House Committee on Finance (02/02/2006)

Final
STAFF SUMMARY OF MEETING

HOUSE COMMITTEE ON FINANCE

Date:	02/02/2006	ATTENDANCE

Time:	09:35 AM to 11:57 AM	Benefield	X
		Cloer	X
Place:	HCR 0107	Crane	X
		Frangas	X
This Meeting was called to order by		Garcia	X
	Representative Vigil	Harvey	X
		Jahn	X
This Report was prepared by		Kerr	X
	Ron Kirk	Marshall	X
		Massey	X
		McCluskey	X
		Judd	X
		Vigil	X
		X = Present, E = Excused, A = Absent, * = Present after roll call

Bills Addressed:		Action Taken:
HB06-1117 Presentation by Chief Economist HB06-1129 HB06-1127 Presentation on Cash Funds HB06-1046		Postponed Indefinitely - Laid Over Amended, Referred to Appropriations - Referred to Appropriations

09:36 AM -- House Bill 06-1117

Representation Cadman, prime sponsor, explained that for the purposes of calculating the amount of sales tax owed, House Bill 06-1117 changes the calculation of the purchase price of tangible personal property for items with manufacturer rebates or coupons. For items with manufacturer rebates (or coupons), sales taxes would be calculated after adjusting the item's price for the savings resulting from the rebate or coupon. This specified reduction in the purchase price would not be applied to rebates or coupons that are redeemed by mail.

Representative Cadman commented on the fiscal impact of the bill and said that for FY 2005-06, there may be a potential decrease in General Fund revenue but for FY 2006-07, the fiscal note estimates the cost of the bill at $16.6 million. The committee discussed the rebate process for manufactured goods and the effect on the total sales taxes collected on the goods. The discussion continued on the process of calculating sales taxes. The committee discussed the policy issues behind funding the bill. Representative Cadman commented that the bill corrects the problem that addresses the "over-collecting" issue of state sales taxes. Representative Cadman commented that the bill would require that consumers only pay a sales tax on a product after rebates or coupons offset the product's sale price. The committee discussed the timing of the policy in terms of revenues collected by the state under Referendum C. Representative Vigil called a spokesperson from the Department of Revenue to clarify the sales tax collection process for products that offer consumers manufacture's rebates.

The following person testified:

09:53 AM -- Mr. Bruce Nelson, Colorado Department of Revenue, responded to committee questions and clarified the department's policies on the effect of coupons and rebates when calculating state sales taxes.

The committee discussed the policy issue: should consumers be charged a sales tax on the price for a good before any rebates, or the price of a good after a rebate is calculated into the sales price. The committee discussed the rule-making process that the department uses to determine the sales tax calculation process for products that have a price reduction through a rebate or coupon. After a brief committee discussion, Representative Vigil, Chairman, placed the bill on the table for action.


BILL:	HB06-1117
TIME:	10:05:32 AM
MOVED:	Cloer
MOTION:	Refer House Bill 06-1117 to the Committee on Appropriations. The motion failed on a 8-5-0.
SECONDED:	Harvey
		VOTE
	Benefield	No
	Cloer	Yes
	Crane	Yes
	Frangas	No
	Garcia	No
	Harvey	Yes
	Jahn	No
	Kerr	Yes
	Marshall	No
	Massey	Yes
	McCluskey	No
	Judd	No
	Vigil	No
Not Final YES: 5 NO: 8 EXC: 0 ABS: 0 FINAL ACTION: FAIL


BILL:	HB06-1117
TIME:	10:17:03 AM
MOVED:	Garcia
MOTION:	Moved to postpone House Bill 06-1117 indefinitely. The motion passed on a 7-6 vote.
SECONDED:	Judd
		VOTE
	Benefield	Yes
	Cloer	No
	Crane	No
	Frangas	Yes
	Garcia	Yes
	Harvey	No
	Jahn	Yes
	Kerr	No
	Marshall	Yes
	Massey	No
	McCluskey	No
	Judd	Yes
	Vigil	Yes
Final YES: 7 NO: 6 EXC: 0 ABS: 0 FINAL ACTION: PASS

10:07 AM -- Presentation by Legislative Council Staff

Mr. Mike Mauer, Chief Economist for Legislative Council Staff, distributed a packet of materials on the "Flow of Revenue to Colorado" to committee members (Attachment A). Mr. Mauer commented that the presentation was in response to the Chairman's request for information regarding the flow of revenue under current law. Mr. Mauer began by commenting on two graphics that were distributed to help explain the revenue flow under current law. Chart 1 displays a cube and shows how revenue is spent from the bottom up. Chart 2 displays a series of containers and shows them filling up from the top down with each container receiving no money until the container above it is full and runs over.

