Colorado Gov. John Hickenlooper kicked off a statewide tour Friday speaking in Frisco and Leadville about his plan to change the so-called Taxpayer’s Bill of Rights or TABOR. He has the right idea.
The governor wants to exempt what is called the hospital provider fee from state revenue counted under TABOR. Doing so would keep that revenue under TABOR limits and allow the state to keep $200 million more, which Hickenlooper says would go to schools and roads.
TABOR, passed as a ballot initiative in 1992, is best known for its requirement that tax increases must be approved by the voters. And if that were all there is to it, there would be few problems. In fact, though, TABOR is a complex and multifaceted measure intended in large part to strangle state government. And on that level, it works.
In addition to making it difficult to raise taxes, TABOR limits the amount of money the state can take in – even under existing tax rates. Any revenue that exceeds the TABOR-imposed limits must be refunded to the taxpayers. That not only interferes with recovering from economic downturns, it also makes it hard to enact new programs or even keep up with old ones.
State government cannot indulge in deficit spending. Nor can it close prisons willy-nilly or do away with the State Patrol. Limiting state spending by any meaningful amount of necessity affects schools and roads. Rebates in particular must come out of the General Fund, which directly affects those areas.
The interaction of those facts with TABOR means that without something like what Hickenlooper is proposing, Colorado could see further cuts to K-12 spending, possibly more tuition hikes for higher education and continued inaction on fixing roads and bridges – all while issuing tax rebates. Exempting the hospital provider fee would simply remove the need for issuing rebates by giving the state more room to move within the TABOR limit.
The Colorado Health Care Afforability Act was signed into law in April 2009. It authorized the state’s Department of Health Care Policy and Financing to collect a hospital provider fee from hospitals, not to exceed 6 percent of net patient revenue. The fees collected are matched by federal dollars and go to help offset the cost of Medicaid, indigent care, hospital quality incentive payments and the Child Health Plan Plus program.
By boosting payments for state-funded care, the provider fee also helps reduce the “cost shift,” in which hospitals are forced to make up for low reimbursement rates for treating the indigent or uninsured by charging more for treating the well-insured. The fee lessens the need for that, and with that, benefits everyone.
Through 2014, the hospital provider fee has increased Colorado hospital reimbursements by a total of $802 million. It is expected to bring in $670 million in fees next year. But it does not spend General Fund revenue and as such is a logical fee to exempt from the TABOR limits.
Colorado’s constitutional ban on deficit spending prohibits state government from writing checks it cannot cover. But as any business owner can attest, deferred maintenance or a failure to invest are also effective ways to fall behind. And that is what Colorado has been doing, with K-12 schools, higher education and transportation infrastructure.
Hickenlooper’s plan to exempt the hospital provider fee from TABOR limits is not magic. It will not undo the fundamental problems inherent in TABOR, nor will it solve all the states’ funding issues.
That said, $200 million is still a meaningful amount of money and well worth the effort. The governor is right to pursue it.
