Republican AG OKs Legality Of Democrats’ Hospital Provider Fee Budget Maneuver

March 1, 2016
Photo: Cynthia Coffman, John Hickenlooper
Republican Attorney General Cynthia Coffman, left, and Democratic Gov. John Hickenlooper in file photos.

Colorado Attorney General Cynthia Coffman said Monday that a Democratic plan to re-classify the state’s Hospital Provider Fee program is legally sound – a key development in one of the biggest battles inside the Capitol this session.

Through a 16-page formal opinion, Coffman, a Republican, determined that proposed changes to the program – which Democrats, including Gov. John Hickenlooper, say could free up hundreds of millions of dollars for budget priorities – meets legal requirements to go forward.

Coffman’s opinion answered a “narrow legal question” asked by Hickenlooper on the constitutionality of his proposal to restructure how the state classifies fees that are collected by hospitals. These fees are used by the state to obtain federal matching funds, which expanded Medicaid and other health care options for low-income residents.

The state is expected to take in about $756 million in revenue from these fees next fiscal year.

Now, the fees are subject to revenue restrictions spelled out in the Taxpayer Bill of Rights – which requires the state to issue tax refunds when revenue exceeds the rate of inflation and population growth. The fees are contributing to a budget situation where the state expects to issue $156 million in refunds on taxpayers’ 2015 returns, which are estimated to be between $13 and $41 for a single filer.

Democrats want to re-classify the program as a TABOR-exempt enterprise fund. Doing this, supporters say, allows the state to pump more money into under-funded areas like education and transportation in a tight budget year.

“Without the Hospital Provider Fee it becomes very difficult to find money for either of those two things,” Hickenlooper told reporters Monday.

At issue was whether the proposed enterprise fund meets the requirements of a “government-owned business” that can be TABOR-exempt. Coffman wrote in her opinion that the term “’government-owned business’ has, for purposes of TABOR, been broadly interpreted by the courts, and the General Assembly has repeatedly relied on the enterprise exception to enact fiscal policy at the state level without seeking voter approval.”

Coffman’s legal opinion clashes with a non-binding Legislative Legal Services memo that questions the constitutionality of the proposed re-classification. The nonpartisan staffers provide legal advice for the General Assembly.

Republicans have balked at the proposal. They’ve argued the re-classification proposal is a shell game and that the state faces a budget shortfall because its spending priorities are out of whack.

Senate President Bill Cadman, a Republican, also says Coffman’s opinion leaves other answered questions, such as why this fee would be exempt from TABOR requirements when other state revenue sources are not.

“The reality of the opinion though is it doesn’t address all the problems with what they’re proposing,” Cadman said.