Plenty to com­plain about

The law­mak­ers strug­gled to find ways to close a $400 mil­lion short­fall.

The Denver Post - - FRONT PAGE - By John Frank and Brian Ea­son

Colorado hos­pi­tals will lose more than a half-bil­lion dol­lars, schools will get $50 mil­lion less for class­rooms and tax­pay­ers won’t see TABOR re­funds in 2018 as state law­mak­ers shuf­fled money in a state bud­get bill that left lit­tle to cheer.

The cost-sav­ing ma­neu­vers made room for mod­est salary in­creases for state em­ploy­ees and larger pay hikes for judges, law­mak­ers and elected of­fi­cials, as well as more money to ad­dress prob­lems in youth pris­ons and child wel­fare in the fis­cal year that be­gins July 1.

State Rep. Mil­lie Ham­ner called the cuts to the hos­pi­tals a “re­ally tough de­ci­sion,” but a nec­es­sary one, as law­mak­ers strug­gled to close a $400 mil­lion short­fall.

“I know this is go­ing to have a very neg­a­tive ef­fect on our hos­pi­tals,” said Ham­ner, a Dil­lon Demo­crat and top bud­get writer.

The state hos­pi­tal as­so­ci­a­tion warned that hos­pi­tals may close with­out the money, call­ing it “a death knell for ru­ral com­mu­ni­ties and dev­as­tat­ing to our state.”

The Joint Bud­get Com­mit­tee com­pleted most of its work in a marathon ses­sion Wed­nes­day that stretched to 11 p.m. as law­mak­ers hud­dled in pri­vate to make the last-minute de­ci­sions. They put the fi­nal touches on the $28 bil­lion spend­ing plan Thurs­day be­fore the bill’s de­but next week.

“It is re­ally painful on K-12 ed­u­ca­tion and hos­pi­tals — those are two things that con­cern me greatly,” said Rep. Bob Rankin, a Car­bon­dale Repub­li­can and bud­get writer.

The bud­get bill is ex­pected to am­plify the con­tentious de­bate this ses­sion about state spend­ing as law­mak­ers push for­ward a sep­a­rate mea­sure to in­crease the statewide sales taxes to pump money into road con­struc­tion and trans­porta­tion projects.

The spend­ing plan for fis­cal year 2017-18 rep­re­sents an es­ti­mated 2.4 per­cent in­crease in dis­cre­tionary spend­ing from the cur­rent year. But the new rev­enues in the $11 bil­lion gen­eral fund did not meet re­quired spend­ing and ex­ist­ing pri­or­i­ties, putting law­mak­ers in the hole to start.

To make ends meet, the three Repub­li­can and three Demo­cratic bud­get writ­ers adopted the more op­ti­mistic fi­nan­cial out­look from leg­isla­tive econ­o­mists that al­lowed for $143 mil­lion in ad­di­tional spend­ing, rather than take the more con­ser­va­tive fore­cast from the gov­er­nor’s of­fice.

The panel also sidestepped the $124 mil­lion deficit in the cur­rent fis­cal year by seek­ing a change to state law that low­ers the re­quired re­serve for the sec­ond straight year. The re­serve fund would re­turn to 6.5 per­cent next year.

Even then, bud­get writ­ers needed to raid other ac­counts to find money to bal­ance the bud­get, tak­ing $26 mil­lion from a state em­ployee re­serve fund and $46 mil­lion from sev­er­ance tax col­lec­tions on oil and gas pro­duc­tion.

A sched­uled tax cut July 1 for recre­ational mar­i­juana went up in smoke af­ter the com­mit­tee re­versed its de­ci­sion a year ago to lower the tax from 10 per­cent to 8 per­cent.

The sev­er­ance tax money will hurt lo­cal gov­ern­ments that rely on those dol­lars to pay for lo­cal projects, a move that led the Colorado Mu­nic­i­pal League to ex­press con­cern about the bud­get bill.

An­other $50 mil­lion will not trans­fer to school districts next year, which will in­crease the so-called neg­a­tive fac­tor in pub­lic ed­u­ca­tion to around $880 mil­lion.

On Wed­nes­day, the bal- an­c­ing act had been ex­pected to be even more dif­fi­cult. Bud­get writ­ers ini­tially voted to with­hold an­other $25 mil­lion from schools, and had planned to take an ad­di­tional $78 mil­lion from em­ployee re­serves, sev­er­ance tax col­lec­tions and state mar­i­juana sales taxes to make ends meet.

“The fact that we can get this close is re­ally good news,” Rankin said.

One of the fi­nal points of ne­go­ti­a­tion for bud­get writ­ers fo­cused on the size of pay hikes for state work­ers. Gov. John Hick­en­looper pro­posed a 2.5 per­cent across-the-board salary hike, but the bud­get writ­ers low­ered it to 1.75 per­cent with an ad­di­tional 0.75 per­cent in po­ten­tial merit pay in­creases.

