Colorado Fiscal Policy Institute's 2012 Legislative Review
2012 Legislative Review: Drawing to a Close
As the 2012 regular legislative session winds to a close today, the Colorado Fiscal Policy Institute evaluates the work of the General Assembly and how well it did to advance policies that foster the health, economic security and wellbeing of Colorado families. True, the 2012 regular session was marked by a great deal of political gamesmanship, but there was also a dose of political pragmatism. While in many cases politics trumped good policy, in others, legislators from both sides of aisle and both chambers seemed to weigh carefully the tradeoffs of the bills before them, and generally allow common sense to prevail.
On the tax and budget front, a number of bills that would have created new, untested tax giveaways failed. Rebounding state revenues helped mitigate another round of cuts to critical programs, but fell far short of reversing the damage done this recession. There were no major gains for transparency and accountability, but also no major setbacks. And finally, despite a lot of rhetoric about jobs, only one COFPI bill targeted to help workers get back to work survived. Altogether, COFPI declares this session a draw for fair fiscal policies that benefit Colorado families.
2012-13 Colorado budget – Running to Stand Still
The $18.9 billion state budget will show improvement in the 2012-13 fiscal year, but even though it represents a 3.7 percent increase in spending from the previous year the budget will neither maintain the current level of services provided by state government nor begin closing the gap on four years of budget cuts. Those cuts have left Colorado $1.9 billion behind the level of spending needed to provide services at pre-recession levels.
Throughout state government, spending has failed to keep pace with inflation and growing demand for services. So in places where workers have not been laid off and facilities have not been closed, hidden cuts have occurred as state employees are asked to do more with less.
In public schools, per-pupil spending in 2012-13 will be the same as the previous year at $6,474 per student; that fails to account for inflation and is still $603 lower per pupil than in 2009-10. If Colorado honored the state’s school-funding formula, the budget would include an extra $1 billion, or an additional $1,307 per student.
Tuition will go up again this year at colleges and universities throughout Colorado. Meanwhile state aid will be cut by $5.8 million.
In 2012-13, the budget will not include any General Fund support for the Temporary Assistance for Needy Families program. Even as the number of people receiving cash assistance grew by 19 percent between 2009 and 2011, funding for the program in 2012-13 will be $50 million, or 20.5 percent, lower than three years earlier.
The Low-income Energy Assistance Program, which is funded entirely by federal aid, will be cut by $11.6 million, or 19.4 percent.
Despite more than 1,300 families on waiting lists for the Child Care Assistance Program, and counties making it harder to qualify for the program, state spending on CCAP in 2012-13 will be 2.2 percent lower than three years earlier.
The state will close a prison for the second consecutive year. This time it will be CSP II in Canon City. Closing the prison will save $1.9 million in 2012-13 and another $7.8 million the following year.
The Senior Homestead Property Tax Exemption will return for people 65 and over who lived in their home for at least a decade. The non-means-tested tax break exempts 50 percent of the first $200,000 of property value, costing the state $96.1 million. If any of the money set aside for the tax break remains unspent at the end of the year, the unspent portion will be transferred to the senior services program.
The General Assembly rejected an effort to expand assistance to seniors through the Senior Property Tax/Rent/Heat Rebate (HB12-1253, Rep. Kefalas/Sen. Johnston). However, it did approve HB12-1326 (Rep. Acree/Sen. Spence) that expands a dental care program for low-income seniors and encourages the State Board of Human Services to approve a cost-of-living increase for Old Age Pension recipients.
State Revenues – Tax Credit Oprah Is In the House! (and Senate)
You get a tax credit! And you get a tax credit! Everybody gets a tax credit! As a result of the slight improvement in the economic forecast, lawmakers were eager to negotiate away state tax revenue in the name of job creation and economic development. COFPI acted as a sandbag against the rising tide of special interest giveaways, and opposed several new revenue-reducing bills.
Since 2009, the height of the recession, the Colorado state legislature has passed eight revenue-reducing measures costing the state over $50 million in FY2012-13. Like sessions before it, this legislative session included an onslaught of bills targeted towards reducing revenue through special interest tax giveaways. However, ultimately only four such bills passed. They will reduce General Fund revenue by $7 million next year.
