By: Ali Mickelson, Director of Legislative & Tax Policy

Because of the chokehold on our state spending due to TABOR, it’s imperative for legislators to use our limited tax dollars in the most thoughtful way possible. Unfortunately, lawmakers have long had a blind spot in evaluating the budget because there hasn’t been any meaningful assessment of spending that occurs through the tax code, also known as tax expenditure.

Transparency and accountability, important parts of what the National Conference of State Legislatures considers hallmarks of good tax policy, have been sorely lacking in Colorado. Until now.

On Friday, September 14 the Colorado Office of the State Auditor (OSA) released the first part of a new five-year tax expenditure evaluation, titled the Tax Expenditures Compilation Report.

This report, which CFI helped lay the groundwork for with bills in 2015 and 2016, “audits” all of the tax credits, exemptions, and deductions in Colorado’s tax code to determine if they’re meeting their intended purpose and doing so in an efficient and effective manner. Over the next five years, OSA will provide an evaluation of the state’s more than 200 tax expenditures, including those related to income tax, sales tax, severance tax, and sin taxes. The reports will look at the intent behind each credit and, using comparisons to other states, evaluate taxpayer data and other available resources, including whether each credit is working as intended. If OSA finds a credit that isn’t working as it should, they’ll make recommendations on improving or eliminating the credit.

Now the report is finally here, and we’re encouraged to see the thought and effort that OSA used in creating this evaluation.  With only an outline of the questions to be answered, they developed an incredibly valuable and accessible analysis of all of the tax expenditures they reviewed. This report is an example of good government creating good governance, with the information in this report and the ones that follow allowing lawmakers to make better decisions about where they spend our collective tax dollars.

Good fiscal and tax data matters because it allows citizens and lawmakers to make educated analysis and recommendations about tax and budget policies. This report is another example of what good data can reveal and we look forward to working with lawmakers to use these reports to make good decisions about the best use our limited resources.

The Colorado Energy Plan (CEP) proposed by Xcel Energy as part of their 2016 Electric Resource Plan (ERP) aims to advance a clean energy future for Colorado. Every four years, regulated utilities in Colorado are required to submit an ERP to evaluate the future electric demands of their customers and determine the energy resource best suited to meet that demand. ERPs are submitted to and approved by the Colorado Public Utilities Commission (PUC). Xcel’s 2016 Electric Resource Plan determined Colorado will need an additional 600 megawatts (MW) of energy capacity by 2023 for reference, approximately 1 MW of energy per 1,000 homes. This means Colorado needs enough energy to power approximately 600,000 additional homes by 2023.

The CEP recommends a two-part solution to meet the 600 MW demand. First, two coal-fired power plants — Comanche 1 and 2, in Pueblo County — will be taken out of service. The plants are currently set to be retired in 2033 and 2035, but the CEP would accelerate the retirements by ten years to 2022 and 2025. Comanche 1 and 2 have a combined capacity of 660 MW, approximately one third of Xcel’s remaining coal resources. Second, Xcel plans to replace the lost capacity from the early retirement of Comanche 1 and 2 with a mixture of renewable resource and natural gas, including development of 1,100 MW of new wind production, 700 MW of new solar, 275 MW of battery storage, and purchase of 380 MW of existing natural gas facilities. The investment in eight Colorado communities is expected to reach $2.5 billion. The CEP expects to provide benefits across Colorado, taking advantage of both new and existing infrastructure to provide reliable, accessible, and affordable clean energy to Colorado consumers.  

Proposed Generation Locations  

120-Day Report

The Colorado Energy Plan charts a bold new approach to provide energy to Colorado’s growing population and increasing demand for electricity. As with any project, it has many uncertainties and unanswered questions. Pueblo County, for example, is dependent on Comanche 1 and 2 for jobs and economic stability. The early retirement of the coal plants will result in the loss of approximately 80 long-term jobs, slightly less than half of the plant’s current employment of 170. Before moving forward with the plan, the Colorado Public Utilities Commission needs to determine if the investments in renewable energy will produce enough economic growth, jobs, energy access and affordability, and environmental and social benefits to offset the loss of jobs and reduction in stability for Pueblo County and the state.

To answer these difficult questions, Xcel took several strategic steps, including conducting an economic impact analysis for Colorado and Pueblo County. The economic impact analysis identified changes in employment (number of jobs), gross domestic product (GDP), and disposable personal income caused by the accelerated retirement of the coal-fired plants and replacement of the lost capacity with renewable energy. As a baseline for comparison, the analysis used the Preferred ERP–an alternative scenario wherein the coal plants are not retired early, but Xcel still invests in a mixture of renewables and natural gas to meet the 600 MW need. By comparing the CEP to the preferred ERP, the study is better able to determine the economic impact of decommissioning the coal plants and investing in renewable energy. The analysis considered the economic changes and corresponding impacts between 2018 and 2040, allowing the 23-year study period to consider both short-and long-term economic impacts. Using capital expenditures, operating expenses, and revenue requirements, the analysis determined the projected economic impact of the CEP.

The analysis made the following assumptions about economic activity in Colorado and Pueblo County when determining the outcomes:

• An increase in capital expenditures like an investment in a solar or wind farm, increases economic activity.

