Colorado Legislative Council Staff

STATE

REVISED FISCAL NOTE

(Replaces Fiscal Note dated January 18, 1998)

General Fund Expenditure Impact


Drafting Number:

Prime Sponsor(s):

LLS 98-328

Rep. Swenson

Sen. Hopper

Date:

Bill Status:

Fiscal Analyst:

February 27, 1998

House 2nd Reading

Harry Zeid (866-4753)

 

TITLE:            CONCERNING INCREASES IN ASSISTANCE GRANTS FOR THE ELDERLY AND DISABLED.



Summary of Legislation


STATE FISCAL IMPACT SUMMARY

FY 1998/99

FY 1999/2000

FY 2000/2001

State Revenues

General Fund

Other Fund



 


 


 

State Expenditures

     General Fund - Grants*

     General Fund - Program Administration


$6,733,989


$13,467,977

$36,878


$13,467,977

$44,600

FTE Position Change

 

1.0 FTE

1.0 FTE

Local Government ImpactNone

            *The current General Fund expenditure for the property tax/rent assistance grant program and the heat/fuel expense grant program is identified in a footnote in the Long Appropriations Bill for informational purposes, as they are continuously appropriated by permanent statute. This would also be true for any increased program expenditures.


            Colorado currently provides a property tax/rent assistance grant and a heat/fuel expense grant to qualified elderly and disabled persons. The maximum property tax grant is $500 and the maximum heat grant is $160 for single persons with income less than $5,000 and married couples with income less than $8,700. As income rises above these amounts, the grant amount is reduced (by 20 percent of the amount of income over $5,000 for single persons or income over $8,700 for married couples for the property tax/rent grant and by 6.4 percent of the amount of income in excess of these income levels for the heat/fuel grant) and is fully phased out at income levels of $7,500 for single persons and $11,200 for married couples.


            Effective for grants claimed for years commencing on or after January 1, 1999, this bill as amended by the House Appropriations Committee (House Journal, February 27, 1998, pp. 770 - 773), would increase the amount of the property tax/rent grant from $500 to $600 and would reduce the amount of the phase-out percentage from 20 percent to 10 percent. The heat/fuel grant would be increased from $160 to $192 and the phase-out percentage would be reduced from 6.4 percent to 3.2 percent. Beginning in the year 2000 and in every even-numbered year thereafter, the Finance Committees of the Senate and the House of Representatives would be required to examine the grant amounts and phase-out percentages, giving consideration to the level of the federal poverty index, in order to determine if the grant amounts and the phase-out percentages should be modified. The bill is assessed as having state General Fund expenditure fiscal impact. The bill will become effective at 12:01 a.m. on the day following the ninety-day period after adjournment sine die of the General Assembly, or on the date of the official declaration of the vote of the people as proclaimed by the Governor, if a referendum petition is filed pursuant to Article V, Section 1 (3) of the State Constitution.



Background


            Colorado residents who meet certain age or disability criteria may qualify for a property tax/rent grant of up to $500 and a heat/fuel grant of up to $160. These grants are provided in the form of a rebate filed with Colorado income tax returns. In order to qualify as an elderly person, either the husband or wife must be 65 years of age or older, or a surviving spouse must be 58 years of age or older. A disabled person need not meet an age requirement in order to qualify for the grant program, but must have been disabled for the entire year and have received full disability payments from a bona fide public or private plan such as Social Security.


            Property Tax/Rent Grants Elderly and Disabled Persons. A person claiming a property tax/rent grant must have paid property taxes on his or her personal residence or have paid rent on his or her living quarters or mobile home space. A grant applicant may not be claimed as a dependent by any other person for Colorado income tax purposes. The amount of the grant may not exceed either the total amount of property taxes paid or 20 percent of the rent actually paid on the residence. Residents of nursing homes are not eligible for a grant for nursing home payments.


            The maximum grant amount of $500 is fixed by statute (Title 39, Article 31, C.R.S.). In the case of an individual, the maximum grant amount is reduced by 20 percent of the amount by which his or her income exceeds $5,000. In the case of a husband and wife, the $500 maximum grant is reduced by 20 percent of the amount by which their combined income exceeds $8,700. For example, a single taxpayer with income of $5,000 or less would be entitled to the full property tax/rent grant of $500. A single taxpayer with income of $6,000 would be entitled to a grant of $300 ($500 less 20 percent of the $1,000 of income over the $5,000 threshold, or $200). The grant is completely phased out for single persons with income in excess of $7,500 and for married couples with income in excess of $11,200.

 

            Heat/Fuel Grants Elderly and Disabled Persons. The maximum heat/fuel grant is $160 per year and may not exceed the actual amount paid for heat and fuel. If the heating bill is included as part of the rental payments, the grant is based on 10 percent of the total rent paid. The heat/fuel grant for elderly and disabled persons is reduced proportionately for qualified single persons with income between $5,000 and $7,500, and for qualified married couples with income between $8,700 and $11,200, in a manner similar to the property tax/rent grant program. Application for the property tax/rent grant and the heat/fuel grant is filed together on the same form.


            Historic Grant Awards. During FY 1979–80, 78,608 qualified returns for property tax/rent and heat/fuel grants were filed with the Department of Revenue. In FY 1980–81, the total value of the grants authorized reached its highest historic level at approximately $24.4 million. Since the income criteria for the grant program has remained unchanged, the number of individuals and married couples that qualify for the program and the value of the grants authorized has steadily declined. For FY 1996–97, 33,351 returns were filed requesting grants in the amount of $10,406,673. The table below identifies the total number and value of grants issued and the average grant per return from FY 1990–91 through FY 1996–97.



