A big difference, at least so far, in the Colorado General Assembly's work on the state budget is severance taxes aren't in the mix.
The legislature's Joint Budget Committee is dealing with a $2 billion to $3 billion revenue shortfall that’s expected to show up in the latest revenue forecast next Tuesday. The legislature recessed on March 14 for the coronavirus shutdown and plans to return to Denver on May 18, primarily to pass the state budget.
The JBC, for the first time in quite a long time, didn't tap the state’s severance tax funds.
This time the money won't be there to spend.
Severance taxes are paid by oil and gas and mineral companies (think coal, copper, gold) when they “sever” the product from the land. In past recessions, the severance tax accounts held by the Department of Natural Resources were a go-to for balancing the budget, even in non-recession years. It’s been popular with budget writers, but not so popular with the programs that would otherwise receive those dollars.
On Friday, when the JBC reviewed budget cuts for the Department of Natural Resources, JBC staff analyst Justin Brakke pointed out that between 2009 and 2012,* the General Assembly took $163 million in severance tax revenues for budget balancing purposes.
What was available on Friday: $25.3 million, which is about 60% of what’s available from one of the funds, known as the severance tax perpetual base account.
That fund normally finances loans for water projects administered by the Colorado Water Conservation Board that flood control, water supply, hydroelectric energy and recreational facilities.
In the past, Brakke explained, severance tax revenues have rebounded sufficiently to refill the perpetual base fund.
That’s not likely to happen anytime soon, Brakke said.
The committee left it alone.
Also left on the table: funding increases for the Colorado Oil and Gas Conservation Commission. The COGCC is expected to hire a new professional commission, to be in place on July 1. That would require just over $1 million.
What would happen if the COGCC didn’t get the money? In effect, the COGCC wrote to the JBC, there would be no COGCC.
The terms of office for the volunteer commissioners all come to an end on June 30, so without the funds for the professional commission, there would be no commission at all.
It wouldn’t stop there. Without a commission, the work on implementing rules tied to Senate Bill 19-181 would come to a very quick halt, the COGCC said. It also wouldn’t be able to regulate operations for the oil and gas industry.
The JBC did spend a little money on Friday. Severance tax money also pays for things like plugging wells. JBC staff analyst Alfredo Kemm explained that with the downturn in the oil and gas industry, the chances that the state will have to take care of more of wells is a possibility. The department asked for additional money, and the JBC authorized the $1.7 million request.
Among the departments facing cuts Friday: agriculture, local affairs, regulatory agencies and the judicial department. In all, the JBC cut about $38 million, most of it coming from the judicial department and most of that tied to salary increases for attorneys in the department’s various divisions.
At the ag department, the JBC cut funding for awards for the 4-H and Future Farmers of America program tied to the Colorado State Fair. JBC staff analyst Scott Thompson said the cut, about $275,000, is for judges and awards, but left half of the program’s funding intact. Thompson cited as part of the reason that he wasn't sure there'd be a state fair this year.
The JBC also eliminated money for a study on what a sustainable marijuana program would look like in Colorado.
But they left alone $300,000 for marketing Colorado agriculture, both inside the state, part of the Colorado Proud program, and to international markets. The funding is an increase -- the first one in 20 years -- that the department sought to market the state’s agricultural products overseas, in part tied to the US-China trade war. Both Democratic Rep. Julie McCluskie of Dillon and Republican Sen. Bob Rankin of Carbondale objected to reducing the marketing budget, stating that it will be needed for the industry’s economic comeback.
Some of the recommendations on Friday didn’t fly with the committee, but as they get closer to Tuesday's expectedly disastrous revenue forecast, those untapped recommendations are likely to come back.
Among them: a study of the state’s utilization of private prisons, which was authorized just a few months ago in House Bill 1019. JBC staff analyst Andrea Uhl questioned whether it was a good year to do a prison study with so many moving parts within the Department of Corrections. But JBC members noted that the Department of Local Affairs, which was tasked with the study, has already hired a contractor to begin the work.
Sen. Dominick Moreno, a Commerce City Democrat and the JBC's vice-chair, mused that there have been two previous prison utilization studies that both wound up on the shelf. He said he was concerned this one would, too. Sen. Rachel Zenzinger, an Arvada Democrat, said the money would be better used for K-12 education or opioid treatment. But int he end, the JBC decided to hold off on a final decision over the $250,000 until they begin the work of figuring out how much more they have to cut, which could be as soon as Saturday or as late as Monday.
Nearly $30 million came out of the judicial department’s budget.
The JBC spent the week finding cuts, mostly in general fund dollars or in cash funds that can be transferred to the general fund, totaling about $400 million. But none are tied to the deep cut across-the-board options of 10% or 20%, presented in the JBC staff documents released on April 27.
JBC staff analysts have said that going deep for many general-funded agencies is likely to mean cuts in personnel services. That’s legislative speak for employees and layoffs.
The JBC has one more agency to review, human services, which will be their task on Saturday. Then they will figure out just how much more they need to tackle before Tuesday’s revenue forecast.
Correction: The severance tax fund was last tapped to balance the budget between 2009 and 2012.