Senate Bill 17-267 would make Colorado’s state budget less transparent, reduce legislative and taxpayer control over state spending, create two new slush funds outside of legislative control, increase state indebtedness, and use a financial trick to raise the amount of tax money the state can keep without voter approval.
The bill’s lack of transparency starts with the title. It says the bill is an Act “concerning the sustainability of rural Colorado.” Rural Colorado sustained itself for well over a hundred years. The problems began when the state and federal governments started raising electric rates, disrupting the financial industry, purposefully destroying jobs in coal country, expanding federal control over water, and raising health insurance rates to ruinous levels. Now the government is back to “help” some more.
The bill is an act, all right, one that claims to make rural Colorado “sustainable” with increases in debt and taxes in two unrelated parts. Each part gives bureaucrats and special interests the ability to grab more money from taxpayers without their permission.
The first part says it will fund highways, “renovation and renewal projects,” bike lanes, pedestrian walkways, and “transit-related projects.” It will use Certificates of Participation (COP) to expand state indebtedness by up to $1.35 billion, removing appropriations of up to $100 million a year from legislative control for up to 20 years. A nifty new form of debt dreamed up by the financial industry, COPs do not create a multi-year obligation and therefore are not required to be reported as debt under generally accepted accounting principles.
The basic idea behind COPs is that the state sells a “facility” to a group of investors. The investors get COPs and title to the asset in exchange for their money. If the state doesn’t make an appropriation to pay the owners of the COPs a certain amount each year for a specified number of years, the COPs owners own the facility. At the end of the required payments, the title for the facility reverts to the state. In its own pursuit of COPs loans, Washington state has sold everything from laptops to school buses, to college student recreation centers, housing, and academic facilities.
If the bill passes, the Hickenlooper Administration can hang a “for sale” sign on everything, including the kitchen sink.
Think about what this does to the legislature’s ability to control appropriations. The State of Colorado received $11.8 billion in revenues from taxes and fees in FY 2015-16. If the Hickenlooper Administration sells off $1.35 billion in COPs by the end of 2018, future state legislatures must either appropriate an annual amount roughly equal to the what the state currently spends on new highway lanes or roads or lose title to buildings, computer systems, and academic facilities.
For its second act, the bill recreates the current Hospital Provider Fee Fund as a state business enterprise. It takes roughly 10 percent of state spending from legislative control and puts it into a health care slush fund controlled by 13 gubernatorial appointees. The appointees can tax hospitals as they see fit, limited only by federal rules. Like the current hospital provider fee, the money brought in can be used to increase Medicaid reimbursement for selected hospitals, pay for cost plus pricing for hospitals that participate in the Colorado Indigent Care Program, pay for quality incentive programs whether they work or not, and sustain current Medicaid enrollment.
Aside from allowing unaccountable appointees to use taxpayer dollars to engage in corporate favoritism with hospitals, the bill’s language also supports the state’s attempt to remodel Colorado Medicaid in the image of a monopolist Kaiser-Permanente. Evidence is scarce that these arrangements will do much more than increase costs for taxpayers and Medicaid clients, especially those in rural areas.
Setting aside the potential for big health care taxes and special dealing without legislative oversight, the provider fee enterprise fund bets that the federal government will continue to pay federal matching funds for state taxes on hospital bills just so that state Medicaid programs can continue to underpay physicians and hospitals for services rendered. That’s a bad bet.
Neither the federal government nor the states can afford the health care programs they currently subsidize. Medicaid clients are unlikely to be well served by enterprise funding making their health care hostage to federal willingness to pay state taxes.
Colorado citizens would be better off in the future if state officials moderated their greed for additional funds and focused instead on running the government within its current budget. This means ending incessant program expansion, forgoing the sale of state assets to increase indebtedness, ending corporate favoritism, and limiting state subsidies to those they can afford, and for those who are most in need of them.
Linda Gorman is Health Care Policy Center director at the Independence Institute, a free market think tank in Denver.
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