Final
Department of Treasury Hearing
COMMITTEE ON
JOINT FINANCE
Votes:
Action Taken:
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09:58 AM -- Presentation by the Department of Treasury
State Treasurer Mike Coffman introduced himself to the committee. Also present at the table was Deputy Treasurer Ben Stein. A copy of the Treasurer's presentation was distributed to the committee (Attachment B). Mr. Coffman discussed the Treasurer's short term and long term investment pools. One important responsibility of the Treasurer's Office is to ensure that money is available when it is appropriated by the General Assembly while also maximizing the return on invested money that is not being used.
Representative Witwer asked about the cash flow position of the state. Treasurer Coffman indicated that the General Fund's cash flow is doing well and that the state has only needed to issue one revenue anticipation note this fiscal year. The Treasurer borrows money in the short term through revenue anticipation notes to meet cash flow needs. The Treasurer uses competitive online bidding to issue the notes. The interest costs on the notes in FY 2003-04 was 1.6 percent.
Mr. Stein indicated that a TABOR surplus puts the state in a good cash flow position. He noted that if voters allow the state to spend surplus revenues it may cause more cash flow difficulties for the state.
10:08 AM
Mr. Coffman discussed the state's Unclaimed Property Program. It is the individual's responsibility to contact the state to claim his or her property and there is no statute of limitations on when a person can claim property. In FY 2003-04, the state collected $41 million and returned $10.1 million in collections. He indicated that his office planned to work on a better way to publish the list of individuals with unclaimed property in order to increase the program's exposure.
Mr. Coffman discussed the state's CoverColorado program. He believed that the new source of funding for the program provided by the CAPCO program will eliminate the need for the assessment paid by insurance companies which partially funds the program. There is currently a lawsuit pending regarding this assessment.
10:17 AM
Mr. Coffman discussed the state's elderly property tax deferral program. He explained that the program is not widely used and that the program should be reviewed to see if it should continue. There are a total of 491 participants in the program. He thought that the program was not widely used because the elderly do not want the state to have a lien on their property. He stated that the utilization of the program did not increase after the suspension of the senior homestead exemption. Mr. Coffman noted that he will have an analysis of whether the program should be continued by the end of the session. He indicated that few county treasurers promote the program.
Representative Vigil noted that the program should not be ended. He commented that in the future less seniors will be averse to having a lien on their property. The committee discussed the possibility of making the program means tested.
10:28 AM
Mr. Coffman discussed the state's interest-free school loan program. The program provides a loan to school districts to help them with cash flow needs during the fiscal year. Districts have to pay back the loan by the end of the year. The state bears the interest costs of the program. School districts that are dependent upon property taxes for their revenue are more reliant on the program. Mr. Coffman explained that due to the financial problems experienced by the St. Vrain school district, districts now have to provide the state their financial information when applying for a loan.
Mr. Coffman discussed the state's bond intercept program. Under the program, by law, the state backs the debt of school districts so that schools can get a lower interest rate.
10:37 AM
Mr. Coffman discussed his office's initiatives for 2005. He stated that he will work with legislators to find a comprehensive solution to the state's financial problems. He thought that the state should address both the state's spending and revenue constraints. He indicated that if Amendment 23 is not addressed, a future economic downturn could cause fiscal problems similar to the current problem. He also added that he would like to safeguard cash funds from being used as a vehicle for balancing the budget and curtail the use of special-interest tax breaks as a method of refunding TABOR surpluses.
Representative Vigil asked about when schools receive their
per pupil operating revenues
(PPOR) from the state. Mr. Stein explained that schools receive PPOR payments from the state monthly. The committee discussed when pupil counts are conducted for districts. Pupil counts are used for purposes of calculating PPOR payments. The committee wondered whether the money paid to schools changes when students change schools.
Representative Benefield clarified that the pupil count is only done once in October. She indicated that the monthly payments are not changed when students change schools.
10:43 AM
Mr. Coffman explained that the biggest issue the Treasurer's Office is working on for 2005 is to rationalize the treatment of income earned on property managed by the State Land Board. When the State Land Board sells property, the proceeds are exempt under TABOR. However, rental income is not exempt from TABOR. The proceeds of property sales and income earned on managed property go to the permanent school fund which is used by K-12 schools for revenue. He indicated that the State Land Board is starting to get more involved with the redevelopment and management of property which it plans to lease. Mr. Coffman explained that he wanted to refer a measure to voters to make rental income to the State Land Board exempt from TABOR. He explained that under current law, money from rental income would only add to the TABOR surplus and the state would not be able to use it for schools.
Mr. Stein explained that making the State Land Board an enterprise would not resolve the issue because once the rental income is received by the state, it counts under TABOR. Senator Teck wanted the Treasurer's Office to explore how the state could create an entity under K-12 education for receiving the rental income that could become an enterprise.
Senator Schaffer inquired about whether rental income received directly by school districts counts under TABOR.
10:52 AM
Mr. Coffman provided information on the use of tobacco securitization as a one-time revenue source to help the state solve its fiscal problems in the short term. However, he stressed that the state also needed to enact long-term structural reforms. He also stated that the state needs a rainy day fund that could be funded through tobacco securitization. He noted that he does not support the state reliance on money from tobacco companies for revenue. He thought that it was better to securitize because the settlement money is not a stable revenue source.
Representative Garcia put forth his idea of using increased tobacco tax money that the state will receive due to the passage of Amendment 35 for the state's short-term fiscal problems. He stated that the state should not use one-time revenue to fund ongoing programs. The committee discussed other options to solve the state's short-term fiscal problems.
Mr. Coffman explained that since Colorado's constitution prohibits general obligation debt, the state would not back the debt owed to bond holders should the state securitize its tobacco settlement money. Representative Witwer noted that some states have spent their tobacco money quickly after they securitized.
11:05 AM
Mr. Coffman discussed his concerns with the Public Employees' Retirement Association's (PERA) unfunded liability. He noted that he has established an independent commission co-chaired by former Governor Dick Lamm and former U.S. Senator Hank Brown to investigate PERA's unfunded liability. The commission consists of volunteers and any expenditures would have to be paid for with money raised from private sources.
Senator Tupa stated that he did not believe that PERA was in an immediate financial crisis. Mr. Coffman responded by saying that he wanted to understand why PERA has an unfunded liability, while other public pension plans in Colorado were in a better financial condition. He was also concerned that PERA had a negative amortization schedule. He indicated that he only wants to ensure that future retirees and taxpayers are protected. Further, he thought there was an opportunity to evaluate whether some beneficial changes to PERA could be made. He indicated that the majority of PERA's Board of Trustees do not think that there is a significant problem in PERA's funding ratio. Representative Vigil also indicated that he did not think PERA was in a major financial crisis.
11:10 AM
The committee adjourned.