Inflection Point: A Tax or a Fee ?

Colorado state flagTo say the least, Colorado’s state fiscal situation is different from that of most states.  With a booming economy, state legislators will nevertheless need to cut state spending this and next year, as TABOR provisions kick in and require refunds to taxpayers. While those in favor of very small state government probably like this constraint, for everyone else it creates a problem in terms of financing basic state services like higher education (where Colorado is already #48 of the 50 states in state funding), K12 education (where Colorado is #42), and transportation.

The TABOR refund provisions arrived sooner than expected, in the recovery period after the Great Recession, in part because of the growth of the hospital provider fee, a mechanism to get Colorado citizens more federal funding for Medicaid services.

Some groups, like Building a Better Colorado, are looking for a longer term solution to some of these fiscal constraints, such as a TABOR timeout, similar to Referendum C that was passed in 2005.

A shorter-run potential budget fix, favored by Governor Hickenlooper, is to take the hospital provider fee out from under the TABOR categories by making it a real “fee,” not a tax under TABOR rules.  A legislative vote could accomplish this.  But, the question is whether there will be any bipartisan support for the idea, especially with the 2016 elections looming.

The Denver Post recently dug into the complexities of the hospital provider fee.  And, it is complex.

But, it will important to watch whether this issue gains any traction in the state legislature this spring.

Categories: Commentary

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