• A decrease in operating expenditures below the preferred ERP such as a decrease in transportation or material costs, decreases economic activity.

• A decrease in the revenue requirement the amount of capital needed to meet the costs of providing electricity to customers reduces the costs to ratepayers.

Economic Impact:

Overall, the analysis found the CEP results in net positive economic benefits. The benefits are attributed to a net increase in capital expenditures and operating expenses and a net decrease in revenue requirements. Assuming the Colorado PUC decides to allow Xcel Energy to adopt and implement the CEP, the estimates reflect the retirement of Comanche 1 and 2 and investments in the previously discussed renewable sources. Table 1 below shows the average increase in jobs, GDP, and disposable personal income. We can interpret these estimates to mean that from 2018-2040 Colorado would see on average of 549 more jobs compared to the baseline ERP scenario and of those 133 are in Pueblo County. The same can be said for GDP and Disposable Personal Income of those workers.

Determining how the scope, magnitude, and more importantly, the proposed change in the way energy is produced in Colorado will impact communities, requires looking at many variables. Economic impact analyses measure how spending flows when it is moved from one industry to another like from fossil fuels to renewable energy. It does not measure the benefits and costs of a project like improved system efficiency or environmental and social benefits. To understand the broader effects and long-term sustainability of an investment like the CEP, it is important to look beyond overall economic impacts.

The overall economic impact indicates the potential number of jobs created under a specific set of assumptions, but it does not provide information about the characteristics of those jobs: how many are temporary or ongoing, how many workers need to be retrained or relocated, or the types of jobs. For example, when considered separately, short-and long-term effects tell two different stories. In the first five years of the CEP, Colorado and Pueblo County are expected to experience a large influx of investment dollars. This artificially inflates the overall impact as illustrated in Figure 5 and 6.

Leeds School of Business Economic Impact Analysis

Leeds School of Business Economic Impact Analysis

In Pueblo County, the significant increase in jobs is likely to be attributed to the temporary or construction-based nature of jobs created by capital expenditures. A large influx in capital expenditures in 2018 might yield positive short-term economic impacts, but they will dissipate quickly, whereas a decrease in operating expenses from the new investments will be felt in the long-term. By looking at the average number of jobs for the first five years and comparing them to the average number of jobs in the last 18 years of the study, we can see the difference between short-and long-term jobs. The average number of jobs produced in Pueblo County in the first five years of the proposed project is three times the average number of jobs produced in the last 18 years of the study. That means that while there is substantial short-term job growth, the long-term impact to employment remains only slightly above the baseline ERP scenario.

GDP is the most common measure of economic prosperity. Typically, GDP growth is considered positive and a reduction in GDP is negative. Because GDP is the equivalent of dollars being spent in an economy, it fails to capture other aspects like health or environmental factors. The economic analysis estimates Colorado’s GDP would increase by an average of $57.8 million per year and Pueblo County’s would rise $9.8 million over 23 years. These fiscal impacts are relatively small in the overall economy representing a 0.01 percent change in Colorado’s $343 billion economy and 0.016 percent change in Pueblo’s $4.9 billion economy (See: Xcel Energy’s 120-Day Report[1] [2]). As with employment, the majority of these increases are seen in the first five years.

Maintaining ratepayer costs is essential, specifically when considering impacts to working families. With the cost of developing renewable energy competitive with fossil fuels, the study estimates revenue requirements would decrease by $431.5 million. Revenue requirements are one method to determine whether rates will increase or decrease. Though this may appear to be a significant change, it represents a 0.8 percent change compared to the baseline ERP. Xcel estimates the CEP will save approximately $213 million (120-Day Report); however, it has not yet been confirmed whether this translates to an increase, decrease, or neutral impact for rates for the average Xcel customer and working families.

The economic impact is an important component when discussing the benefits and costs of the CEP. Economic impact analyses can provide valuable information and guidance about things that are easily counted like the number of jobs created or lost, but these figures do not tell the entire story. The economic impact analysis concludes that the net positive growth in job creation, GDP, and disposable personal income is better for the overall economy, but to be confident with the CEP, decision makers should also consider the environmental and social implications of the plan. This can help consumers to better understand the benefits and costs of the CEP.

Additional Considerations:

When you pay your utility bill, you are directly paying for the price of energy, but with all types of energy, including renewables, there are externalities (additional costs and benefits) not included in the price you pay. Externalities can be positive or negative. Negative externalities include: water or air pollution, land degradation, resource limitations, decrease in aesthetic value, or social impacts like damages to public health. Positive externalities include improved environmental and health conditions. Externalities (costs or benefits) are not calculated in an economic impact analysis.

Coloradans want clean energy at a reasonable cost. By replacing coal-fired power with cleaner renewable sources, Xcel projects to reduce Colorado’s carbon dioxide emissions by as much as 60 percent and sulfur dioxide and nitrogen oxide emissions by up to 90 percent from 2005 levels by 2026 (120-Day Report). However, these estimates reflect only one phase of the system life cycle. Once in operation, wind and solar facilities do not emit greenhouse gases, but manufacturing, transportation, installation, maintenance, and decommission phases of the system life cycle involve energy use, part of which comes from fossil fuel combustion. One method to examine the overall energy use of a resource is to determine the net energy ratio of a proposed investment. Net energy ratios (NERs) are the relationship of useful energy output to the grid to the fossil or nuclear energy consumed during the lifetime of the project. Basically, NERs determine whether the amount of fossil fuels that go into producing a wind turbine or solar panel is offset by the emission free energy produced. For renewable energy resources, NERs are expected to be greater than one, indicating a positive return over fossil fuel energy, which have average estimates of 0.3 and 0.4 for coal and natural gas. NERs give a clearer picture of the lifetime sustainability or overall energy use of the resource.

