner, R-Yuma. “We can get behind this plan.”

Pinnacol supporters rally outside the Capitol on Monday morning.
Photo by Jason Kosena/The Colorado Statesman

For one week, Democratic members of the Legislature had been promising doubters that their attempt to transfer $500 million from Pinnacol was a legal and responsible way to balance the state’s massive budget deficit. And while Ritter came out early to say cutting higher education even more was not an option, he didn’t signal his position on the Senate Democrats’ plan.

But the death of the Pinnacol plan became inevitable on Wednesday morning, as Ritter and lawmakers met in the governor’s office and agreed the asset transfer was not an option

Republicans, who stood firm with the business community in opposing the Pinnacol plan, said Ritter and the Democrats had made a fiscally responsible move by pulling SB 273.

“Their scheme ... was misguided from the start,” said Sen. Mike Kopp, R-Littleton. “The (Democrats) now seem to realize at the 11th hour what Republicans have been saying from the beginning of the budget process. We have to buckle down and start looking at wide-ranging cuts to spending programs, including at the state bureaucracy itself and not keep putting the entire burden on Colorado’s college students with draconian cuts to the state’s college system. It now appears such broad-based cuts are back on the table, and that is encouraging.”

Ritter, who has been criticized for staying on the sidelines as Democratic legislators wrestled over a budget solution, said in a prepared statement that the move to raid Pinnacol wasn’t workable and that negotiations with Pinnacol management — which included the possibility of loans from the insurance agency — had broken down. He said he would continue to work with the JBC and the Legislature to find ways to balance the budget.

“Members of my staff and I have tried in good faith to reach an agreement with Pinnacol,” Ritter said in his statement. “However, there remain too many unresolved issues and questions for Colorado citizens and Pinnacol shareholders and customers. Therefore, with a budget deadline looming, I have halted negotiations with Pinnacol. Together with my budget office, the JBC and legislative leadership, we are now focusing on a number of other steps to erase the shortfall caused by the economic downturn without devastating cuts to higher education.”

Earlier in the week, Ritter said the proposed $300 million cuts to higher education were not an option because they might trigger the loss of more than $700 million in federal stimulus money.

Pinnacol officials, who vowed to sue if the state moved to take some of its money, said they were pleased with the recent decision and reiterated their contention that Pinnacol’s funds are private and not subject to seizure by the state.

The news of the Democrats’ move to kill the bill was seen as a positive step, said a spokesman for Republican Attorney General John Suthers, who publicly came out against the proposal last week, calling it unconstitutional and vowing not to defend the state if the issue went to court.

Republican Rep. Cory Gardner and Sen. Mike Kopp stand with Democratic Reps. John Soper and Joe Rice during the Pinnacol protest. Rice and Soper were among a handful of Democrats who bucked their party and didn’t support the effort to take $500 million of Pinnacol reserves.
Photo by Jason Kosena/The Colorado Statesman

“Obviously, we are pleased with the decision by legislators to set aside what we felt was an unconstitutional raid on Pinnacol Assurance reserves,” spokesman Mike Saccone said.

The light shone on Pinnacol by the debate, however, has put new pressure on the insurance company. Legislative leaders also announced on Wednesday that they plan to move forward with Senate Bill 281, a companion to SB 273 that aims to enact an accountability plan for Pinnacol. If passed, that legislation will create a committee to review Pinnacol’s operations, require a full audit of its assets and require the agency to pay dividends to policyholders from the large reserves Democrats had hoped to raid.

“Significant issues have been disclosed regarding the operations of Pinnacol Assurance,” said Sen. Majority Leader, Brandon Shaffer, D-Longmont, in a prepared statement. “It’s important that we continue to move forward with an audit and interim committee to review Pinnacol Assurance’s structure.”

Pinnacol management took it on the chin from fired-up legislators Tuesday morning during a House Appropriations hearing where SB 273 passed on a 9-3 vote. At the time, a bipartisan group of lawmakers grilled Pinnacol leaders about the need for high salaried executives and a $25 million building in Lowry.

“The recent discussion about Pinnacol has uncovered extremely complicated issues that deserve a longer discussion than the last couple weeks of the session,” said House Majority Leader Paul Weissmann, D-Louisville. “We will continue to pursue a plan to create a more accountable Pinnacol Assurance that protects policy holders and contributes to the health of our state.”

If the SB 281 passes and is signed by the governor, the committee to begin oversight of the agency will start work this summer.

As for the Long Bill, early next week it will head back to the Senate, which has to approve the sweeping changes the House included.

Jason@coloradostatesman.com