Hammering out a state budget that can win support from lawmakers across a divide matrix that includes party and regional affiliation is a surgical exercise, made all the more so given the split control of the 2015 Colorado Legislature. Further complicating the matter is lawmakers’ reticence to ask voters to keep the projected excess revenue that will trigger a refund under Taxpayer’s Bill of Rights. The net result is a proposed state budget for fiscal year 2015-16 that, while an increase from this year’s funding, will leave many needs unmet despite the rosy economic climate that is filling the state’s coffers.
The Joint Budget Committee, tasked with crafting a budget to present to the Legislature for approval, has proposed a $26 billion budget – a 6.6 increase over last year’s document – that also provides for $187 million in TABOR-triggered refunds and up to $58 million more for refunds that resulted from the state’s new retail marijuana tax. Regardless, the state’s roads are in need of significant investment, as is the education system from preschool through college.
But TABOR requires the state to return revenue in excess of budget projections and those that exceed the inflation rate plus population growth and therefore limits the state’s ability to catch up on spending from darker revenue years. The best solution is to ask voters to keep this year’s excess revenue. Instead, at the urging of Gov. John Hickenlooper’s budget office, members of the JBC and the state Senate have set their sights on a growing revenue source unhampered by constitutional or statutory mandates: the severance tax fund. Tempting as it might be to dip into this revenue pool to help offset the expected TABOR rebates, it is the wrong answer to the state’s convoluted budget challenges.
The severance tax is charged on the gas and oil extracted from beneath Colorado’s surface. The money is split between the state’s Department of Natural Resources and the counties from whence the gas and oil came. That is an appropriate allocation of the money and, given the fact that Colorado’s effective severance tax is the lowest in the West, the fund is relatively meager. The state is projected to collect between $260 million and $275 million in severance taxes in 2015, according to a report prepared for the Legislature in 2014 by the Western Natural Resources Law Group. The proposed budget would transfer $20 million of that into the general fund; Hickenlooper had asked for a $47 million transfer. Neither is acceptable.
The severance tax helps fund the Department of Natural Resources, which regulates gas and oil production in the state – at a significant cost – and manages the state’s water, wildlife and parks. Each of these divisions is affected by gas and oil development and is struggling for adequate dollars. The other half of severance taxes collected returns to the counties where the gas was extracted. This is critical funding to help offset the many public investments counties must make to accommodate gas and oil production, including roads, schools and emergency services. The Legislature must not crib from that limited resource that counties rely upon to mitigate the demands that gas and oil development make of local infrastructure.
Sen. Ellen Roberts, R-Durango, is right to call foul on this ploy. While $20 million is a needle in the budgetary haystack, it is not at all insignificant to the counties and agencies that rely on severance-tax money to balance their own budgets. Put simply, the Legislature must look elsewhere.