Additionally, renewable energy can be viewed as unpredictable and inconsistent. For this reason, renewables are need battery storage to produce large quantities of energy in the same way as fossil fuels. To meet current and future capacity needs, efficiency will need to be improved  or more energy facilities including battery storage will need to be built. The CEP includes 275 MW of battery storage further accounting for increasing the reliability of the renewable energy investments. The National Renewable Energy Laboratory (NREL) estimates that 32 acres of solar energy needed to power 1,000 homes. The land needed to produce solar and wind energy is substantially more than what is needed to produce fossil fuel energy. To combat this, the CEP makes investments in two highly cost-effective sources: natural gas and renewables. Xcel Energy views the CEP as an opportunity to diversify their electricity generation mix in a way that simultaneously achieves economic and environmental benefits across the state (120-Day Report). Maintaining a diverse energy mix increases reliability, accessibility, and affordability.

The analysis above works to provide context and consideration to the many variables surrounding a transition from fossil fuels to renewable energy like the one proposed by the CEP. Overall, with consideration given to long-term economic sustainability, environmental improvements, low-income people, and communities of color, the anticipated benefits likely outweigh the costs. Decision makers on this plan, the Colorado Public Utilities Commission, should evaluate impacts on these areas while they are making their decision. before moving forward with a decision. Ratepayers and interest groups should take interest in this forward looking proposal and hold our leaders and utilities to their word for implementation. This will lead to an equitable transition to cleaner energy.

Photo credit: Paul Wasneski – “LimeBike west of Denver”

With Bike to Work Day 2018 coming up on June 27, the Colorado Fiscal Institute decided to run the numbers to see where Colorado ranks among other states in its share of residents biking to work.

Based on CFI’s analysis of 2016 U.S. Census data, 34,240 Coloradans bike to work each day, ranking the state third in the nation for bike commuters per capita, behind only Oregon and Montana. In fact, if 2,200 more Coloradans biked to work, Colorado would overtake Montana and capture the second-place spot.

In order to become number one, the Centennial State still has a long way to go. CFI calculates that 24,700 more Coloradans would need to take up biking to work to surpass Oregon’s per capita biking share. Oregon’s biking superiority is largely driven by cycling commuters in Portland, which has the highest Ridership rating among all U.S. cities, according to the biking nonprofit PeopleForBikes.

Biking has become more popular in Colorado’s major cities in past years. In Denver, the share of bicycle commuters has more than doubled since 2000. Additionally, PeopleForBikes rated the city of Fort Collins as the top city for biking nationwide while Boulder is ranked third. The rating is mainly based on five variables: ridership, safety, network (the quality and completeness of the biking network), reach (how well the biking network in each city serves traditionally underserved populations), and acceleration (how quickly improvements are being made). Among those variables, Fort Collins excels at safety. On the other hand, Boulder still needs to improve its safety, but has a high rating for network.

As Denver, Boulder, and Fort Collins become more bike-friendly, Denver, Boulder, and Larimer Counties, have been ranked the top counties in Colorado for bike commuters per worker among the top ten counties with most number of workers.

Now that more and more Coloradans are biking to work, it’s time to overtake Montana for second place. Who knows, if enough people take it up, Colorado could even make a push for the top spot. There’s never been a better time to start than this coming Wednesday, June 27!

By: Abbey Pizel, Natural Resource Policy Analyst

Colorado (and the U.S. as a whole) relies heavily on conventional energy sources like coal, oil, and natural gas to provide fuel for our cars, heat and lights for our homes, and even food. Colorado’s oil production has more than quadrupled between 2005-2015, and natural gas production increased 50 percent over that same period. However, conventional energy sources are nonrenewable meaning the energy they produce comes from a limited source. Because their sources are limited, conventional energy will eventually become too monetarily or environmentally costly to be sustainable. This has led to rising concern about the environmental and economic impacts nonrenewable resources have on our communities. To combat these concerns, scientists, advocates, and policymakers are looking at alternative energy sources. Enter renewable energy.

U.S. Department of Energy

Renewable energy is produced from sources that are naturally replenished over time. Solar, wind, geothermal, and hydroelectric are a few of the most well-known sources. Electricity generation, air and water heating and cooling, and transportation, can all be powered by renewable sources. Renewable energy, a cleaner alternative to oil, gas and other nonrenewable sources, provides a strategic step in climate mitigation and environmental conservation. The appeals of renewable energy are economic as well as environmental since it has the potential to boost economic development and job creation. The health impacts of producing wind or solar are also substantially less than producing coal or oil. So why haven’t we transitioned to renewable energy at a much faster rate?

