Is costly Colorado cannabis tax error worth special session? Why the GOP says no

Published: Sep 28, 2017, 5:54 pm • Updated: Sep 29, 2017, 2:28 pm

By John Frank and Brian Eason, The Denver Post

The $7,200 that the Montezuma County Hospital District loses each month because of a mistake by state lawmakers may not seem like a lot, but Keenen Lovett insists the rural health care provider is feeling the loss.

The latest: Colorado gov on pot-tax error: I might cancel special session if GOP pledges to address glitch in January

“It is an urgent matter for us,” said Lovett, an attorney who represents the district. “You take out that kind of money … and yeah, it’ll make a difference.”

The sense of urgency in certain parts of the state is what prompted Gov. John Hickenlooper to call state lawmakers back into a special session to fix legislation that mistakenly exempted retail marijuana from sales taxes in nine special districts around the state.

But not all share the same outlook. The leaders of the Republican-controlled state Senate made clear they plan to adjourn the special session without passing legislation to fix the glitch.

This week, Senate President Kevin Grantham, R-Canon City, once again called on the Democratic governor to rescind the executive order and complained that he did not adequately consult Republican lawmakers about the special session.

Instead, Grantham said the Senate would wait until the legislature reconvenes in January to act. By that point, the total revenue loss is projected to top $4.5 million, but most districts are expected to avert significant impacts to public services.

“There should have been a little more talking on the front end instead of the last-second, eleventh-hour crisis being thrown at us in the legislature,” Grantham said in an interview. “This will end up being taken care of in January.”

Grantham’s political action committee later sent a fundraising solicitation blasting the governor for wasting money with a special session, saying Hickenlooper was “toying with taxpayer dollars to advance his political agenda.”

If lawmakers are concerned about the cost, they can decline their per-diem payment — which accounts for the bulk of the $25,400 cost for each day of the special session. To pass the bill, it would take a minimum three days.

House Speaker Crisanta Duran, D-Denver, called critics of the special session “obstructionists.”

“I think there’s a simple fix,” she said in an interview. “We can come back for three days, get it done and be done with it. We can’t forget that, by not taking action, this is having a negative impact on Coloradans.”

The apparent impasse and political gamesmanship threaten to tarnish the bipartisanship that defined 2017 session when it adjourned in May and touted the legislation in question — Senate Bill 267 — as the term’s crowning achievement.

Why is a fix needed?

The new law exempted recreational marijuana sales from the state sales tax and instead boosted the special sales tax on pot to 15 percent. The move prevented special districts from imposing a sales tax on recreational pot that they previously collected.

Republican lawmakers — many of whom opposed the original legislation — are raising questions about whether the bill to fix the issue would violate the Taxpayer’s Bill of Rights.

House GOP leader Patrick Neville of Castle Rock said TABOR requires any new tax to go to the voters for consent, and reinstating a special district tax on marijuana qualifies, even if voters previously approved it.

“The fact is 267 is law so … no matter what happened, if we are going to enact some change that will result in net revenue increase for any district, we have to go to the voters,” he said.

Democratic lawmakers and the governor’s office point to court decisions that give the General Assembly the ability to modify tax policy in certain cases without seeking voter approval again. But Democratic leaders declined to release a legal analysis from nonpartisan legislative staff that they say supports their approach.

“We are only doing what voters have already asked,” said House Democratic leader KC Becker, one of the sponsors of the new law.

The issue came to the forefront soon after the session ended, just days before it took effect. Hickenlooper’s administration worked behind the scenes for months to reverse it through an administrative rule only to be told it must to go the legislature for approval.

“Where I grew up when you made a mistake like that, you fixed it,” Hickenlooper told reporters earlier this week. “I was taught you acknowledge the mistake, you apologize and then you fix it as quickly as you can.”

Colorado’s top Republican lawmaker @SenatorGrantham is fundraising off #COGov‘s decision to call special session #copolitics#colegpic.twitter.com/4HHJQyeByE

— John Frank (@ByJohnFrank) September 28, 2017

What is the impact?

Colorado is home to dozens of voter-approved special districts that impose their own taxes to pay for certain services, such as ambulance, fire, water and sanitation, but only a handful that levy sales taxes are affected.

Two Denver-based districts are losing the most. The Regional Transportation District is receiving about $560,000 less a month. The Denver metro area’s Scientific and Cultural Facilities District, which includes the Denver Zoo, the Denver Museum of Nature & Science and more than 275 other arts and culture organizations, is short roughly $56,000 a month.

The special districts contacted by The Denver Post supported the special session and emphasized the need for a fix. But the majority of the districts affected could not point to immediate impacts if the new law is not immediately amended.

RTD, for instance, has lost more than $1.6 million to date, and could lose as much as $4 million if the legislature doesn’t fix the problem until January. But it’s still only a fraction of a percent of the eight-county transit district’s $1.2 billion budget. That’s such a small difference that RTD officials said they won’t even need to go back to their board for budget adjustments this year.

Similarly, officials with the Pikes Peak and Roaring Fork transportation districts said they don’t expect the shortfall to cause any cuts to service this year. Deborah Jordy, executive director of the Scientific and Cultural Facilities District, said she couldn’t pinpoint any direct impacts from the funding loss at this point.

Still, over the long term, the consequences are significant. Next fiscal year, RTD’s losses are projected to climb to $8 million as pot sales are expected to grow.

“The longer that the error remains in place, the more that residents who receive the voter-approved services will be impacted,” said Scott Reed, a RTD spokesman. “Six million dollars (a year) funds a substantial amount of bus or train service — and that will need to be taken into consideration with our upcoming budgets.”

“The issue is, it’s cumulative,” added Jordy, whose organization stands to lose about $750,000 annually. “The sooner we get it fixed, the better.”

What it means for one hospital

The new law is a wide-ranging spending measure that pumped money into hospitals, roads and schools. The main thrust exempted the hospital provider fee from counting toward the state’s spending cap, a move needed to funnel money to rural health care facilities.

Ironically, it ended up cutting funding to just the sort of hospital it was supposed to help.

Montezuma County voters in 2015 approved a 1-cent sales tax to help fund a $30 million expansion of Southwest Memorial Hospital in Cortez, a town of about 9,000 whose hospital serves a much larger region.

In July, the revenues generated by the tax dropped by about 6 percent. And now, the nonprofit rural hospital has to make up the money out of its operating budget.

“Us losing money now does hurt us,” Lovett said. “It hurts us down the road. We’re going to be paying (interest) on those amounts for however much longer they don’t fix this.”

This story was first published on DenverPost.com

Topics: Colorado, Colorado legislature, Colorado taxes, John Hickenlooper, rtd, tabor, tax