Final
BILL SUMMARY for HB05-1046

HOUSE COMMITTEE ON FINANCE

Votes:
Action Taken:
Moved amendment L.002 (strike below), as amended.
Moved amendment L.003. (The amendment would have
Moved to amend amendment L.002, page 3, line 9, fi
Refer HB 05-1046, as amended, to the Committee on 		Pass Without Objection
TIE
Pass Without Objection
PASS


04:32 PM -- House Bill 05-1046 - Concerning Dynamic Modeling to Analyze Tax Policy Changes

Representative McCluskey, prime sponsor, explained that House Bill 05-1046 would require that dynamic modeling could be required for up to ten bills a year that make a tax policy change. Representative McCluskey described the use of dynamic modeling and distributed amendment L.002 (Attachment H) to committee members. He also distributed a Legislative Council Staff memorandum on the impact of amendment L.002 (Attachment I). He explained that amendment L.002 (strike below) authorizes the Executive Director of the Legislative Council Staff to establish a pilot program for the purpose of creating or procuring a dynamic model to analyze the economic impact of up to ten bills per year that result in a tax policy change. Representative Judd distributed amendment L.003 (Attachment J) to committee members.

The following persons testified:

04:45 PM -- Dr. Richard Wobbekind, representing Economic Developers Council and the University of Colorado at Boulder, testified in support of the legislation. Dr. Wobbekind noted dynamic modeling is a helpful way to look at certain policies because it incorporates the indirect and secondary effects of a tax policy change. One important aspect of dynamic modeling is that it allows users to evaluate the long-term effect of a tax policy change on the economy. Dynamic modeling results do a much better job of showing the cost/benefit analysis of tax policy changes than static modeling. He noted that dynamic modeling will also help the legislature make more difficult policy changes by allowing legislators to make better decisions on legislation that may stimulate the economy in the long-run.

Dr. Wobbekind discussed the differences between dynamic and static analysis on tax policy changes. Dynamic modeling would look at secondary effects on the longer-term outlook. He suggested that the state should incorporate dynamic modeling in the tax policy process. Dr. Wobbekind discussed the input-output systems that are part of dynamic modeling and discussed their application to a wide range of secondary impacts. The committee discussed different applications for dynamic modeling and questioned whether it could be applied to education and other policy issues. Dr. Wobbekind closed by saying that dynamic modeling would help the legislature make better, long-term, policy decisions.

In a closing brief committee discussion, Dr. Wobbekind discussed some state-specific applications for dynamic modeling and Colorado's need for the state to develop a state-specific model rather than purchase a canned model.

05:10 PM -- Mr. Jim Zelenski, Center for Fiscal Policy, took a neutral position on the bill and distributed a position paper (Attachment K) to committee members. Mr. Zelenski commented on the TABOR implications tied to dynamic modeling. He closed by saying that he would like to see the bill contain expenditure effects as well as revenue impacts.

05:15 PM -- Ms. Debbie Woodward, representing the Colorado Leadership Coalition and the Jefferson Economic Council, testified in support of the measure and noted that the Jefferson Economic Council uses dynamic modeling for local government tax policy changes. She stated that the legislation will give the legislature the tools needed to enact economic development bills. Ms. Woodward closed by discussing the multiplier effect of job creation and how it could affect state and local government long-term revenues.

05:20 PM -- Ms. Vicki Agler, National Federation of Independent Business (NFIB), testified in support of the legislation. She pointed out that, dynamic modeling is often an important part of a business plan. She explained that without such a tool, the business personal property tax will never be reduced.

05:23 PM -- Mr. Herb Homan, Colorado Senior Lobby, also representing himself, testified in support of the bill. He explained that any mechanism that provides more information on a measure is favorable. He discussed the time-frame for producing static fiscal notes and the additional demands placed on the fiscal note staff should dynamic modeling be implemented. Mr. Homan suggested that in the future, the legislature should keep better track of the General Fund impact that is associated with tax incentives.

05:29 PM -- Mr. Mike Mauer, Chief Economist, Legislative Council Staff, commented on the implementation of dynamic modeling. He commented that he is in favor of any tool that provides the General Assembly more capabilities to analyze tax policy changes. He stressed the importance of the assumptions that go into modeling and how minor changes can result in different outcomes. Additionally, Mr. Mauer briefly discussed other states that were not satisfied with model results. He stated that the modeling results did not meet the legislator's expectations. Mr. Mauer suggested that the state look into a state-specific model that would account for TABOR, Gallagher, and other constitutional measures.

The committee discussed whether a more broad-based advisory committee would be beneficial than the one established in amendment L.002. The discussion closed by deciding on a dollar amount ($170,000) that would be inserted into amendment L.002 (Page 3, line 9) that would trigger the project's inception by the Director of Research of the Legislative Council Staff.
BILL:HB05-1046
TIME: 05:39:13 PM
MOVED:McCluskey
MOTION:Moved amendment L.002 (strike below), as amended. The motion passed without objection by those members present.
SECONDED:Cloer
VOTE
Benefield
Cloer
Crane
Frangas
Garcia
Jahn
Marshall
Massey
May M.
McCluskey
Witwer
Judd
Vigil
Not Final YES: 0 NO: 0 EXC: 0 ABS: 0 FINAL ACTION: Pass Without Objection
BILL:HB05-1046
TIME: 05:44:58 PM
MOVED:Judd
MOTION:Moved amendment L.003. (The amendment would have expanded the use of dynamic modeling to all types of tax policy changes.) After a brief committee discussion, the chairman ruled the amendment did not fit under the bill's title.
SECONDED:Garcia
VOTE
Benefield
Cloer
Crane
Frangas
Garcia
Jahn
Marshall
Massey
May M.
McCluskey
Witwer
Judd
Vigil
Not Final YES: 0 NO: 0 EXC: 0 ABS: 0 FINAL ACTION: TIE
BILL:HB05-1046
TIME: 05:45:30 PM
MOVED:McCluskey
MOTION:Moved to amend amendment L.002, page 3, line 9, fill in the blank with $170,000. The motion passed without objection by those members present.
SECONDED:Crane
VOTE
Benefield
Cloer
Crane
Frangas
Garcia
Jahn
Marshall
Massey
May M.
McCluskey
Witwer
Judd
Vigil
Not Final YES: 0 NO: 0 EXC: 0 ABS: 0 FINAL ACTION: Pass Without Objection
BILL:HB05-1046
TIME: 05:47:35 PM
MOVED:McCluskey
MOTION:Refer HB 05-1046, as amended, to the Committee on Appropriations. The motion passed on a 9-3-1 vote.
SECONDED:Massey
VOTE
Benefield
Yes
Cloer
Yes
Crane
Yes
Frangas
Yes
Garcia
No
Jahn
Yes
Marshall
No
Massey
Yes
May M.
Excused
McCluskey
Yes
Witwer
Yes
Judd
No
Vigil
Yes
Final YES: 9 NO: 3 EXC: 1 ABS: 0 FINAL ACTION: PASS