The primary reason is price. Historically, the technologies needed to develop and produce renewable energy have been considerably more expensive than conventional energy. However, since 2010, the cost of solar electricity has fallen by 73 percent and wind production by around 23 percent. Renewable energy continues to see decreasing production prices attributable to three things: advances in technology, a growing base of experienced developers, and a completive bidding process for projects. Because of the lower prices, renewable energy is not only environmentally friendly but also economically feasible. Electricity from renewable sources has more than doubled since 2010 to around 20% of Colorado’s net electricity generation in 2016, led by increased wind power from the state’s roughly 1,900 turbines (EIA).

An Investment in Renewable Energy is an Investment in Colorado

Huerfano Wind Farm Wikipedia

By turning to renewable energy, Colorado, like many other states, is making a social and financial investment that will secure a diverse and stable energy future. Renewable energy provides clean, safe, reliable, and affordable energy necessary to build a sustainable future that works for all Coloradans.

On June 6, 2018, Xcel Energy unveiled the much-awaited Colorado Energy Plan as part of their Electric Resource Plan. The Colorado Energy Plan is the product of consumers, businesses, energy producers, and rural leaders recognizing the need for a diverse energy mix that is affordable, clean, and accessible. Under this plan, Xcel would retire two coal fired power plants in Pueblo, CO and replace the energy with clean energy sources. The Colorado Energy Plan offers a diverse energy mix of resources including more than 1,800 MW (megawatts) of new wind and solar and would double the amount of battery storage. Xcel will own 27 percent of renewable resources and 58 percent of nonrenewable resources.

Xcel estimates retiring the coal plants ten years ahead of schedule would reduce carbon emissions by 40 to 60 percent below 2005 levels by 2026. The Colorado Energy Plan would move Xcel towards nearly 55 percent renewable energy by 2026. Additionally, the Colorado Energy Plan would generate a more than $2.5 billion economic impact in eight Colorado communities, furthering investment in a Colorado that thrives now and for future generations. All of this would be done while maintaining or lowering costs to ratepayers. The Colorado Energy Plan is a substantial step for Colorado in achieving a clean, affordable, and diverse energy future.

In a long-awaited ruling with plenty of implications for Colorado, the U.S. Supreme Court has issued a landmark decision regarding states’ abilities to collect internet sales tax. The 5-4 decision reverses the court’s prior ruling and opens the door for collection from internet retailers even when they aren’t located—or don’t have “nexus”—in the state levying the tax.

The ruling in South Dakota v. Wayfair overturns the prior legal precedent set in 1992 in Quill Corp. v. North Dakota, which allowed internet and other remote retailers to avoid collecting sales tax and offer seemingly lower prices than their in-state counterparts. Seemingly, because as Associate Justice Anthony Kennedy astutely noted in his majority opinion, “(the prior standard) puts both local businesses and many interstate businesses with physical presence at a competitive disadvantage relative to remote sellers. Remote sellers can avoid the regulatory burdens of tax collection and can offer de facto lower prices caused by the widespread failure of consumers to pay the tax on their own.” What Kennedy was alluding to is the reality that while lower prices seem like a win for consumers, we often don’t realize that the requirement to pay the tax is not absolved, but merely shifted to us in the form of use tax.

Indeed, as the online economy grew throughout the 1990s, states and local businesses began to brainstorm ways to capture some of the revenue that was lost as a result of the tax loophole. In fact, Colorado created one current model for internet sales tax regulation when it enacted a requirement for online retailers that aren’t collecting and remitting tax to the state to notify both the consumer and the Department of Revenue of the sales tax owed by the consumer. This law was also litigated and, after the Colorado Supreme Court upheld the law, in 2016 the Supreme Court ultimately opted not to hear the case.

The implications of the new Supreme Court ruling are still being analyzed, but Colorado could benefit immensely from the changes. A 2017 report from the United States Government Accountability Office estimated that Colorado could see an increase in state and local government revenue of between $168 to $262 million from the expanded tax collection on remote sales.

However, there is no guarantee that Colorado can capture this new revenue without other reforms. Beyond our typical TABOR considerations resulting from increased revenue, the Court alluded to concerns about smaller internet retailers navigating the complicated sales tax requirements resulting from multiple taxing districts within some states.

While the revenue implications in Colorado remain unclear, we are encouraged by the Court’s recognition of the modernization of our economy and the impact it has on state and local governments’ bottom line. We love the quote from Justice Kennedy addressing this in relation to Wayfair, the respondent in the case and an online-only home furnishing retailer:

“In essence, (Wayfair) ask[s] this Court to retain a rule that allows their customers to escape payment of sales taxes—taxes that are essential to create and secure the active market they supply with goods and services. An example may suffice. Wayfair offers to sell a vast selection of furnishings. Its advertising seeks to create an image of beautiful, peaceful homes, but it also says that ‘[o]ne of the best things about buying through Wayfair is that we do not have to charge sales tax.’ What Wayfair ignores in its subtle offer to assist in tax evasion is that creating a dream home assumes solvent state and local governments. State taxes fund the police and fire departments that protect the homes containing their customers’ furniture and ensure goods are safely delivered; maintain the public roads and municipal services that allow communication with and access to customers; support the sound local banking institutions to support credit transactions [and] courts to ensure collection of the purchase price and help create the climate of consumer confidence’ that facilitates sales.”

