Joint Committee Committee on Joint Finance (01/20/2010)

Final
STAFF SUMMARY OF MEETING

COMMITTEE ON JOINT FINANCE

Date:	01/20/2010	ATTENDANCE

Time:	12:12 PM to 01:24 PM	Benefield	X
		Brophy	E
Place:	LSB A	DelGrosso	X
		Frangas	X
This Meeting was called to order by		Gerou	X
	Representative Judd	Hudak	E
		Johnston	X
This Report was prepared by		Kagan	X
	Elizabeth Hanson	Kefalas	X
		King K.	X
		Labuda	X
		Roberts	X
		Scheffel	X
		Steadman	X
		Summers	X
		Swalm	X
		Sandoval	X
		Judd	X
		X = Present, E = Excused, A = Absent, * = Present after roll call

Bills Addressed:		Action Taken:
Presentation by Department of Treasury Presentation by Department of Revenue		Witness Testimony and/or Committee Discussion Only Witness Testimony and/or Committee Discussion Only

12:12 PM

The meeting was called to order.

12:12 PM -- Presentation by Department of Treasury

Ms. Cary Kennedy, the Colorado State Treasurer, testified about the current state of Colorado's assets. She distributed a copy of her presentations to the members (Attachment A). She also distributed a report about the state's assets (Attachment B) and a copy of Standard & Poor's November rating of Colorado (Attachment C).

Ms. Kennedy began by explaining that while 2009 has been a difficult year for financial markets, Colorado has positive news to report. The state of Colorado closed 2009 with positive earnings. She explained that the investment pool is approximately $5 billion and discussed liquidity and the state's daily cash flow needs. Ms. Kennedy also provided an overview of the programs managed by the department.

12:16 PM

Ms. Kennedy continued her presentation by explaining that the total operating budget for the state Treasury is about $1.8 million. She discussed how the department has reduced its costs and increased the amount of money it saves.

The market value of the five largest funds currently under management by the department was also provided. Ms. Kennedy stated that as State Treasurer, she has followed a long tradition in Colorado of using a more conservative investing approach with the guidance of state law. She continued by explaining that Colorado neither holds any collateralized debt obligations nor does it have any holdings in the five largest investment banks. All of the state's assets are posted on the department's website and taxpayers can see each investment holding the state owns.

12:21 PM

Ms. Kennedy provided an overview of the department's accounting practices and procedures. She discussed the accounts for all cash received by the state and the process for electronic deposits. Ms. Kennedy also discussed the disbursement of Highway User Tax Funds (HUTF) and Federal Mineral Lease (FML) dollars. In addition, she explained the state's cash flow borrowing and stated that if Amendment 61 is approved by voters, it would prevent the department from cash flow borrowing in the future.

12:25 PM

Ms. Kennedy provided background information about the interest-free school loan program. This program was established by the General Assembly in order to address the school district's cash flow needs, and she stated if Amendment 61 is approved, the state would be prohibited from providing these loans to school districts. Ms. Kennedy also discussed several state bond programs.

12:30 PM

Ms. Kennedy responded to questions about charter schools' participation in the bond program. Ms. Kennedy explained that in order for a charter school to participate in this program, the school must have a bond rating. Senator King also stated that the program was created to ensure the risk to the state was minimal. Discussion ensued about this issue.

Committee members also asked Ms. Kennedy about the potential impact of Amendment 61 on short term borrowing. She explained that if the state could not do General Fund cash flow borrowing, the state would have to borrow the money from itself. The department would also have to sit down with school districts on a case by case basis. Discussion continued about Amendment 61 and its potential to increase the cost of borrowing.

12:38 PM

Representative Roberts asked Ms. Kennedy about proposed Amendment 61's potential impact on the state's investment earnings. Members also asked about what the department is doing to enhance transparency.

12:44 PM

Ms. Kennedy explained to committee members that Colorado did not invest in variable rate debt agreements or derivatives. This has left Colorado in a better position than many other states that invested in such investments. She closed her presentation to committee members by discussing state refinancing.

12:48 PM -- Presentation by Department of Revenue

Ms. Roxanne Huber, Executive Director of the Colorado Department of Revenue (DOR), began her presentation. She began by making reference to the department's annual 2009 report, which provides information about the department activities in Tax Year 2008, including data about tax filings, driver's license and permits, vehicle registrations, the state lottery, and other information. This report can be found on the department's website located at www.colorado.gov/revenue.

Ms. Huber explained that the department's activities impact many citizens in Colorado, from the areas of tax administration to registering motor vehicles. She stated that her goals three years ago were focused on changing the agency's technology and how the department interacts with Colorado citizens.

12:53 PM

Ms. Huber provided an overview of the Colorado Integrated Tax Architecture (CITA) program, which is the new accounting and computer system being implemented by DOR. The second phase of CITA was implemented in November 2009, and 5 million records have been converted into the system. The program has used less funding than budgeted and implementation is moving forward. The department has also launched a new web-based single taxpayer filing system for the state sales and use tax and is working with local governments to have a one-stop business shop for paying these taxes. She explained the next phase of the CITA project for business tax returns.

In addition, Ms. Huber discussed an employee theft that occurred. She said the department now has an audit trail for every refund that is processed.

12:58 PM

Ms. Huber continued by discussing the department's outreach to its public and local government partners. The largest General Fund component of the agency's budget is for taxpayer services, including taxpayer filings, forms, and refunds. Thus, this division is most affected when General Fund reductions are made. Ms. Huber provided an overview of other spending reductions the department is making to its budget. Eventually, to reduce costs, the department would like to make kiosks available for citizens to use that could also process credit card and other payments. This practice is being used in other states. Likewise, such kiosks could be available to the public on evenings and weekends.

01:00 PM

Ms. Huber responded to questions from members of the committee about the Earned Income Tax Credit. She also explained that the department is not allowed to use federal tax data to contact individuals and that DOR is working with the Piton Foundation on this issue. Discussion continued about the credit.

01:03 PM

Ms. Huber provided committee members with an overview of the Colorado Department of Motor Vehicles and discussed the actions of the department to alleviate long public lines for processing drivers licenses and registrations. Ms. Huber explained that one of the challenges the department faces is accessing federal database systems, including the Social Security system, that must be used to issue certain types of licenses. When the federal computer systems are not functioning, the department cannot issue these licenses. An upgrade was implemented on July 1 that will help address these issues and the department is applying for additional funding in this area.

01:07 PM

Committee members asked Ms. Huber about the federal databases that must be used to issue driver licenses. She explained that the department must have access to three federal databases, including the immigration, Social Security, and problem driver databases. She also said the department will not issue a license if an individual has unpaid tickets.

Ms. Huber stated cash fund revenues have declined for motor vehicle registrations and the department may have to make potential reductions as a result. She discussed other spending reductions and budget cuts that have been made.

01:12 PM

Ms. Huber responded to several committee questions about vehicle registration fees. Ms. Huber also provided the committee with information about the department's enforcement efforts in tobacco and in the state lottery.

01:19 PM

Representative Roberts also asked what the department is doing to assist its workers to keep a professional demeanor when conducting its enforcement. She explained the department conducts training of its employees and that it must sometimes use law enforcement officials.

01:24 PM

The committee adjourned.