Local Government Severance Tax Fund Transfer

The Governor is proposed, and the JBC agrees, to transfer $10 million from the Local Government Severance Tax Fund into the General Fund to help balance the budget.

Money from that fund goes to local governments to offset the costs of energy development, like oil and gas production.  The Dept. of Local Affairs distributes the money two ways:

• direct distributions according to a formula
• grants

The transfer won't change the amount available for Direct Distributions to local governments, but it will reduce the amount available for grants.  Even with the transfer, there will still be $32 million for grants in FY 2010-11.

The transfer requires a change in law; it's in (TBD).

Not so refreshing

One of the ways we're trying to balance the budget is to suspend or eliminate some special tax exemptions, like the one that applies to candy and soft drinks.

Repealing the exemption would let the state's 2.9% sales tax apply to soda and candy.

We haven't heard much from candy companies, but the soda industry is fighting hard to keep the tax break.

We got dozens of letters from people who work at the Pepsi Bottling plant in Denver.  They were handwritten, but nearly-identical.

One letter stood out:

Please read this entire letter. I know you are inundated with mail, but this is important. I work for Pepsi in Denver.

The company has recently assigned us to write letters...  The intent is for us to express our opposition into taxing beverages.

I, unlike many around me, strongly support a tax on beverages that are loaded with corn syrup or sugar. I am afraid that if my supervisors where aware of my position, that my job would be in jeopardy, but I feel this issue and the health of future generations is more important than corporate earnings for shareholders.

I have almost given up on the idea that Washington is not run by corporate America, however there is still hope for the state governments stand up and say no to corporate interests and do what is right for the people. I trust you know what is right, but like my Grandpa always use to say “It’s no what you know about the problem, but what you do about it that matters.”

Feel free to contact me if you would like more information regarding my position.

I'm keeping his name a secret so that he can keep his job.

Coca-Cola sent a dozen or so employees to testify in committee.  They said they were afraid they'd lose their jobs if Coke loses its sales tax break.

They're boss emphasized the point.

Chris Harr, president of the Colorado Beverage Association and Denver-based general manager for the Pepsi Bottling Group, said that adding 2.9 percent sales tax to soda would reduce sales of soft drinks by as much as 2.8 percent and that such a sales dip would cost some 800 Coloradans their jobs.

That's from the Denver Business Journal, but We heard the same testimony during the committee hearing.

Is it true?  I doubt it.  For one thing, the soda companies don't really set the retail prices.  They sell wholesale; stores decide what to charge their customers.  (Coke and Pepsi do force some retailers to charge higher prices, but they do it by charging them a higher wholesale price and keeping them from buying their products for less from places like Costco).

If a sales tax raises the price (which in turn, the companies argue, reduces sales), then the price should be higher in states that impose a sales tax on soda.  Plenty do.

Fourteen states charge sales tax on soda as part of a general tax on all food.  Twenty-one states charge a higher tax on soda than they do on other foods.

Texas and California, for instance, have a special 6.25% tax on soda.  Colorado, as of now, has no tax on soda.  Here's how the states compare on soda prices:

Product	Colorado (No Tax)	California (6.25%)	Texas (6.25%)
2 Liter Coca-Cola	$1.69	$1.69	$1.69
2 Liter Safeway Soda	$0.75	$0.75	$0.75
12 Pack Soda	$4.99	$4.99	$4.99

The prices are identical.  I got them by comparing supermarket ads.

Colorado (No Tax)

California (6.25% Tax)

Texas (6.25% Tax)

Easy as Pie: The Colorado Budget in Charts

You've probably heard that most of Colorado's General Fund budget goes to just 5 (out of 22) departments. Fascinating, huh? Well it gets even more interesting if you start slicing up the budget different ways. Especially when you factor in the way we've been balancing the budget.

For instance, this year we're cutting costs by furloughing state employees. Furloughs are a tricky way to save money.

Think about prisons. Correctional officers can't just take a day off and leave the inmates on the honor system. Not living by the honor system is what led them to become inmates in the first place.

If we furlough one guard, another has to come in (on overtime) to take his or her place. No savings there.

That's why the governor said right up front that the furloughs wouldn't apply to all state employees. He did say that, and in some detail. Apparently one investigative reporter wasn't paying attention.

In any case, the furloughs don't apply to agencies that have to stay staffed 24 hours a day, seven days a week. Those agencies are Corrections (prisons), Human Services (mental health institutes, e.g.) and Public Safety (State Patrol).