In other words, Kennedy notes that the sales taxes that online retailers seek to avoid, actually fund the public investments that allow consumers to enjoy, and continue to purchase, online goods. We couldn’t agree more. That is why we are heartened by the Court’s decision and look forward to the policy discussions it drives both nationally and in Colorado.

CFI will continue to research the issue and resulting implications and provide updates on our blog. 

1. TABOR rebates are back

Projections for TABOR rebates rose due to rising severance tax revenue and stronger-than-projected corporate income tax collections (corporate income tax revenue was increased by $100 million from the March forecast due to already higher-than-estimated collections this year). In FY2018-19, TABOR rebates will be $147.5 million, which includes $21 million in adjustments from the last rebate in 2015. These rebates, however, will not go directly to all taxpayers, but will instead be used to fund the senior homestead and disabled veterans property tax exemptions in FY2020-21.

2. We may be experiencing the longest economic expansion on record

The current expansion has lasted 109 months, which ranks second to the 120-month expansion during the 1990s. This isn’t just a historically good recovery, either: Colorado’s economy is outpacing the nation’s current growth as well, with only the state of Washington growing faster than Colorado during 2017. Additionally, an upswing in energy prices is boosting Colorado’s high-powered oil and gas industry, and the tax cuts passed by Congress late last year are strengthening business activity beyond what we’d normally expect during this state in a business cycle. One downside of the booming economy: we may see a slow-down in housing as the Fed raises interests rates—the effects of which are already being seen in the recent rise in 30-year mortgage rates.

3. What about Trump’s tariffs on Colorado?

Tariffs, the name for taxes on imports between two countries, tend to benefit domestic suppliers at the cost to consumers through higher prices. The U.S. recently imposed tariffs on steel and aluminum as well as $50 billion in tariffs on Chinese exports which prompted China, Canada, and Mexico to announce retaliatory tariffs on the U.S. The Colorado steel industry stands to benefit, while higher prices for things like construction, transportation, and machinery industries may have negative effects on those industries. We’ve already seen an uptick in the cost of aluminum cans which impacts our beer industry. The retaliatory tariffs from the trading partners mentioned earlier likely means more difficulty for Colorado’s agricultural industry (which is already dealing with problems stemming from drought conditions, especially in Southern Colorado).

4. $1 billion more for next year’s budget

Similar to the budget process in the 2019 legislative session, the new General Assembly set to be elected in November will have $1.01 billion, or about 8.1 percent, more to spend than what is budgeted for in the FY2018-19 budget. This also means more was saved in the FY2017-18 budget. That means the legislature will have more opportunities to make critical public investments in areas such as education and transportation.

5. The Tobacco Master Settlement Agreement settlement is buoying the General Fund

Despite the strong economy, recurring General Fund revenue sources were actually lower by about $80 million, as compared to the forecast in March. However, due to the one-time payment of $110.7 million from a settlement reached with tobacco companies, overall General Fund revenue forecast for this fiscal year’s budget is higher than originally anticipated by $30.3 million.

The Colorado Fiscal Institute is excited to announce that we have expanded our research and policy efforts to include Environmental Justice. Colorado is home to abundant natural resources that not only make the state beautiful, but are essential to the health, well-being, and economic prosperity of all Coloradans.

In recent years, Colorado has experienced unprecedented economic and population growth which has led to an increase in the demand placed on the state’s natural resources. Outdoor recreation contributes to more than $35 billion in annual economic activity and creates over 300,000 jobs in Colorado. This means more people on the roads, visiting our National and State Parks, and enjoying the rivers, lakes and other public lands. In 2017, the Department of Natural Resources estimated 14.8 million people visited Colorado State Parks. The more we depend on and use our natural resources the more we have the responsibility to protect them.

Growth is often viewed as an economic positive, but if it is not carefully managed it can result in negative environmental impacts—which often lead to inequitable fiscal and economic effects. When thinking about environmental consequences, we consider pollution, contamination, and degradation of waterways, air, and open space since they are at the heart of people’s everyday lives.

In Colorado, for example, the uneven exposure to environmental risks can be attributed to differences in zoning laws, economics, infrastructure, policies, and access to parks and open space. By focusing on environmental justice, we are looking for solutions that address environmental degradation across our communities. As Coloradans, we must work to ensure that our rivers, streams, air, and ecosystems are healthy and able to provide safe and clean water and air, energy to heat our homes, habitat, and parks and open space. These efforts are essential to building thriving communities all across the state and sustaining the diverse Colorado way of life.

CFI will be working to research, analyze, assess, and engage in strategic fiscal policies that promote smart natural resource management. Our aim is to ensure all people have an opportunity to participate in decisions that affect their environment and that their community concerns are appropriately considered in public policy decisions. To conserve Colorado’s natural resources for future generations, Colorado must implement dynamic and innovative public policies designed to foster comprehensive, specific, and accountable environmental justice and natural resource management to keep our state beautiful.

For more information about CFI’s Environmental Justice work visit our new page CFI Environmental Justice.

Is This The Year Colorado Stops Digging? Stay Tuned.

Another Legislative Session is in the history books, and this year’s session was certainly shaped by a unique set of factors. Close majorities, an election year, term limits for key leaders, a booming economy, and a significant budget surplus all made for an interesting 120 days and an unusual policy-making environment.