Some of COFPI’s major accomplishments this session include defeating a bill that would have reinstated the arbitrary 6 percent General Fund spending directive (HB12-1075, Rep. Beezley/Sen. Brophy) and defeating another attempt to eliminate the business personal property tax (SB12-52, Sen. Scheffel/Rep. Priola). Each of these bills would have reduced revenue for schools, health care and other public services that support low-income Coloradans.
One defensive success was opposition to HB12-1132 (Rep. Miklosi/Sen. Williams S.), which would have provided generous tax incentives to businesses in newly created enterprise-zone style “creative districts.” HB12-1132 would have allowed a person who earns income from a creative business activity within a creative district to claim a 50 percent tax credit against income tax liability attributable to income derived from the activities. Similarly, the bill reduced the sales tax rate made on all sales within the district from 2.9 percent to 1.45 percent. COFPI testified in opposition to this bill that it would have required cuts to vital services that all Coloradans depend upon in order to finance a new, untested, special interest tax cut.
COFPI successfully defeated SB12-124 (Sen. Harvey/Rep. Nikkel), a bill intended to eliminate the limit on the number of regional tourism projects and expand tax increment financing in the state. The bill would have expanded an unproven economic development gimmick at the expense of the services supported through the General Fund. COFPI led the fight against this bill that had garnered broad bi-partisan support. Governor HIckenlooper vetoed the bill in the waning days of the session.
COFPI also killed a bill that would have taken money out of schools and subsidized profits for retailers. HB12-1069 (Rep. Miklosi/Sen. King S.) attempted to create a sales tax holiday for “school supplies” in Colorado. However, studies have shown that during similar sales tax holidays, retailers often increase their prices to offset any savings at the expense of the state. The credit was also overly broad and would have unnecessarily reduced revenue for schools and other general fund services without any targeted relief for Colorado families.
However, COFPI did not win every revenue battle. The Legislature passed one particularly troublesome bill, HB12-1286 (Rep. Massey/Sen. Newell),that will spend $3 million to increase film incentives in Colorado. Similar film tax credits in other states have proven to be ineffective policy and have resulted in net losses to the state. COFPI testified against the proposal; however the bipartisan bill passed through both houses with few votes in opposition.
The legislature also passed a potentially-costly bill, HB12-1042 (Rep. Pace/Sen. Schwartz), that creates a refundable income tax credit based on the amount of estate taxes paid on agricultural land. While dependent upon federal policy change, if implemented this bill could end up costing the state millions to finance a tax cut for wealthy land owners.
Transparency and Accountability – Cloudy with a Chance of Meatballs
The potentially most significant accountability measure promoted by COFPI in 2012 was never introduced in the General Assembly. COFPI, through a diverse coalition process, helped develop legislation designed to increase reporting requirements on tax increment financing (TIF). TIF is a tax subsidy that promotes development by transferring future public tax revenues to private development. This bill would have made information that urban renewal authorities already report easily available to the public.
Another transparency and accountability bill suffered a swift death in its first committee. HB12-1039 (Rep. Hullinghorst) would have implemented a pay-as-you-go requirement mirrored after a federal procedure that requires all tax cuts to identify a spending cut offset. COFPI worked with the bill sponsor and testified in support of this bill, which did not survive a vote in the House Finance Committee.
COFPI testified in support of implementing limitations on the under-reviewed and over-valued enterprise zone tax credits, another tool that is abused in the name of economic development without proper checks and balances. Ultimately, COFPI helped encourage lawmakers to pass HB12-1241 (Rep. Ferrandino/Sen.Heath), which commissions an enterprise zone review task force that will evaluate and make recommendations on the future of enterprise zone tax credit use in Colorado.
COFPI also fought against misinformation and political gamesmanship on SB12-83 (Sen. Scheffel/Rep. DelGrosso) − a bill to create a dynamic model that would require an analysis of the impact of tax cuts in Colorado. Research shows that dynamic models are ineffective and inefficient at the state level, leading to unproductive biases and flawed forecasting. While COFPI opposed the bill, we worked to at least amend the original bill to expand the model to apply all bills, not just to tax cuts, and to include a more thorough analysis of the impacts of public investments. The bill was amended in the Senate to create a legislative advisory committee to study the bill and make recommendations on the purchase of a dynamic model in the future. Ironically, political gamesmanship killed this bill. It was one of the 30 or so bills not heard in the House as House leadership fought to close down debate on SB12-002 (Sen. Steadman/Rep. Ferrandino) establishing civil unions.
