HOUSE 3rd Reading Unamended March 14, 2011 HOUSE Amended 2nd Reading March 11, 2011First Regular Session Sixty-eighth General Assembly STATE OF COLORADO REENGROSSED This Version Includes All Amendments Adopted in the House of Introduction LLS NO. 11-0549.01 Ed DeCecco HOUSE BILL 11-1123 HOUSE SPONSORSHIP Coram, Brown SENATE SPONSORSHIP Roberts, Grantham, King S. House Committees Senate Committees Agriculture, Livestock, & Natural Resources A BILL FOR AN ACT Concerning a prohibition on transfers to the state general fund from cash funds that have revenue related to the severance of minerals in the state. Bill Summary (Note: This summary applies to this bill as introduced and does not reflect any amendments that may be subsequently adopted. If this bill passes third reading in the house of introduction, a bill summary that applies to the reengrossed version of this bill will be available at http://www.leg.state.co.us/billsummaries.) The bill prohibits transfers to the general fund from the: Higher education federal mineral lease revenues fund; Higher education maintenance and reserve fund; Local government permanent fund; Local government mineral impact fund; Colorado water conservation board construction fund; Perpetual base account of the severance tax trust fund; and Local government severance tax fund. In addition, the governor is prohibited from restricting the moneys in each of these funds from being used as required by law for the purpose of saving the restricted moneys for a future transfer to the general fund. Be it enacted by the General Assembly of the State of Colorado: SECTION 1. Legislative declaration. (1) The general assembly hereby finds, determines, and declares that: (a) In order to offset the impact created by nonrenewable resource development, a portion of state severance taxes are deposited into the local government severance tax fund; (b) Thirty percent of the moneys in the local government severance tax fund are directly distributed to local governments based on production-related factors; (c) The department of local affairs uses a portion of the remaining moneys in the fund to provide grants to local governments that are socially or economically impacted by the development, processing, or energy conversion of minerals and mineral fuels; (d) Another portion of state severance taxes are deposited into the perpetual base account of the severance tax trust fund; (e) Moneys in the perpetual base account are used to provide low-interest loans to local governments and agricultural water users throughout Colorado for a wide variety of water infrastructure improvement projects; (f) Typical projects include the construction, improvement, or rehabilitation of water storage and management infrastructure; conservation and efficiency improvements; development, maintenance, and improvement of flood control mechanisms; and the development and renovation of hydroelectric facilities; (g) The United States receives compensation from a party that obtains a lease for the privilege of extracting minerals from federal public lands located in the state, and the state, in turn, receives a portion of this compensation from the federal government; (h) A portion of the federal mineral lease revenues are deposited into the: (I) Local government mineral impact fund, which is used to provide grants and direct distributions to local governments impacted by the production of energy resources on federal mineral lands; (II) Local government permanent fund, which is a reserve for the local government mineral impact fund; (III) Higher education federal mineral lease revenues fund, which is used for capital construction projects at state-supported institutions of higher education and at area vocational schools, with priority consideration given to those projects located in communities that are substantially impacted by energy production or conversion activities; (IV) Higher education maintenance and reserve fund, which is a reserve for the higher education federal mineral lease revenues fund; and (V) Colorado water conservation board construction fund, which is used to provide loans and grants to local governments and agricultural water users for the construction, improvement, rehabilitation, and enlargement of water supply, flood control, and hydroelectric facilities in Colorado; (i) As state revenues have decreased in recent years, cash funds with severance tax related revenues have been used to backfill the general fund; specifically in fiscal years 2008-09 and 2009-10, over two hundred million dollars was transferred to the general fund from the higher education federal mineral lease revenues fund, the higher education maintenance and reserve fund, the local government permanent fund, the local government mineral impact fund, the Colorado water conservation board construction fund, the perpetual base account of the severance tax trust fund, and the local government severance tax fund; (j) For the fiscal year 2010-11, ten million dollars from the local government severance tax fund, eleven million dollars from the perpetual base account in the severance tax trust fund, and seven million dollars from the higher education federal mineral lease revenues fund will be transferred to the general fund; (k) In his budget balancing plan to the joint budget committee, dated August 23, 2010, the governor proposed additional transfers of over forty million dollars from the local government funds and higher education funds to the general fund; (l) In that plan, the governor also restricted thirty million dollars in the local government severance tax fund from being used as required by law, and the department of local affairs suspended making grants from the fund; (m) In that plan, the governor also restricted ten million dollars from the perpetual base account of the severance tax trust fund from being used as required by law; and (n) These transfers and restrictions have caused great hardship for local governments in impacted communities and for the state higher education system, and they have also devastated the state's important water projects. (2) Now, therefore, with the passage of House Bill 11-____, enacted in 2011, the general assembly intends to prohibit transfers of revenues related to the severance of minerals in this state to the general fund, as well as to prohibit the restriction of any funds in anticipation of such transfers. SECTION 2. 