In many ways, this year felt like a fork in the road for Colorado.

Faced with persistent funding shortages in education, transportation, and several other key priorities, would Colorado repeat the mistakes of the past by slashing public investments, enacting piecemeal tax policies, and further hamstringing future legislatures? Or would we invest in the very priorities that build thriving communities and sustain the Colorado way of life?

We’re happy to report that this General Assembly largely chose wisely, and avoided repeating past missteps. Responsible transportation investments were secured, PERA’s continued viability was advanced, and school funding got a boost. These are all good things for the long-term economic viability for the state. Yet, while the General Assembly spent a lot of time talking about very diverse ideas for addressing the implications of our changing economy, there was not much in the way of fundamental policy change to address Colorado’s underlying, root challenges.

In our ongoing efforts to make Colorado a state where fiscal and budget policies advance equity and widespread economic prosperity, CFI spent a lot of time working on a wide ranging set of issues with varying levels of success.

As we continue to debate fiscal policies and decide which fork in the road to take, it’s worth asking whether Colorado has turned a corner and is now ready to make the investments that build the thriving communities we all want to live in? Stay tuned to this fall’s elections, which will help determine the fate of future investments and shape the 2019 agenda and beyond.

Bill Summaries

State Budget

HB 18-1332, the Long Bill was signed by Governor John Hickenlooper authorizing total state spending for FY 2018-19 of $28.9 billion with General Fund spending of $11.4 billion. The budget included nearly $500 million for transportation, $250 million for PERA adjustments, about $480 million for schools, including $150 million to catch funding up to 2000 levels (adjusted for inflation), $75 million for higher education to keep tuition increases around 3 percent.

Tax Policy

The state Legislature considered a total of 22 different tax credit or deduction bills. Tax credits can dig the fiscal hole deeper without looking like a direct General Fund expenditure, which is why CFI has high standards for what a good tax credit looks like. Credits and deductions, like any general fund spending, should be targeted, equitable, and fiscally prudent.

This session, the General Assembly passed seven tax credit and deduction bills, which will take away $44 million from the General Fund. Those are based on first year expenditure estimates, and it’s important to remember that tax credits tend to get more expensive over time. Two of the bills passed were continuations of existing tax credits. HB 1004 continues the Child Care Contribution Tax Credit and HB 1208 expands the Child Care Expenses Income Tax Credit. If every one of these 22 bills had passed, the General Fund would have seen a $261 million reduction in revenue in the first year of their implementation. Counties and school districts would have lost as much as $36 million in funds to invest in local needs. CFI worked hard to ensure that decision makers on Capitol Hill understood each of these bills means a reduction in the General Fund to invest in education, transportation, and other key priorities.

CFI opposed SB 265, which was the Child Care Savings Accounts Income Tax Benefits. This bill was a costly and poorly targeted tax credit for taxpayers who set aside money for child care expenses in a tax preferred savings account. Bad tax policies, like this one, mean that high income earners more easily get the benefits, while low income earners don’t, and the gap between them persists over a lifetime, even a generation. SB 265 was just one bill considered that would allow individuals to set aside money for basic needs like child care or family and medical leave, it won’t be the last even with a hefty price tag of $30 million General Fund annually. SB 265 died in Senate Appropriations Committee.

CFI also opposed HB 1013, which was the Income Tax Credit for Endowment Contributions. This bill allows for a tax credit for contributions to a qualifying nonprofit endowment. CFI opposed because there is already a federal tax benefit for charitable contributions, and this double credit would have gone to wealthy Coloradans and primarily to large endowed charities. HB 18-1013 did not meet CFI’s standards for equity and prudent fiscal policy: the price tag for this bill was $12 million in the first full year of its implementation. HB 1013 died after no action was taken in the House Appropriations Committee.

HB 18-1060, a Tax Deduction for Military Retirement Benefits, is another tax expenditure that CFI opposed. This bill proposed that military retirement benefits below $40,000 for individuals under age 55 be deducted from that person’s taxable income. The bill would cost the state as much as $8 million per year, and did not meet CFI’s guidelines and principles for sound tax policy. HB 1060 was passed by the legislature on May 9.

CFI supported HB 18-1185, Market Sourcing for Business Income Tax Apportionment. This bill implemented a common-sense change to how Colorado calculates business income taxes, bringing our corporate tax code up to speed with the technology of the 21st century. The fiscal impact of the bill is unclear, but this change could end up increasing state tax revenue by as much as $18.3 million in the first full year of implementation. HB 1185 was passed by the legislature on May 7 and will be signed by the Governor.

CFI opposed HB 18-1202, Income Tax Credit for Organ Donation. This bill allows the employers of Coloradans who donate an organ to claim a tax credit for any expenses associated with the employee’s leave. Giving tax breaks to employers is not the right way to incentivize organ donation. Though this bill’s fiscal note is small ($114,000 in its most costly year), using state revenue to benefit employers is not prudent fiscal policy and does not meet CFI’s principles for efficient, effective, and equitable tax policy. HB 1202 passed on May 8 and will be signed by the Governor.