COFPI supported HB12-1138 (Rep. Kefalas/Sen. Hudak), a bill to allow Legislative Council staff to prepare a poverty impact statement for a select number of bills that are likely to affect individual, child or family poverty in Colorado. This information, provided as legislation is being considered, would not only help orient the debate to actual families, but would be an important tool to help legislators evaluate tax policies, child care subsidies, eligibility standards for human service programs, funding for job training programs or other forms of education, and of course, economic development programs. HB12-1138 was killed in the House State Affairs Committee.
COFPI testified against a pair of bills that shared the goal of producing so-called “business-impact statements” for certain legislation (SB12-80, Sen. Mitchell; HB12-1115 Rep. Liston/Sen. Jahn). COFPI testified that these bills, which would allow testimony by “affected businesses” to accompany a fiscal note, would create an unfair advantage for a single perspective. COFPI argued that it would be more appropriate to measure the impact on Colorado families, particularly the most vulnerable Coloradans. Both bills failed.
Jobs and the economy – Still Haven’t Found What I’m Looking For
Throughout the session both parties focused on jobs and the economy. They debated a number of bills intended to increase jobs, remove barriers to employment and help Coloradans get the training and skills they need to better compete in a tough economy. COFPI testified in support of a number of these bills, including SB12-001 (Sen. Hudak/Rep. Duran) and a companion bill, HB12-1113 (Rep. Lee) which would have given preferences in state contracts to businesses that hired Colorado workers and veterans. These bills would have helped ensure that state tax dollars benefit Colorado communities to the greatest extent possible. COFPI supported these bills because we know that local workers, who live, shop, play and pay taxes in Colorado, reinvest in our state and help create thriving local economies. Unfortunately, both bills were killed in the House State Affairs Committee.
COFPI also supported SB12-003 (Sen. Carroll/Rep. Fischer), a bill that would have restricted the use of credit information for employment purposes. More and more employers are using credit information in hiring and promotion decisions, often creating a barrier to getting a job or getting ahead for many, including people who have suffered a long period of unemployment or low-income, young or minority workers who are likely to have no credit or lower credit than their competitors. SB12-003 would have put reasonable restrictions on using a person’s credit history for these purposes. Despite strong testimony in support and wide popular support, the bill was killed in the House Local Government Committee.
Finally, COFPI supported two bills intended to enhance the safety net for unemployed workers. The first, SB12-177 (Sen. Jahn/Reps. Liston & Pabon), is a technical bill that guarantees the greatest benefit for employers, workers and the state if the department of labor decides to issue bonds to pay back the debt to the federal unemployment insurance trust fund. This late bill, supported by the business lobby and certain to save employers millions over five years, had garnered unanimous support in both chambers. The bill died on the calendar in the wake of House leadership’s refusal to bring civil unions to the floor and will likely come back in special session.
The second, and higher priority COFPI bill, HB12-1272 (Reps. Duran & Ramirez/Sen. Newell), expands a program COFPI helped establish in 2009 that allows an unemployed worker to receive an enhanced unemployment insurance benefit if he or she enters an approved training program. HB12-1272 extends and expands this program to include employer-based training programs and self-employment assistance programs. Research from around the country and within Colorado has proven that these training programs are a good investment – they create a path to stable employment for most and even help turn some unemployed workers into entrepreneurs. This bill gained wide bi-partisan support in both houses and will likely be signed by the Governor. At a time when other states have restricted unemployment insurance and targeted this important safety net for workers, Colorado once again took a different route, choosing instead to help unemployed workers get the training they need for future prosperity. It’s another big win for COFPI.
COFPI partners on juvenile justice reform
COFPI played a supportive role on HB12-1271 (Rep. Nikkel/Sen. Giron), a piece of legislation that reforms Colorado’s direct file statute by placing age limits and safeguards on the ability of prosecutors to file criminal charges against youthful offenders directly in adult court. COFPI conducted research to evaluate the costs of filing against young offenders in adult courts. Our analysis found that young offenders adjudicated in juvenile court will have better employment prospects and higher earnings over their lifetimes because their records will not include a felony. Moreover, services provided to juveniles, such as education, are not provided to youth in adult prison. COFPI supported HB12-1271 because it helps limit the use of direct file for more severe cases, and therefore enhances future prospects for youthful offenders and contributes to our state’s wellbeing.