Mr. Mauer said that the first money that comes in the door is used to pay for continually appropriated items and items with a special appropriation. These items, which total an estimated $246.1 million in FY 2005-06 and $324.1 million in FY 2006-07 are shown in Table 1. After those items are paid, revenue then flows into appropriations passed under the Arveschoug-Bird limit. These amounts are $6,292.7 million in FY 2005-06 and $6,670.3 million in FY 2006-07, assuming that the full amount of allowable appropriations are made each year. Next, and somewhat in parallel with appropriations, revenue is dedicated to the state's required reserve of 4 percent. The reserve will equal $251.7 million during FY 2005-06 and $266.8 million during FY 2006-07.

Mr. Mauer continued the presentation saying that if revenue is sufficient to fund all of the above items, then 10.355 percent of sales and use tax collections are diverted to the Highway Users Tax Fund (HUTF). We expect a full diversion of $216 million in FY 2005-06 and a partial diversion of 125.8 million during FY 2006-07. Next, during FY 2005-06 only, $67.1 million will be paid back to certain cash funds as established in law.

Finally, any remaining revenue above the required reserve amount is split 2/3 to the HUTF and 1/3 to the Capital Construction Fund. We anticipate that the HUTF will receive $64.6 million during FY 2005-06 and that the Capital Construction Fund will receive $32.3 million. This money is actually diverted as part of the first category in the next fiscal year.

The committee asked about the difference between the statutory and TABOR emergency reserves. Mr. Mauer responded saying the 4- percent statutory reserve is all General Fund. The TABOR reserve is made up of buildings and some cash funds. The committee discussed the flow charts and concluded the discussion. Mr. Mauer concluded the presentation saying that any tax policies that have a General Fund revenue reduction reduce revenue diverted to the HUTF through the Senate Bill 97-1 diversion.

10:34 AM -- House Bill 06-1129

Representative Lundberg, prime sponsor, explained House Bill 06-1129 subtracts from federal taxable income any income earned by a Colorado resident from the United States government for active duty service in the United States armed forces, for the purpose of determining the amount of an individual's Colorado taxable income. Current law allows this income to be taxed at the state level for all active personnel serving in the United States.

Representative Lundberg distributed a staff memorandum on state exemptions for active duty income (Attachment B) and asked staff to provide the committee with a broad overview of the state-by-state treatment for active duty income. Mr. Ron Kirk, Legislative Council Staff explained that when active duty income is earned by military personnel it must be included in federal taxable income unless the pay is earned in a combat zone. Research on 41 states shows that 18 states and the District of Columbia follow federal law and tax military income unless it is earned while serving in a combat zone. Because Colorado follows federal law, military income earned in a combat zone is excluded from taxation in Colorado.

Mr. Kirk continued saying Colorado also exempts military pay earned by persons domiciled in the state whom serve at least 305 days during the income tax year outside of the country. Six states other than Colorado tie active duty income tax exemptions to out-of-state or overseas stationing-requirements. Other than these exceptions, active duty pay is generally taxed by the state. Exemptions for the remaining states vary. Nine states allow partial exemptions for active duty income that range from $1,000 in North Dakota to $15,000 in Virginia. Four states exempt active duty income only if military personnel satisfy certain conditions. Of the remaining states researched, three exclude active duty income altogether from state income taxes (similar to House Bill 06-1129).

The committee briefly discussed the fiscal note. In response to the committee discussion, Representative Lundberg discussed the amendment that was adopted by the State Veterans, & Military Affairs committee that would reduce the fiscal impact by requiring that only military personnel who have incomes of $40,000 or less, would qualify for the tax benefit under House Bill 06-1129.

The following persons testified:

10:38 AM -- Mr. Herman Stockinger, Colorado Department of Transportation, testified in opposition toward the bill. Mr. Stockinger said that the bill would leave less money for highway construction through the Senate Bill 97-1 transfer.

10:50 AM -- Mr. Walter Paul, Department of Military Veterans Affairs, testified in support of the legislation and commented on the personnel who would qualify for the tax exemption under the amendment that was adopted by the first committee of reference.

The committee briefly discussed the amendment that would reduce the cost of the bill. Representative Vigil, Chairman, laid over the bill to Wednesday, February 8 to allow staff time to revise the fiscal note based on the amendment that was adopted by the State, Veterans, & Military Affairs on January 31, 2006.

11:00 AM -- House Bill 06-1127

Representative Riesberg, prime sponsor, began by saying that athletic trainers typically work with athletes in the identification, treatment, and prevention of injuries. House Bill 06-1127, the Athletic Trainer Practice Act, grants the Colorado State Board of Medical Examiners the authority to license and regulate athletic trainers. The bill includes the following provisions:

• defines athletic trainers and the scope of their work;
• specifies applicant educational background, certifications, and examination requirements necessary to obtaining a license;
• gives license terms;
• determines grounds for disciplinary action and the board's responsibilities and authority when handling violations of the act or of the body's rules and regulations;
• provides the authority of the board to require a mental or physical examination of athletic trainers that are believed to be unable to practice with skill and safety;
• provides the power to make and adopt rules; and
• provides the ability to set and collect fees.the provisions of the bill.