CFI opposed HB 18-1217, Employer 529 Contributions Tax Credit. This bill allows employers to take a double deduction for any contribution they make to an employee’s 529 college savings plan. 529 plans are used overwhelmingly by the wealthiest Coloradans, and enriching employers is not the best way to ensure more Colorado families can save for college. The estimated fiscal impact of this bill is $51,250 in 2019. HB 1217 passed on May 4 and will be signed by the Governor.

CFI supported HB 18-1380, Grants for Property Tax Rent and Heat. This bill built on an existing tax rebate which helps very low income seniors in Colorado pay for basic expenses like rent and utilities. HB 1380 proposed a modest increase (based on CPI inflation) to this already modest rebate, which would only go to Coloradans most in need. HB 1380 died in the Senate Committee on State, Veterans, & Military Affairs on May 3.

Among the bills that died, and kept the state from digging our budget hole deeper, was Senate Bill 61. This bill, among other things, proposed a reduction in the state income tax rate from 4.63% to 4.43%. The estimated cost of the bill was $384 million in FY 18-19. This reduction in revenue would have meant cuts in the state budget equal to more than a third of the General Fund spending for colleges and universities or more than 50 percent of General Fund allocation for corrections. CFI testified against this bill in Senate State, Veterans and Military affairs committee in January. The bill passed the Senate, but died in the House committee.

Another bill that would have dug a deeper hole for the state budget is HB 1203 This bill reduced the state income tax rate from 4.63 percent to 4.0 percent. The estimated General Fund cost of the bill was $1.15 billion in FY 18-19. CFI testified on this bill, providing historical context for the impact of tax cut measures. HB 1203 bill died in the House State, Veterans and Military Affairs committee.

CFI also weighed in on SB 273 that would have made the Senior Homestead Property Tax exemption “portable” for a very limited number of seniors. The bill proposed allowing seniors who had to leave their home for a “medical necessity” to take their eligibility for exempting a portion of their home value from local property taxes with them if they purchased a new home, thereby waiving the requirement of having to own the property for at least 10 years. CFI worked on proposals to improve the efficiency and targeting of the homestead exemption for the last few years and chose to oppose SB 273 because the solution proposed was too narrow and did not address the equity issues associated often identified with the Homestead exemption. The bill died in House Veterans and Military Affairs committee.

Transportation

One of the major accomplishments of the 2018 General Assembly was a workable compromise around funding for transportation needs statewide. Building on the framework from last year’s end of session compromise, SB 17-267, the 2018 legislature’s transportation funding measure provides General Fund transportation transfers of $495 million in FY 2018-19 and $150 in FY 2019-20. These short term infusions of General Fund were justified based on new revenue coming to the state because of federal tax changes. The bill also contains a long term General Fund commitment of $50 million annually for bond repayment or other transportation uses for 20 years. This long term obligation of General Fund revenue is a renewed commitment to transportation as a state funding priority and increases the pressure associated with balancing the state budget when revenue collections are falling. The exact use and duration of the General Fund transfer is contingent on outcome of 2018 and 2019 revenue elections.

The General Assembly considered two bills dealing with RTD’s affordable fares program, a long-standing priority for CFI and our partners at Mile High Connects. CFI supported HB 1401 – RTD Low Income Fare Program, which would have directed $80,000 to RTD to offset costs associated with implementing the recommendations from RTD’s Pass Program Working Group for a reduced fare program for low-income riders and youth. The bill was ultimately a statement to RTD to stop dragging their feet and commit to creating a low-income fare program for transit riders like RTD has been claiming to want to do for several years. It forced RTD’s officials to come down to the capitol and testify against receiving the money. This bill died in House Appropriations.

Alternatively, CFI opposed SB 204, Limit RTD Discount Fare Programs, which was a careless bill that would have prohibited RTD from changing any of their fare reduction programs without prior legislative approval. While no progress was made on funding the low-income and youth pass programs this year, it is clear that the General Assembly recognizes how important affordable transit is to families who are struggling to keep up with skyrocketing costs, and to the future economic vitality of the RTD district. This bill died in Senate.

Safety Net

CFI opposed SB 171, Marketplace Contractors Workers Comp and Unemployment, which was a bill that would make it easier for marketplace platforms like Handy and Instacart to classify people who find work through their platform as independent contractors, denying them access to important economic safety net benefits like workers compensation coverage and unemployment insurance. CFI worked with a fierce coalition of workers’ rights advocates against this bill and SB 171 died on the House calendar.

CFI also opposed SB 214, Medicaid Work Requirements, which would have required Colorado to submit a waiver to the federal government to institute work requirements, copays and 5-year lifetime limits for able-bodied adults receiving health care through Medicaid. The bill would have increased the number of Coloradans without access to healthcare and harmed many rural economies where jobs are more scarce and wages lower. SB 214 died in Senate Health and Human Services Committee.

Once again, CFI prioritized HB 1001, FAMLI Family and Medical Leave Insurance Program, a new social insurance program that would provide paid leave to workers who need to take time off to welcome a new baby or to care for themselves or a loved one with a serious medical issue. Despite a growing coalition of business and health organizations, and persuasive data on the equity, health and income benefits of paid leave, the Senate State, Veterans and Military Affairs Committee killed the bill.

