Property tax exemption for seniors would still be suspended

Hickenlooper unveils first complete budget for state
The Colorado Statesman

Gov. John Hickenlooper unveiled his first complete budget on Tuesday, a $20 billion 2012-13 proposal that would suspend a property-tax break for seniors, a move vehemently opposed by Republicans, while cutting $97.1 million from K-12 education in an effort to close an estimated $1 billion structural gap. The governor said there is $679 million that cannot be financed under currently available resources, although his budget represents a $342.6 million increase in spending over last year.

Hickenlooper’s proposed budget is already being lampooned by Republicans who vowed over the summer not to support a measure that would suspend the Senior Homestead Exemption. The exemption costs the state $98.6 million annually. Hickenlooper said that without its continued suspension, lawmakers would be forced to cut K-12 spending even further than the $97.1 million already proposed, as well as make additional cuts to higher education, which is also facing a $76.8 million cut. The governor also pointed out that because of federal mandates, the state would not be able to make further cuts to Medicaid.

“If we can’t cut from Medicaid, and we can’t cut higher-ed, and we can’t cut K-12 anymore, then corrections?” asked the governor rhetorically at a press briefing Tuesday, illustrating the dire quagmire that faces state government. That would be unrealistic, Hickenlooper himself answered, given the state’s high recidivism rate.

The expected caseload for the Department of Corrections is expected to be higher than previously estimated, so the governor has proposed an additional $24.7 million for the department, a 3.4 percent increase over last year’s budget.

“Certainly, you can’t just come in and cut corrections tomorrow,” said Hickenlooper.

“Obviously, there’s going to be serious resistance to almost all the cuts, and legitimate resistance — these aren’t healthy cuts,” added the governor. “But given the financial situation, they are the cuts that make the most sense in terms of not destroying that infrastructure that will allow us to work out [of the recession.”

The budget process this year will begin in the Republican-controlled House, meaning it will have an uphill battle from the onset if House lawmakers have to contend with the controversial Senior Homestead Exemption. House Speaker Frank McNulty, R-Highlands Ranch, first aired many of the Republicans’ concerns in July when he issued a statement following a report of improved state revenues.

“The days of balancing Colorado’s budget on the backs of seniors are over,” McNulty said at the time. “Tough budget times led to the suspension of the Senior Homestead Exemption. That meant less money for seniors to spend on medicine and food during this economic crisis. This is money we can now get back to them.”

The measure, which allows seniors 65 or older to claim an exemption from property taxes for the first $200,000 of the value of their home, has been suspended for the past two years. Republicans on Tuesday suggested that any further suspension of the exemption would result in a heated battle at the legislature.

“While we appreciate many of the proposals the governor has made, the governor’s budget does raise some points of concern, like increasing taxes on seniors who have been hit so hard by this recession,” said Rep. Cheri Gerou, R-Evergreen, vice-chairwoman of the Joint Budget Committee, in a statement. “House Republicans are committed to working with the governor and Senate to pass a responsible and honest budget.”

Gerou told The Colorado Statesman in September that a continued suspension of the exemption is off the table, noting that it is protected by the state constitution.

Joint Budget Committee member Rep. Jon Becker, R-Fort Morgan, issued a similar statement to that of colleague Gerou: “We have a lot of difficult decisions to make, including entitlement reform, which the governor has refused to address again this year,” he said. “House Republicans will continue to do their part to pass a budget that protects families and seniors, and empowers our state’s job creators so Colorado can emerge from this recession stronger and better than before.”

Hickenlooper hopes to ease tensions over the proposal to continue the suspension of the Senior Homestead Exemption by expanding the existing Colorado Property Tax/Rent/Heat rebate to help the state’s poorest seniors. And in an effort to address the state’s ongoing structural gap, Hickenlooper has proposed triggering the Senior Homestead Exemption only in years when growth in the state’s income taxes exceeds that of the most recent positive year for revenue growth, which was in 2007-08.

Senate Minority Leader Bill Cadman, R-Colorado Springs, has raised the issue of federal mandates, arguing that Colorado should exercise its own free judgment when it comes to health care spending. The governor’s budget calls for a $346 million increase to the Department of Health Care Policy and Financing, marking a 6.8 percent increase over last year.

The governor’s office points out that Medicaid enrollment has increased by 281,000, approximately 72 percent increase, and the Children’s Health Plan+ caseload has increased by about 11,000, or about 19 percent.

But Cadman remains concerned about caving into federal interests.

“Increasing these expenditures by hundreds of millions of dollars threatens our ability to fund the core functions of government, our K-12 schools and higher education,” Cadman said.

Hickenlooper says the state was never granted a waiver from federal health care spending mandates, so his hands are tied when it comes to entitlement programs.

“As the economy has weakened, the last and the least have found themselves in more difficult circumstances, and certainly the number of people eligible for things like Medicaid has increased dramatically, and we are obligated to finance the costs,” the governor explained. “It’s not a question of choosing to do this. These are obligations we have under federal law.”

Education also would take another hit under the governor’s budget, but not as much as the $227.5 million cut from K-12 last year. Henry Sobanet, the governor’s budget director, said following the press briefing on Tuesday that increased revenues have allowed them to propose far less significant cuts to K-12. He noted an increase in local property taxes, as well as a transfer of $64 million in severance taxes — in addition to suspension of the Senior Homestead Exemption — all as reasons for being able to avoid greater cuts to K-12. Sobanet added that the budget takes into account money that was put aside last session, but not spent.

“There was a lot less money and a bigger hole,” Sobanet said of last year’s budget. “It’s a two-shot swing if you’re a golfer.”

Still, education advocates have already raised concerns, noting “grim” times for local schools. Some had been banking on passage of a the statewide ballot question that asked voters to raise taxes over five years in order to raise $3 billion for education. But voters widely rejected Proposition 103 Tuesday, leaving the governor’s office with the “unhealthy” task of having to propose additional cuts to education. The governor’s office points out that K-12 student enrollment is up by 52,000, about 6.8 percent, and higher education enrollment has increased by 33,600, about 20.5 percent. Education proponents, however, maintain that now is not the time for further cuts.

“Diverting funds from our investment in public education is the wrong strategy to advance prosperity and growth in Colorado,” said Beverly Ingle, president of the Colorado Education Association, in a statement. “The right strategy is to provide children with the well-rounded, quality education they need to become competitive and successful adults.”

Although the budget proposed by Hickenlooper continues the four-year freeze on salaries for state workers, it does not make additional cuts, thereby somewhat appeasing Colorado WINS, the union representing state employees. Hickenlooper also has proposed reversing a policy that requires state employees to contribute 2.5 percent more into their pension funds. The new budget would restore a 2.5 percent pay cut to state workers by putting the money into their take-home pay rather than shifting it into the Public Employees’ Retirement Association (PERA). It is a “step forward,” says the union.

“Many state employees are taking on second jobs and losing homes to foreclosure, while some have had to resort to using food banks or forgoing critical medical care,” said Paul Boni, president of Colorado WINS. “Continuing to cut our paychecks means that state employees will have even less money to spend at local businesses — and that’s bad for our economy. This budget is a step forward, but there’s much more to be done.”

Other proposals in the governor’s budget include:

• Allocating $6 million to the Economic Development Council;

• Allocating $3.1 million to fund the Governor’s Energy Office with limited gaming funds;

• Allocating $3 million from limited gaming funds to start a loan program to promote film production in Colorado;

• Allocating $7.7 million to begin implementation of teacher effectiveness reform efforts required under 2010’s Senate Bill 191; and

• Modernizing the state’s accounting system and consolidating more than 30 data servers.

Peter@coloradostatesman.com