Pinnacol proposal falls through

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— District 8 Sen. Al White, R-Hayden, beat a reporter to the punch with the first question about the collapsed proposal to use Pinnacol Assurance surplus funds to balance next year's state budget without slashing state support for higher education.

"What now?" White asked, as lawmakers went back to the drawing board to fill a $300 million deficit in the budget.

He then answered his own question.

"Now we find other cuts in the budget that will enable us to draw down federal matching funds for higher ed and spread the pain to others," he said. "We're looking at furloughs (of state employees), cuts to financial aid for students, cuts to K-12."

Rep. Randy Baumgardner, R-Hot Sulphur Springs, spent much of the week caucusing with fellow House Republicans about the so-called "long bill" and dozens of other bills and amendments that are part of the budget process.

It all must go back to the Senate, where the process started, after the House gets done with it. All is being done under an ever-closer mandatory deadline for adjournment May 6.

"We're still looking under every rock trying to find money," Baumgardner said. "I don't think Pinnacol was a good place to look, but higher ed has been beat up pretty bad."

It's the majority Democrats, however, who are in the driver's seat when it comes to the budget-reconciliation package. More cash fund transfers to the general fund and higher taxes on cigarette sales are among items under consideration.

As a member of the Joint Budget Committee, White played a key role in the Pinnacol debate and was the primary sponsor of the now moot bill (Senate Bill 273) that would have transferred $500 million from Pinnacol to the general fund.

In addition to balancing the budget, the cash transfer that most other legislative Republicans called an unconstitutional raid on a private company, would have put another $200 million into a reserve account for future budget emergencies.

Gov. Bill Ritter announced Wednesday an end to negotiations with Pinnacol, which holds about 70 percent of the workmen's compensation insurance policies of Colorado's employers and had threatened a court challenge if White's bill became law.

"Members of my staff and I have tried in good faith to reach an agreement with Pinnacol," Ritter said. "However, there remain too many unresolved issues and questions for Colorado citizens and Pinnacol shareholders and customers. Therefore, with a budget deadline looming, I have halted negotiations with Pinnacol."

Ritter warned earlier in the week that massive cuts to higher education, which could lead to double-digit tuition increases and/or shutting down community colleges, were not an option.

He said cutting $300 million in support to colleges and universities would put Colorado below the threshold for drawing down $760 million in federal stimulus funds.

"Clearly, it would be counter-productive to cut higher education by $300 million only to lose the entire $760 million in Stabilization Funds," Ritter said.

White said he still thinks the legislature should consider more state oversight of Pinnacol, which largely was privatized in 2002. The company is tax exempt, has governmental immunity form lawsuits and its board of directors are appointed by the governor.

Still alive is Senate Bill 281, sponsored by Senate Majority Leader Brandon Shaffer, D-Longmont, which calls for a performance audit and an interim committee review of Pinnacol's operations. The bill also would require Pinnacol to issue dividends to policy holders equal to 5 percent of its surplus.

Shaffer said Pinnacol currently has a surplus of $700 million above the $600 million reserve that it holds to pay off future workmen's compensation claims.

"I still think a battle as to whether or not Pinnacol belongs to the state is one that needs to be decided," White said. "Certain provisions in (SB) 281 are worth keeping that bill alive. If policy holders are the owners of those surplus funds, then I want to see the policy holders get that money back as opposed to sitting in a Pinnacol vault unused and unneeded."

White is concerned, however, the lawmakers might go too far in taking advantage of a recent Colorado Supreme Court decision that would allow legislators to repeal tax exemption or credit without getting approval from voters as required by the Taxpayer's Bill of Rights.

Eliminating tax exemptions and/or credits became part of the budget-balancing discussion after the March 16 Supreme Court decision that last year's freeze on property tax mill levies was not an unconstitutional violation of TABOR.

Since TABOR's passage in 1992, lawmakers have assumed no tax policy change that resulted in additional revenue could be made without a vote of the people. However, the high court's ruling stated a public vote would be required only in limited circumstances.

"Legal Services (which provides legal advice to the legislature) indicates : that removing tax credits or exemptions falls outside of TABOR considerations and can be legislated without a vote of the people," he said. "I'm very leery of it. I think it's bad policy for us to do away with those sorts of things."

White said the high court ruling could affect numerous tax credits, including an estimated $90 million worth of tax credits issued to farmers and ranchers for conservation easements to protect land from development.

"In my district the tax credit for conservation easements is huge," he said. "It helps ranchers stay on the place. If that goes away, many of my constituents could lose their ability to provide for themselves and their families on the ranch."

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