by Loren Furman, CACI Vice President of Governmental Affairs

& Jenn Penn, Mountain Regional Vice President, BIPAC

July 10, 2009

The Fiscal Stability Commission, established by the Colorado General Assembly during the 2009 Legislative Session by SJR09-044, convened on July 8-9, 2009 at the Colorado State Capitol.  The Commission is made up of 16 members – 6 legislative members and 10 members from the public which are listed as follows:

Legislative Members:                                             Non-Legislative Members:

Charge of the Commission:

·         “Study the fiscal stability of the state, including but not limited to solutions for higher education and transportation funding, affordably access to health care, kindergarten through twelfth grade education, state-owned assets, and the creation and adequate funding of a state rainy day fund;”

·         “Develop a strategic plan for state fiscal stability that may be amended on a yearly basis to reflect then-existing economic realities; and consider other issues as needed.” 

Click here for the full text of SJR09-44 Establishing the Fiscal Stability Commission

Overview of July 8 & 9 Meetings:

During the last two days of meetings, the Commission received a crash course in the state budget structure and status.  Legislative Council and Legislative Legal Services provided the commission with overviews of the state expenditures and revenues.  Overviews of the constitutional and statutory framework of the state budget focused on the big six state budget drivers – Education, Health Care Policy & Financing, Corrections, Human Services and Judicial Departments.  State Revenue overviews included presentations on TABOR and Referendum C.  

The Commission received budget updates from State Treasurer, Cary Kennedy and Joint Budget Committee Chair, Senator Moe Keller.  The Commission also heard presentations by Richard Wobbekind, Unversity of Colorado at Boulder, Leeds School of Business, Charlie Brown, Center for Colorado’s Economic Future, Henry Sobanet, President Colorado Strategies, Carol Hedges, Colorado Fiscal Policy Institute, Wade Buchanan, Bell Policy Center and Barry Paulson, Independence Institute, and a panel presentation from local government representatives Sam Mamet, Colorado Municipal League, Evan Goulding, Special District Association and Chip Taylor, Colorado Counties, Inc. 

Discussion of Elimination of Tax Exemptions:

The Commission also discussed the elimination of current tax exemptions and enterprise zones as potential ways to backfill the budget shortfall for the 2010-2011 fiscal years.  CACI will be defending such exemptions which are critical to the health of businesses throughout the state.  Eliminating these exemptions would deprive state and local economic developers of the tools that they need for Colorado to compete in the global economy for businesses and jobs.  In addition, eliminating the exemptions would increase taxes on companies during the worst economic downturn since the Great Depression of the 1930’s.  Please see the article below regarding the Commission’s review of tax exemptions and enterprise zones:

Colorado fiscal panel eyes higher corporate taxes, cutting enterprise zones

Denver Business Journal - by Ed Sealover

Elimination of enterprise zones and an increase in corporate income taxes are now on the table as potential ways to raise more revenue for Colorado’s state government.

Both were among suggestions on short- and long-term budget-balancing measures that were offered by businesspeople, think-tank operators and legislators at Thursday’s meeting of the new Long-Term Fiscal Stability Commission. The 16-member commission will consider a bevy of ideas over the next four months before making recommendations to the Legislature near the end of the year.

Sen. Moe Keller, a Wheat Ridge Democrat and chairwoman of the Joint Budget Committee, offered a list of ways the Legislature could close a $384 million shortfall in this year’s budget and reduce spending in the long term. That included proposals like requiring Colorado State Parks to get all of its funding from fees rather than tax money and ending the state’s conservation easement program.

But the idea that Keller offered that seemed to get the most traction was her suggestion that the state get rid of its enterprise program, which offers tax breaks to companies that locate in rural or disadvantaged areas.

The program is so widespread — some estimates say 85 percent of the state is in an enterprise zone — that the program has outgrown its purpose and could generate tens of millions of dollars without hurting business recruitment, Keller said.

Commissioner Tim Hume agreed with that sentiment, saying that when he decided to locate a sunflower oil seed processing plant and feed mill in Lamar, the potential of locating in an enterprise zone did not factor into his decision.

“There are parts of it that I think are beneficial to particularly rural areas, but it is seldom a deal-changer in my experience,” agreed Tom Clark, executive vice president of the Metro Denver Economic Development Commission.

Weld County Commissioner Sean Conway said that while he, too, is open to changes to the program, he does think it should be retained in some form to help rural areas compete against cities to lure jobs.

Clark drew more mixed response with his suggestion that some business taxes are low enough that they could be increased without harming business retention and investment. One in particular that he mentioned was the corporate income tax, which is now 4.63 percent, one of the lowest in the country.  “The corporate income tax has never been a factor in companies deciding where to go,” Clark said.

However, the state’s contribution to higher education is so low that Clark was told by a national site selector prior to the 2005 passage of the Referendum C revenue-retention measure that he advised companies against relocating to Colorado. Per-student state contributions to higher education remain the third-lowest in the country, and the state risks not being competitive for some jobs unless that increases, Clark told the commission.

Clark suggested that in addition to looking at the corporate income tax level, the state also should re-examine its corporate property tax levels, which are now so high that some companies are scared off.

The Gallagher Amendment, passed in 1982, requires that non-residential property pay 55 percent of the total property taxes in the state. One of the commission’s goals is to look at whether that law should be altered.

Commission’s next scheduled meetings: 

The next Fiscal Stability Commission Meetings will be held on July 28^th and 29^th, 9:00 a.m.  – 5:00 p.m. at the Colorado State Capitol, House Committee Room 0112.   Public testimony will be allowed during the meeting scheduled on July 28^th.  The Commission is limited to proposing five bills for the 2010 legislative session and the bills must be determined by November 6^th, 2009.