How One Fee Can Impact The Whole Of Colorado's State Budget
Colorado lawmakers are required to pass a balanced state budget every legislative session, but that could prove challenging for the 2016 -2017 fiscal year. The governor’s office of state planning and budgeting submitted a budget proposal to lawmakers last fall. They’ve identified over $926 million in funding needs mandated by new constitutional and statutory demands on the general fund, which makes up the largest part of the budget. But the revenue doesn’t match up.
“We identified over $926 million of needs against only $426 million in available money, so we had a $500 million gap that we had to close,” said Henry Sobanet, director of the governor’s office of state planning and budgeting.
To understand Colorado’s state budget constraints, you have to understand the taxpayer bill of rights, also known as TABOR. Under the constitutional amendment passed in 1992 by state voters, Colorado officials have to get voter approval to raise or implement new taxes. It also caps state revenue with an equation. If the state collects taxes above the inflation rate plus population growth, taxpayers get the surplus money back - unless voters say the government can keep it.
It helps to think of TABOR like a glass. The bottom portion of the glass is taken up with cash funds that the state collects from fees, including the hospital provider fee. The middle of the glass comes from the income and sales taxes the state collects in the general fund.
As the fees portion of the glass fills up, the easier it is for the general fund to spill over the top -- triggering more money in TABOR refunds -- something the governor’s office wants to keep from happening because of the existing funding gap.
Under the proposed $28.5 billion budget, the collections of the hospital provider fee will be reduced by $195 million, preventing state revenue from exceeding the TABOR limit.
“All the money counts toward the same [TABOR] limit, but when we pay rebates we can’t use the hospital fee for the rebates so we have to carve out money in the general fund to pay for growth in the hospital fee program,” said Sobanet.
“So we’ve proposed limiting the hospital fee program to bring the total amount of money underneath the total limit. That saves money in the general fund, which pays for the regular Medicaid program, K-12 education, higher education, and public safety issues like department of corrections, mental health. So that’s how we’re managing it now.”
It’s a strategy legislators have used before. The problem, according to Sobanet, is that the hospital provider fee is counted toward the TABOR limit, taking up more and more of the glass.
It’s a per-patient fee charged to hospitals that is used to pay for health care for people who can’t afford insurance plans and offset some of the costs of Medicaid. It’s matched dollar for dollar by the federal government, but the state doesn’t get to keep the money, it gets redistributed back to hospitals.
“I think the TABOR limit that we have from referendum C is pretty manageable. The design of the hospital fee program is why we are bumping up against that limit. The rest of state government is below population plus inflation growth since the Great Recession,” Sobanet said.
For the past two legislative sessions, Gov. John Hickenlooper, Democrats and some Republicans in the legislature have tried to make a permanent solution to the hospital provider fee issue. They wanted to put the fee into a separate enterprise fund, which would put the money in its own glass where it wouldn’t contribute toward TABOR limits. The measure was defeated in the Republican-controlled Senate. Some Republicans like TABOR, and would rather have the money go back to taxpayers than into funding government services.
Changing the hospital provider fee to a separate fund may not happen in the 2017 session since Republicans retained control of the state Senate in the November 2016 election.
“I think TABOR is the limit that people wanted, and I think if the hospital fee were designed differently the growth of the state would generate the tax revenue we could use to pay for the services people want,” Sobanet said.