23-19.9-102 (1) (d) and (2) (b) (IV), Colorado Revised Statutes, are amended to read: 23-19.9-102. Higher education federal mineral lease revenues fund - higher education maintenance and reserve fund - creation - sources of revenues - use. (1) (d) Notwithstanding any other provision of this subsection (1) to the contrary, on July 1, 2010, the state treasurer shall deduct seven million dollars from the revenues fund and transfer such sum to the general fund. On and after July 1, 2013,transfers from the revenues fund to the general fund are prohibited. On and after January 1, 2013, the governor is prohibited from restricting the moneys in the revenues fund from being used as required by law for the purpose of saving the restricted moneys for a future transfer to the general fund. (2) (b) (IV) Notwithstanding any provision of this subsection (2) to the contrary, on April 15, 2010, the state treasurer shall deduct two million three hundred thousand dollars from the higher education maintenance and reserve fund and transfer such sum to the general fund. On and after July 1, 2013, transfers from the higher education maintenance and reserve fund to the general fund are prohibited. On and after January 1, 2013, the governor is prohibited from restricting the moneys in the higher education maintenance and reserve fund from being used as required by law for the purpose of saving the restricted moneys for a future transfer to the general fund. SECTION 3. 34-63-102 (5.3) (a) (I) (D) and (5.4) (b.5), Colorado Revised Statutes, are amended to read: 34-63-102. Creation of mineral leasing fund - distribution - advisory committee - local government permanent fund created - definitions. (5.3) (a) Bonus payments credited to the mineral leasing fund created in subparagraph (I) of paragraph (a) of subsection (1) of this section shall be distributed on a quarterly basis for each quarter commencing on July 1, October 1, January 1, or April 1 of any state fiscal year as follows: (I) (D) Notwithstanding any provision of this subsection (5.3) to the contrary, on April 15, 2010, the state treasurer shall deduct fourteen million three hundred five thousand six hundred ninety-seven dollars from the local government permanent fund and transfer such sum to the general fund. On and after July 1, 2013, transfers from the local government permanent fund to the general fund are prohibited. On and after January 1, 2013, the governor is prohibited from restricting the moneys in the local government permanent fund from being used as required by law for the purpose of saving the restricted moneys for a future transfer to the general fund. (5.4) Except as otherwise provided in subsection (5.5) of this section, on and after July 1, 2008, all moneys other than bonus payments, as defined in paragraph (b) of subsection (5.3) of this section, credited to the mineral leasing fund created in subparagraph (I) of paragraph (a) of subsection (1) of this section shall be distributed on a quarterly basis for quarters beginning on July 1, October 1, January 1, and April 1 of each state fiscal year as follows: (b.5) Notwithstanding any provision of paragraph (b) of this subsection (5.4) to the contrary, for each quarter commencing during the 2009-10 fiscal year, as soon as practicable after moneys are credited to the local government mineral impact fund pursuant to paragraph (b) of this subsection (5.4), the state treasurer shall transfer from the local government mineral impact fund to the general fund an amount equal to fifty percent of the amount so credited to the fund for such quarter; except that the aggregate amount of moneys so transferred pursuant to this paragraph (b.5) shall not exceed twenty-two million six hundred thousand dollars. On and after July 1, 2013, transfers from the local government mineral impact fund to the general fund are prohibited. On and after January 1, 2013, the governor is prohibited from restricting the moneys in the local government mineral impact fund from being used as required by law for the purpose of saving the restricted moneys for a future transfer to the general fund. SECTION 4. 37-60-121 (9), Colorado Revised Statutes, is amended to read: 37-60-121. Colorado water conservation board construction fund - creation - nature of fund - funds for investigations - contributions - use for augmenting the general fund - funds created. (9) Notwithstanding any provision of this section or of section 37-60-122 to the contrary, on April 20, 2009, the state treasurer shall deduct ten million two hundred fifty thousand dollars from the Colorado water conservation board construction fund and transfer such sum to the general fund. On and after July 1, 2013, transfers from the Colorado water conservation board construction fund to the general fund are prohibited. On and after January 1, 2013, the governor is prohibited from restricting the moneys in the Colorado water conservation board construction fund from being used as required by law for the purpose of saving the restricted moneys for a future transfer to the general fund. SECTION 5. 39-29-109 (2) (a) (VII), Colorado Revised Statutes, is amended to read: 39-29-109. Severance tax trust fund - creation - administration - distribution of moneys - repeal. (2) State severance tax receipts shall be credited to the severance tax trust fund as provided in section 39-29-108. Except as otherwise set forth in section 39-29-109.5, all income derived from the deposit and investment of the moneys in the fund shall be credited to the fund. At the end of any fiscal year, all unexpended and unencumbered moneys in the fund shall remain therein and shall not be credited or transferred to the general fund or any other fund. All moneys in the fund shall be subject to appropriation by the general assembly for the following purposes: (a) (VII) Notwithstanding any provision of this paragraph (a) to the contrary, on June 30, 2011, the state treasurer shall deduct eleven million dollars from the perpetual base account of the fund and transfer such sum to the general fund. On and after July 1, 2013, transfers from the perpetual base account of the fund to the general fund are prohibited. On and after January 1, 2013, the governor is prohibited from restricting the moneys in the perpetual base account of the fund from being used as required by law for the purpose of saving the restricted moneys for a future transfer to the general fund. SECTION 6. 39-29-110 (7) (a), Colorado Revised Statutes, is amended to read: 39-29-110. Local government severance tax fund - creation - administration - definitions. (7) Notwithstanding any provision of this section to the contrary: (a) On June 30, 2011, the state treasurer shall deduct ten million dollars from the local government severance tax fund and transfer such sum to the general fund. On and after July 1, 2013, transfers from the local government severance tax fund to the general fund are prohibited. On and after January 1, 2013, the governor is prohibited from restricting the moneys in the local government severance tax fund from being used as required by law for the purpose of saving the restricted moneys for a future transfer to the general fund. SECTION 7. Safety clause. The general assembly hereby finds, determines, and declares that this act is necessary for the immediate preservation of the public peace, health, and safety.