Legislative session comes to a close; $621.4 million cut from K-12 education bringing budget stabilization factor to $1.18 billion

The abbreviated 2020 legislative session drew to a close on Monday, with a flurry of last-minute and substantial bills passed in the closing days.

Those final days included approval of a law enforcement accountability bill, a measure tightening the State’s regulations on immunizations, two tax bills, a bill to extend the State’s reinsurance program, and the most important of all, final approval of the 2020-21 budget and the school finance act.

Legislators returned to the Capitol just over three weeks ago, after a 73-day recess implemented to avoid spreading the novel coronavirus, COVID-19.

In that three weeks, Democratic lawmakers pledged an agenda of “fast, friendly and free,” which was supposed to mean that bills in the three weeks would pass quickly without controversy and without cost.

That promise went by the wayside almost immediately.

When lawmakers returned on May 26, there were 350 bills left over from the first two months of the session. Republicans fussed that their bills got killed and then they had to watch as Democrats pushed through an aggressive package that was anything but “fast, friendly and free.”

The School Finance Act, for the first time in more than 20 years, had almost no Republican support, gaining just one vote in the State Senate and none in the House.

The bill cut $621.4 million from K-12 education, adding that to the debt that’s been owed to K-12 for nearly a decade. With that addition, the debt, known as the budget stabilization factor, rises to $1.18 billion, the highest in history.

Republicans walked away from the normally-bipartisan bill, sponsored by Speaker of the House KC Becker of Boulder, due to its inclusion of a hike in property taxes — known as mills — for many school districts. The bill requires districts to increase mills to 27, although school districts are supposed to issue tax credits to hold taxpayers harmless in 2020-21. Whether the tax credit is available in the following year is up to the General Assembly and that’s if State revenues rebound in a year, which economists say is unlikely.

According to the Colorado Department of Education, 39 of the State’s 178 school districts are already at 27 mills. That includes schools in Phillips and Logan counties, although the districts in Yuma County are well below that. The Wray School District is at 15.032 mills.

The 2020-21 budget, at $30.5 billion, is $3.3 billion less than originally expected, due to declining revenues in corporate and individual income taxes, and sales and use taxes, including from oil and gas.

The $3.3 billion cut is in the general fund that comes from those sources and is the discretionary money lawmakers have for paying for things such as K-12 education, higher education and services to seniors, those with disabilities and for corrections. The $3.3 billion cut is 25 percent of the general fund.

One of the bills most impacting rural Colorado in the session’s final days is a hike in tobacco taxes.

House Bill 1427 will ask voters in November to increase the taxes on cigarette and tobacco products. The tax on cigarettes would increase from 84 cents to $1.94 per pack for the first three years and more after that. It also would create a new tax on non-cigarette nicotine products (vaping) at 30 percent of the manufacturer list price. Non-cigarette tobacco products, such as chewing tobacco, would increase from 40 percent of the list price to 50 percent. A new tax on snuff is also in the bill, at a $1.48 per can.

The tax increase is expected to generate $82.7 million in 2020-21 and more than double that the following year. In 2020-21, about $49 million would go to the State education fund and $25 million of that would go to a new Rural Schools Cash Fund. That would be split 55/45 between large rural and small rural schools. The following year, the rural school fund would get $30 million and $35 million in 2022-23. After that, the rural cash fund goes away and the money goes into the general fund.

The bill was adopted on party-line votes.

The State’s reinsurance program, which in its inaugural year lowered health insurance premiums for individuals who buy their own health insurance, could be extended for an additional five years and refinanced under a bill approved over the weekend.

Senate Bill 215 changes the fee structure for reinsurance, a type of insurance for insurance companies to help cover the cost of the most expensive claims. In its first year, hospitals were to be charged a $40 million fee to pay for the program, but under SB 215 that was cut in half and delayed for a year, a nod to the revenue problems many hospitals, including rural ones, are facing due to the pandemic.

Instead, the health insurers will pick up the tab, with a fee based on their premium base. The bill is expected to generate at least $90 million, which is more than twice the amount that was needed for the program’s first year. That has led health insurers to claim that the fee is an illegal tax, given that the fee would generate more money than it needs. That could be a violation of the Taxpayer’s Bill of Rights, they claimed. Health insurers grudgingly agreed to changes in the bill at the end of last week.

Health insurance premiums for the Eastern Plains dropped by an average of 27.7 percent in 2020. That applies only to the individual market, which is about seven percent of the State’s insured population.

Both State Senator Jerry Sonnenberg of Sterling and Representative Rod Pelton of Cheyenne Wells voted against the measure.

Democrats pushed through a second major tax bill that would repeal a handful of tax exemptions for business, but one substantially watered down to avoid a threatened veto by Governor Jared Polis. House Bill 1420 was blasted by business groups and industries throughout the State, including Pro 15.

The northeastern Colorado advocacy group also opposed the reinsurance bill, calling on lawmakers to slow down and be aware of how harmful the bills are for small business and economies. “If these are good valid legislation they can be studied with lots of input from stakeholders and brought back,” the organization said in a statement last week.

The law enforcement accountability bill won rare bipartisan support from lawmakers. It was introduced in the wake of protests over the death of George Floyd of Minneapolis, Minn., who died after a police officer put his knee on Floyd’s neck for nearly nine minutes. Concerns over excessive use of force in Denver and Aurora also led to the bill. It won support from Republicans such as Sen. John Cooke of Greeley, former Weld County sheriff, who worked on amendments approved by the General Assembly. The bill strips away governmental immunity for officers who use excessive force, but caps lawsuits at $25,000. It also requires officers to wear body cams, and that unfunded mandate drew a “no” vote from Sonnenberg, the only member of the Senate to vote against it.

And after two years, the General Assembly has adopted a bill tightening regulations around school immunizations. Senate Bill 163 was a leftover from the earlier part of the session. It continues to allow parents to exempt their children from immunizations but would require either a signed note from a health care provider or that the parent watch an online pro-vaccination video from the state department of public health.

The measure is intended to boost Colorado’s immunization rate, which at 89 percent for kindergartners who have obtained the measles, mumps and rubella shots, is the worst in the nation.