Gov. Hickenlooper proposes tax change to give state more money, lower future refunds

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Photo: Gov. John Hickenlooper | January 2015 (AP Photo)
Gov. John Hickenlooper, answers questions from reporters at the National Press Club, in Washington, in January 2015.

Gov. John Hickenlooper is backing a proposal that could allow the state to spend hundreds of millions of dollars it will otherwise have to refund to taxpayers.

The Taxpayer's Bill of Rights requires that any money the state brings in over a certain cap be sent back to residents. Currently analysts believe the state will start sending out those refunds next year.

Under the governor's proposal, rebates would still go out next year and the following year. But he would like to see the state hold onto more of the money in the future.

Specifically, he's asking state lawmakers to move something called the hospital provider fee out of the pot of money considered for the TABOR cap.

"[It] would allow us to spend a couple of hundred million dollars towards roads, desperately needed, and a couple hundred million dollars toward reducing the negative factor in our public schools, eventually," Hickenlooper told Colorado Matters host Ryan Warner on Thursday. The "negative factor" refers to the $1 billion the state cut from school budgets during the recession.

The hospital provider fee is paid each night a bed is occupied, and the state uses the money to expand Medicaid, effectively reducing the number of uninsured people hospitals have to serve.

The governor wants lawmakers to delay the change to the hospital provider fee until the fiscal year that starts in July 2016, which would allow Colorado to send out full TABOR refunds for two years. Those would include sales tax refund checks to all taxpayers, as well as the start of a new, permanent state Earned Income Tax Credit.

Henry Sobanet, Hickenlooper's budget chief, says the governor wants to make sure the EITC goes into effect, but that lawmakers should otherwise use this opportunity to reconsider who benefits from TABOR refunds.

The governor's proposal is likely to face trouble in the Republican-controlled state Senate, which Sobanet acknowledged on Thursday.

"There are obviously controversial components of the plan," he said, "but we're trying to offer an idea of, can we still do some tax relief? Can we still send some money to transportation? And can we make progress on the negative factor?

"We think it's a fair question to raise," Sobanet added.