Colorado Gov. John Hickenlooper talks about Amendment 64 at the State Capitol in 2012. (Denver Post file)

How some marijuana taxes will be utilized in Colorado’s 2018 budget

Colorado Gov. John Hickenlooper on Tuesday proposed a $28.5 billion state budget that cuts spending on education, hospitals and road construction to help close a $500 million shortfall.

The fiscal year 2017-18 plan is the starting point for a six-month process that will probably prove painful because state revenues are not keeping pace with current demands.

The spending plan shortchanges school districts by $45 million, cuts $195 million in payments to hospitals, anticipates an average 6 percent hike in college tuition, slashes road funding by more than $100 million and eliminates the projected 2019 taxpayer refund under the Taxpayer’s Bill of Rights.

Hickenlooper said the plan’s priority is “to minimize the pain,” but he acknowledged in a recent interview that “we are going to have to cut everything.”

“It’s one of those budgets where I’m certainly going to be the least popular person in the state with an awful lot of people,” he said.

At the same time, the plan spends money to hire more mental health professionals in schools and child welfare caseworkers; starts to allocate $64 million for additional costs from the 2013 floods; raises state employee salaries 2.5 percent; and uses marijuana tax revenues to launch an $18 million program to create affordable housing for the homeless.

The governor also set aside $16 million in marijuana taxes for a forthcoming initiative to control the illegal pot trade operating in the shadows of the state’s legal industry.

How lawmakers receive the Democratic governor’s plan — which is required to go to state lawmakers at the start of November — will depend on the outcome of the contested legislative races a week later.

The current split legislature, with a Republican-led Senate and a Democratic-controlled House, creates an evenly divided budget committee. A shift in either chamber would realign the spending priorities.

“This provides a baseline for discussion,” said Sen. Kent Lambert, a Colorado Springs Republican and top budget writer. “But frankly, this is not going to be what the budget looks like at the end of the day. A lot — a lot — depends on the outcome of the elections next week.”

The $10.9 billion in discretionary or general-fund spending in the proposal represents a roughly 4 percent increase compared with the current budget. But the $426 million in new revenue is still $500 million less than current spending requirements, according to the governor’s office. Those requirements include news students and inflation in K-12 education costs, TABOR rebates, new Medicaid costs and more.

The next plan also must set aside $181 million to refill the reserves tapped to close the deficit in the current budget year.

Joint Budget Committee Chairwoman Millie Hamner, D-Dillon, said the outlook appeared worse than the prior year — a sentiment shared by other budget writers.

“We are in a bit of a bind,” said Sen. Pat Steadman, a Denver Democrat and veteran budget writer who is departing at the end of the year. To close the gap, he said, “there are several things in this proposal that are uncomfortable or will probably be unpopular.”

To make the plan work, the governor’s budget office tapped a dozen different smaller accounts to make it balance.

The $47 million for the across-the-board state employee salary hike is being pulled from an account reserved for merit pay raises. Another $32 million for general expenses is diverted from severance tax money that traditionally goes to local governments. And $15 million is taken from the grant program that builds schools. Many of the transfers will require a change in law.

Other measures to balance the budget include the elimination of a position in the governor’s marijuana coordination office and a delay in implementation for a law approved this year that requires the court to appoint attorneys in certain municipal court cases.

Republicans expressed concerns about the proposed diversion of severance tax money and the cuts to transportation and schools funding.

“That may not sound like a lot, but incrementally, that hurts,” said Rep. Bob Rankin, a Carbondale Republican and budget writer.

One particular area of focus for the coming year is the $195 million cut to the hospital provider fee, which facilities receive to subsidize the cost of indigent care. It’s the second straight cut to hospitals.

Hickenlooper proposed legislation in the 2016 session to reclassify the fee and make more room for spending in the budget, but Republicans blocked the measure in the Senate.

The tight budget will only renew focus on the issue, and Hamner said she wants to revisit the issue.

“We cannot continue to balance the state budget by bleeding our hospitals,” she said. “I will redouble my efforts to solve this problem through the simple legislative fix of turning the hospital provider fee into a state enterprise.”

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