Colorado lawmakers look at tax changes, furloughs
The Associated Press
Aspen, CO Colorado
DENVER ” Colorado lawmakers are considering everything from furloughing state workers to imposing a sales tax on cigarettes to avoid a proposed $300 million cut to higher education.
Senators are set to start debating the budget for the next fiscal year on Thursday, even though all the details and possible deals between Republicans and Democrats, as well as the House and Senate, are still up in the air.
Under the official plan, colleges and universities would take a 60 percent cut, but that money could be restored if state lawmakers pass two companion bills that would take $500 million from Pinnacol Assurance, the state-created worker’s compensation company.
But the company, which has a surplus of nearly $700 million, is fighting the move along with business groups who say the money belongs to business owners who paid premiums. Some lawmakers who back the move acknowledge that if even the bill passes, the money could be tied up for a long time in a likely legal battle. That would mean the state would have to cut higher education anyway, which could trigger double-digit tuition increases and cause other smaller schools serving mostly lower-income students to close.
That’s why Republicans, who largely oppose the Pinnacol move, as well as Democrats, who mostly support it, spent hours going through the budget Wednesday, putting their ideas on chalkboards and bulletin boards in their separate meeting rooms.
Senate Minority Leader Josh Penry said the GOP will offer two main alternatives. One will ask all state departments to find ways to cut 2.9 percent. The other lays out a package of cuts worth about $200 million to ease the higher education cut, including one- or two-day furloughs for state workers, and taking $100 million from kindergarten through 12th grade schools to give to higher education.
Lawmakers need to cut the state budget this year and next because tax revenue is expected to drop $900 million because of the recession. But some parts of the budget are still growing, including funding for K-12 schools. K-12 funding is set to grow by $146 million, or about 4.7 percent, in the fiscal year that starts July 1, partly because of requirements in a voter-approved amendment.
Democrats, meanwhile, have been looking at furloughs ” although several senators said they opposed them ” and taking $60 million approved for a water project that isn’t likely to happen for several years to help plug the budget shortfall. But they’ve mainly focused on reversing a series of tax credits and tax exemptions, including one now in place for cigarettes. Charging a state sales tax on cigarettes would bring in an estimated $30 million a year.
Lawmakers can’t raise taxes on their own because the Taxpayers Bill of Rights requires that any increase be approved by voters. But they say a recent state Supreme Court ruling gives them the right to get rid of existing tax breaks.
Sen. Chris Romer, D-Denver, said he’d like to start by getting rid of a capital gains tax credit for Colorado assets. If the state started by eliminating the exemption just for people earning more than $250,000, it could take in an estimated $25 million more a year in taxes, he said.
Romer proposed keeping sales tax exemptions only on food purchased with food stamps, prescription drugs and manufacturing materials, and throwing out all the rest, including breaks on things like gold bullion, bull semen, farm equipment and newspapers. He said special interest groups would then be forced to come to lawmakers and justify why the breaks make sense for the state.
Romer said one possible budget solution is getting Pinnacol to loan the state money to prevent deep cuts and then paying the company back with revenue raised by getting rid of some of the tax breaks.
However, Democrats still need to come up with a plan on how to do that because all tax changes must start in the House, even though the Senate is set to start debating the budget first.
Penry said he didn’t think the capital gains change would bring in as much money as expected because of the recession, but he said he would listen to what Democrats had to say on other proposed changes.
Pinnacol CEO Ken Ross and staffers from the governor’s office have been in talks on a possible voluntary solution to help the state but have released no details.
Gov. Bill Ritter said Wednesday the state should avoid cutting higher education in case tax revenues don’t drop as much as legislative economists predict. They believe the recession will last longer than the governor’s advisers.
Ritter said any possible Pinnacol money could be held in reserve in case it’s needed later.
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