Judicial, by the way, is a separate branch of government and its ability to fulough judges, for instance, is limited by the constitution.

Here's how Personal Services look divided up by department:

(click on the chart to make it bigger)

You can see why some state employees are irritated.  Once you take Corrections, Human Services and Public Safety (and to some extent, Judicial) out of the mix, the furloughs fall pretty heavily on less than a quarter of all state employees.

Judicial Branch JBC Briefing

Decision Items

Budget and Staff Cuts

The Judicial Dept. has a plan to cut 5% from it's budget and 7.5% of it's staff in FY 2010-11:

• Trial Courts: $7,407,811 and 154.0 FTE
• Probation: $6,942,701 and 94.0 FTE
• Supreme Court and Court of Appeals: $682,031 and 10.0 FTE
• Integrated Information Services: $536,214 and 5.0 FTE
• Courts Administration: $317,206 and 3.0 FTE
• Health, Life and Dental benefits: $1,469,600

Delay New Judges

HB 07-1054 created a number of new trial court judgeships around the state. The final 15 new judges were supposed to start this year FY 2009-10. Judicial delayed them until this year and is now proposing another delay. It wants to fill 14 of the judgeships on January 1, 2011 and the 15^th on July 1, 2011.

Courthouse Security Grants

The Department wants to spend an additional $675,000 from the Court Security Cash Fund on court security grants to counties.

Public Defender Cut

The Public Defender wants to make some one-time cuts to its budget:

• waiting four months to hire 40.1 FTE (needed to handle additional cases from the 28 new judges added in (FY 2007-08 and FY 2008-09)
• delay hiring 34.5 FTE that would match 15 new judges this year (Judicial is delaying the 15 new judges)
• cut operating expenses ($241,319)
• cut automation plan ($221,433)
• cut mandated costs ($182,672)
• cut capital outlay ($176,732)

More Cuts

These are the cuts Gov. Ritter is planning to make in order to rebalance the FY 2009-10 budget to the latest revenue forecast. There are a few notes after the spreadsheet that are important to understanding the HCPF numbers.

Department	FY 2009-10 GF (Long Bill)	Gov. Cuts (Balance to June Forecast)	Cuts as a Percent	Layoffs (Annualized)
Agriculture	$6,860,955	-$694,765	-10.1%	0.0
Corrections	$677,839,527	-$25,809,462	-3.8%	-29.3
Education	$3,239,416,000	-$33,022	0.0%	0.0
Governor and Energy Office	$14,283,355	-$1,105,650	-7.7%	-9.0
Health Care Policy & Financing	$1,587,903,164	-$457,136,848	-28.8%	-0.5
Higher Education	$660,575,732	-$80,935,058	-12.3%	0.0
Human Services	$670,638,807	-$19,913,782	-3.0%	-186.2
Judicial	$336,357,516	-$10,090,725	-3.0%	0.0
Labor and Employment	$0	$0	0.0%	0.0
Law	$10,008,042	-$300,241	-3.0%	0.0
Legislature	$35,162,475	-$1,054,874	-3.0%	0.0
Local Affairs	$11,889,613	-$778,013	-6.5%	0.0
Military and Veterans Affairs	$5,862,332	-$422,754	-7.2%	0.0
Natural Resources	$29,680,331	-$2,729,440	-9.2%	-6.3
Personnel and Administration	$6,291,404	-$271,294	-4.3%	-8.0
Public Health and Environment	$28,232,074	-$1,520,308	-5.4%	0.0
Public Safety	$83,212,852	-$2,159,794	-2.6%	-6.6
Regulatory Agencies	$1,666,729	-$189,549	-11.4%	-1.0
Revenue	$75,719,920	-$1,803,535	-2.4%	-19.7
State	$0	$0	0.0%	0.0
Transportation	$0	$0	0.0%	0.0
Treasury	$1,933,721	-$28,900	-1.5%	0.0
Total:	$7,483,534,549	-$606,978,014	-8.1%	-266.6

That $457 million cut for Health Care Policy and Financing isn't as big as it seems. Part of the federal ARRA program is giving states a higher match for the money we spend on Medicaid.

We put that money into hte budget as a GF cut. It is a cut in GF, but it's replaced with the federal money. (We could put the higher Medicaid match in the budget as revenue, but that would mask the fact that we'll have to replace it with GF when ARRA ends).

The ARRA part of the HCPF cut is $345.8 million. That means the actual cut to Medicaid is $111.3 million or 7%.