How­ever, cer­tain state em­ploy­ees will get a larger boost. Colorado State Pa­trol troop­ers will re­ceive a 7 per­cent salary hike plus pos­si­ble merit pay, while ju­di­cial branch of­fi­cers will get a 5.7 per­cent pay bump.

The in­crease in ju­di­cial pay will trig­ger a salary hike for the gov­er­nor, trea­surer, at­tor­ney gen­eral, sec­re­tary of state and state law­mak­ers, ef­fec­tive in 2019, be­cause their com­pen­sa­tion in­creases were linked un­der a 2015 law.

In the fi­nal ne­go­ti­a­tions, the gov­er­nor’s of­fice re­ceived a $6.7 mil­lion ear­mark for its top leg­isla­tive pri­or­i­ties. Hick­en­looper’s ad­min­is­tra­tion also re­ceived $4.7 mil­lion to hire 60 new em­ploy­ees to ad­dress safety and se­cu­rity con­cerns at the trou­bled Divi­sion of Youth Cor­rec­tions, as well as ad­di­tional money for child wel­fare case work­ers.

But the com­mit­tee re­jected Hick­en­looper’s re­quests to spend $18 mil­lion in mar­i­juana tax col­lec­tions to de­velop as many as 2,400 af­ford­able hous­ing units statewide for home­less in­di­vid­u­als and other at risk pop­u­la­tions.

An­other top ad­min­is­tra­tion pri­or­ity left on the cut­ting room floor: $3 mil­lion for film in­cen­tives that the state’s eco­nomic de­vel­op­ment chief con­sid­ers vi­tal to main­tain­ing the in­dus­try’s pres­ence in Colorado.

The com­mit­tee made both moves this week as the Demo­cratic gov­er­nor si­mul­ta­ne­ously met with re­porters to tout their im­por­tance in the bud­get bill.

Hick­en­looper pro­posed his own dras­tic mea­sures to bal­ance the spend­ing plan, but the law­mak­ers man­aged to avoid one of his most con­tro­ver­sial pro­pos­als: a re­duc­tion in the prop­erty tax ex­emp­tion for se­niors aged 65 and older.

But it re­sulted in deeper cuts to hos­pi­tals, who bear the brunt of the state’s bud­get crunch for the sec­ond con­sec­u­tive year.

The rea­son is a com­pli­ca­tion in how hos­pi­tals are re­im­bursed for un­com­pen­sated care.

Un­der the cur­rent sys­tem, Colorado hos­pi­tals pay fees to the state based on pa­tient stays and the money is lever­aged for nearly a dol­lar-for-dol­lar match from the fed­eral gov­ern­ment. Then the to­tal amount is dis­trib­uted back to hos­pi­tals based on a for­mula that sends the largest pro­por­tions to ur­ban and ru­ral hos­pi­tals that treat the most Med­i­caid pa­tients.

The catch is this: The hos­pi­tal provider fees count to­ward the state’s rev­enue un­der the Tax­payer’s Bill of Rights, help­ing to push the state above the caps and re­quir­ing TABOR re­funds.

Like the cur­rent year, the bud­get com­mit­tee ap­proved a re­duc­tion in the fee col­lec­tions by $264 mil­lion — which then put the state un­der its spend­ing lim­its and elim­i­nated the need for a re­fund, which was pro­jected to range from $23 to $526 for sin­gle fil­ers.

But for hos­pi­tals, the re­duc­tion in the fees adds up to $528 mil­lion less for op­er­at­ing ex­penses af­ter the fed­eral gov­ern­ment matches the dol­lars.

“While the Colorado Hos­pi­tal As­so­ci­a­tion and its mem­ber hos­pi­tals and health sys­tems are sen­si­tive to the bud­get cri­sis, Colorado’s hos­pi­tals — es­pe­cially those in ru­ral parts of the state —play a cru­cial role, not just as care­givers, but as em­ploy­ers, eco­nomic en­gines and com­mu­nity part­ners,” said Steven Sum­mer, the as­so­ci­a­tion’s pres­i­dent and CEO. “A bud­get cut that elim­i­nates these part­ners will be a death knell for ru­ral com­mu­ni­ties and dev­as­tat­ing to our state.”

The cuts may put pres­sures on law­mak­ers to con­sider ex­empt­ing the hos­pi­tal provider fee col­lec­tions from count­ing to­ward the TABOR limit.

For the prior two leg­isla­tive ses­sions, Repub­li­can leg­isla­tive lead­ers re­jected re­peated Demo­cratic ef­forts to re­clas­sify the fee money, but GOP law­mak­ers are ex­pected to re­visit the ques­tion as the new bud­get cuts come into fo­cus.

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