Representative Riesberg commented on the states that have certification programs and the various state-by-state credentials required for athletic trainers. After Representative Riesberg's comments, the committee engaged in a discussed of whether there is a need for the legislation. Representative Riesberg distributed a handout on athletic trainers (Attachment B) to committee members.

The following persons testified:

11:13 AM -- Ms. Susan Miller, Department of Regulatory Agencies, State Board of Medical Examiners, testified in opposition to the bill. Ms. Miller commented that House Bill 06-1127 is over-regulation and not needed. Ms. Miller said that the current system is working.

11:19 AM -- Ms. Betsy Murray, American Physical Therapy Association (APTA), testified on the bill as introduced and stated that her position was neutral.

11:24 AM -- Ms. Pat Karns, Colorado Athletic Trainer's Association, testified in support of the legislation and commented that there is a need for the bill.

11:26 AM -- Mr. Chris Mathewson, Colorado Athletic Trainer's Association, testified in favor of the bill.

Representative Vigil, Chairman, placed the bill on the table for action and Representative Riesberg distributed amendment L.006 to committee members (Attachment D). Representative Riesberg explained that the amendment defines "athlete" for bill purposes.


BILL:	HB06-1127
TIME:	11:43:27 AM
MOVED:	Frangas
MOTION:	Moved amendment L.006 (the amendment defines athlete). The motion passed without objection by those members present.
SECONDED:	Cloer
		VOTE
	Benefield
	Cloer
	Crane
	Frangas
	Garcia
	Harvey
	Jahn
	Kerr
	Marshall
	Massey
	McCluskey
	Judd
	Vigil
Not Final YES: 0 NO: 0 EXC: 0 ABS: 0 FINAL ACTION: Pass Without Objection


BILL:	HB06-1127
TIME:	11:46:12 AM
MOVED:	Cloer
MOTION:	Refer House Bill 06-1127, as amended, to the Committee on Appropriations. The motion passed on a 8-5-0 vote.
SECONDED:	Benefield
		VOTE
	Benefield	Yes
	Cloer	Yes
	Crane	No
	Frangas	Yes
	Garcia	No
	Harvey	No
	Jahn	Yes
	Kerr	Yes
	Marshall	Yes
	Massey	No
	McCluskey	No
	Judd	Yes
	Vigil	Yes
Final YES: 8 NO: 5 EXC: 0 ABS: 0 FINAL ACTION: PASS

11:48 AM -- Presentation on Cash Funds

Mr. Natalie Mullis, Economist for Legislative Council Staff, distributed a table on cash fund balances to committee members (Attachment E). Mr. Mullis commented that the presentation and table on cash funds responded to Representative Harvey's questions about the revenue that was transferred from cash funds to the General Fund. Ms. Mullis briefly talked about the table and said that the total net cash fund transfers to the General Fund as of February 2006 (FY 2001-02 through FY 2005-06) was almost $1.3 billion over this time period.

11:50 AM -- House Bill 06-1046

Representative Vigil, prime sponsor, explained that House Bill 06-1046 was recommended by the Legislative Audit Committee. The bill authorizes the Private Occupational School Board (POSB) to issue rules concerning the minimum criteria that an applicant for an occupational teaching credential must meet before such credential is issued or renewed. Representative Vigil said the bill requires applicants for issuance or renewal of an occupational credential in those schools that teach students under 16 years of age to submit, as part of the application, a complete set of fingerprints to the State Board for community Colleges and Occupational Education (SBCCOE). The bill mandates that the SBCCOE keep the fingerprints on file and authorizes it to use the fingerprints to conduct a criminal history record check of the applicant through both the Colorado Bureau of Investigation and the Federal Bureau of Investigation.

After a brief committee discussion, Representative Judd, acting as Chairman, placed the bill on the table for action.


BILL:	HB06-1046
TIME:	11:52:00 AM
MOVED:	Vigil
MOTION:	Refer House Bill 06-1046 to the Committee on Appropriations. The motion passed on a 13-0-0.
SECONDED:	McCluskey
		VOTE
	Benefield	Yes
	Cloer	Yes
	Crane	Yes
	Frangas	Yes
	Garcia	Yes
	Harvey	Yes
	Jahn	Yes
	Kerr	Yes
	Marshall	Yes
	Massey	Yes
	McCluskey	Yes
	Judd	Yes
	Vigil	Yes
Final YES: 13 NO: 0 EXC: 0 ABS: 0 FINAL ACTION: PASS

11:57 AM

Adjourn.