Housing

As the housing crisis continues to affect Coloradans around the state, CFI understands the importance of supporting legislation that improves tenant protections and increases funding options for affordable housing. CFI supported SB 007, Affordable Housing Tax Credit, which would rename the existing low-income housing tax credit to housing tax credit and would extend it through 2024. This credit is a crucial source of funding for affordable housing in the state, and with bipartisan support, the bill passed and is on its way to the Governor’s desk.

CFI, along with other partners, also supported the Colorado Homes for All Coalition in their efforts to pass HB 1397, Landlord Tenant Warranty of Habitability. This bill would have provided tenants with more renter protections. Warranty of Habitability (WoH) is a Colorado State Statute that requires landlords to uphold and maintain safe and habitable conditions in rental units. Colorado’s WoH statute fails as it favors landlord rights over tenant protections. For instance, the law assumes that if a landlord files an eviction or increases rent after a complaint is made by a tenant, the presumption is that the landlord is doing this in “good faith.” With Colorado increasingly becoming a state with more renters than homeowners, not only is this a critical housing matter, but it is also a health, safety, and consumer concern. HB 1397 did not make it through the session this year.

Immigration

CFI knows that our communities thrive when everyone thrives and immigrants help supercharge economic growth and prosperity. Working with our allies at the Colorado Immigrant Rights Coalition CFI supported bills that strengthened laws that allow hard working immigrants to contribute to our communities, including supporting HB 1417, Protect Constitutional Rights of Colorado Residents, a bill that would designate public spaces like courts, hospitals and schools as safe spaces for immigrants from ICE operations, and SB 108, Expand Eligibility for CO Road and Community Safety Act, which will allow a more seamless administration of Colorado immigrant driver’s license program. SB 108 made it through the process this year, but HB 1417 did not.

CFI opposed SB 220, Public Safety From Sanctuary Policies, and HB 1178, Hold CO Governments Accountable for Sanctuary Policies. Both bills would increase local government enforcement of federal immigration law. CFI’s research shows that these aggressive enforcement policies create confusion for local government employees, generate fear and distrust in immigrant communities, compromise public safety, waste scarce local resources and damage the economy. Both bills died in House State, Veterans and Military Affairs Committee.

Environmental Policy

Severance tax revenue funds programs to offset the impacts of extracting and using natural resources in local communities and the state. This session, there were three bills related to severance tax that worked to meet revenue shortfalls and alleviate volatility. HB 1338 would assist in funding Department of Natural Resource programs through General Fund transfers in the absence of sufficient severance tax revenue. HB 1201 attempted to remove severance tax revenue from the state’s TABOR revenue limits and HB 1387 tried to eliminate local governments’ responsibility to pay interest on refunds issued as a result of an error made by the taxpayer when filing. However, none of these bills made it through the process.

By Carol Hedges

Every year, Tax Day reminds us all how much of a commitment we make to our communities through our taxes. It’s often met with cynicism and scorn, as it’s a reminder that part of what we earn is not ours to spend. It’s an especially tough day for folks who are struggling to make ends meet. And most of us are quite aware that the tax code is upside down, with the wealthiest paying a smaller portion of their income than the rest of us.

Some of us think about what we could have done for our families if we didn’t have to pay taxes. We might regret that we were not able to do more to save for our kids’ education or our own retirement or pay down some debt we incurred. All of that can make us grumpy.

But we shouldn’t just think about what we collectively pay in taxes without considering the things that benefit all of us. That’d be like putting a tank of gas in your car without recognizing all the places you can go, or paying your rent or mortgage without acknowledging that it provides your family a home.

Taxes, though, are different than the things we buy as consumers. Because taxes are about what we can invest in together to help families succeed and to build thriving communities.

At CFI, we are flipping that script and highlighting Tax Day as a reminder of all the amazing things that our tax contributions pay for that benefit our families and our communities. We remind ourselves that our taxes pay for teachers, fire fighters and physicians. We are thankful that we contribute to our roads and bridges, our parks and open spaces, and our reservoirs and damns and sewer systems. We are reassured that our taxes will help victims of fires and floods, help first generation college students afford tuition, and hold wealthy corporations accountable to the rules and regulations that keep our water and land and air safe from exploitation.

Today, we join with people all across the country to declare that we are #ProudtoPay our share to support the public investments that build the thriving communities we all want to live in. At CFI, we spend lots of time analyzing the limitations in our tax code. We know that there are many unfair, unproductive and ineffective tax loopholes that let some people avoid paying their fair share –often it’s the wealthy few and big corporations. We know that our state tax code needs to be modernized as it was built for 25-year old economic conditions dramatically different than they are today.

But on Tax Day, we take a break from thinking about how to improve our tax code to appreciating what we have because we make public investments that benefit us all and help our communities thrive.

If you’ve ever gone to a public school, gotten somewhere safely on a public road, hiked a public trail or gone camping in a state park with your family, relied on first responders in a crisis, took a big refreshing drink of clean water, felt gratitude for military service members, or enjoyed a sunny afternoon in a park, you have our taxes to thank for that.

We invite you to join the effort to acknowledge and celebrate the communities we love, which are made possible because people all across the state and the country pay their taxes. Please take a minute to think about what makes you #ProudtoPay, and share your thoughts on Twitter or Facebook.

And let’s all be proud of building strong communities that support our Colorado way of life.