Property Tax/Rent and Heat/Fuel Grants for Elderly

 and Disabled Persons, FY 1991 through FY 1996

Fiscal

Year

Number

of Returns

Amount

of Grant

Average

Grant

1997

1996

1995

1994

1993

1992

1991

33,351

36,117

37,055

38,174

39,262

43,041

41,294

$10,406,673

$11,563,000

$12,332,539

$12,767,958

$13,487,520

$14,443,827

$15,474,478

$312

$320

$333

$334

$344

$336

$375



State Expenditures


            Program Grants. The bill would increase the maximum property tax/rent grant amount by $100 to $600 and the maximum heat/fuel grant amount by $32 to $192. In addition, the maximum property tax grant award would be reduced by 10 percent (rather than the current 20 percent) of the amount by which a single person’s income exceeds $5,000 and a married couple’s income exceeds $8,700. In order to maintain the same relationship between the two grant programs, the heat grant award would be reduced by 3.2 percent (rather than the current 6.4 percent) for the excess income amounts. At these levels, the property tax/rent grant and the heat/fuel grant would be phased-out to zero at $11,000 for single persons and $14,700 for married couples.


            The table below illustrates the value of the property tax/rent grant and the heat/fuel grant at selected income levels for single persons and married couples under current law and under the changes identified in the bill.


Value of Proposed Property Tax/Rent Grants

and Heat/Fuel Grants at Various Income Levels

Income

Levels

Current

Law Grants

Proposed

Grants

Single

Persons

Married

Couples

Property Tax Grant

Heat

Grant

Property Tax Grant

 Heat

Grant

$ 5,000

$ 6,000

$ 7,000

$ 7,500

$ 8,000

$ 9,000

$10,000

$11,000

$ 8,700

$ 9,700

$10,700

$11,200

$11,700

$12,700

$13,700

$14,700

$500

$300

$100

$160

$ 96

$ 32

$600

$500

$400

$350

$300

$200

$100

$192

$160

$128

$112

$ 96

$ 64

$ 32


            As illustrated in the previous table, single persons with income between $5,000 and $7,500 and married couples with income between $8,700 and $11,200 would be eligible for increased grant payments, as compared to current law, since the benefits would be phased out over a $6,000 income range rather than the current $2,500 range. In addition, the bill would qualify currently ineligible single elderly and disabled persons with income levels between $7,500 and $11,000, and married elderly and disabled couples with income between $11,200 and $14,700. These individuals would qualify for partial grant amounts.


            In order to estimate the fiscal impact of the bill, the Department of Revenue was able to simulate the impact using a data base containing 1993 income tax returns filed in 1994 (latest available data). This analysis indicated that the bill would increase the total value of grants authorized by $13.47 million beginning in FY 1999-00. This includes $9.44 million in additional property tax/rent grants and $4.03 million in additional heat/fuel grants. Grant eligibility would be for years commencing on or after January 1, 1999. Since the value of the grants are computed on an accrual accounting basis, a one-half year fiscal impact would be accrued to FY 1998-99 to account for the six-month period from January 1, 1999, to June 30, 1999. Therefore, General Fund expenditure fiscal impact identified for FY 1998-99 would be $6.73 million for the six-month period.

 

            Benefits to qualified grant beneficiaries currently receiving full or partial grants would be increased by $4.76 million ($3.10 million in property tax grants and $1.66 million in heat grants). In addition, it is estimated that approximately 35,100 individuals and married couples currently ineligible for grants would become eligible under the proposed new income threshold guidelines. The grants for these new qualifiers is estimated to total $8.71 million; $6.34 million in property tax grants and $2.37 million in heat grants.


            The table below identifies the combined additional property tax/rent and heat/fuel benefits that would result for current and new program qualifiers.


Estimated Additional Benefits from Proposed Changes to

the Property Tax/Rent and Heat/Fuel Grant Programs

 

Current

Qualifiers

New

Qualifiers


Total

Property Tax/Rent Grant

$ 3,096,073

$ 6,345,529

$ 9,441,602

Heat/Fuel Grant

$ 1,660,138

$ 2,366,237

$ 4,026,375

   Total

$ 4,756,211

$ 8,711,766

$13,467,977


            Program Administration. The bill will more than double the number of individuals and married taxpayers who will become eligible for the property tax and heat grants. The Department of Revenue will incur additional annual expenditures as a result of this increase. The Taxpayer Service Division will have to review the additional 35,100 property tax credit forms filed. At a review rate of 25 returns per hour, this function will require 0.7 FTE Tax Examiner I (grade 80, step 1). It is anticipated that the Telephone Information Section of the Taxpayer Service Division will experience an increased workload of 7,020 new telephone calls to request information regarding the grant program. This will require an additional 0.3 FTE Tax Examiner I. Based on an agreement with the Joint Budget Committee, Legislative Council Fiscal Note Staff, and the Department of Revenue, the Department of Revenue will absorb the costs of approximately 70 hours of contract programming time necessary to make the changes within the Information Technology Division. Additional expenses will include $4,037 annually for printing new booklets and $1,070 annually for pipeline processing costs. Beginning in FY 2000-01, $702 will be required annually for envelopes, and an additional $7,020 will be required annually for postage.


            Total annual General Fund expenditures are projected to be $36,878 in FY 1999-00, and $44,600 in FY 2000-01 and each fiscal year thereafter. These expenses include personal services costs of $31,771 and 1.0 FTE in FY 1999-00 and FY 2000-01, and operating expenses of $5,107 in FY 1999-00, and $12,829 in FY 2000-01 (including printing, processing, envelopes, and postage). It should be noted that while an increase in assistance grants would not be subject to the state General Fund appropriations limit, any expenditure related to program administration would be subject to the appropriations limit.


Expenditures Not Included


            Pursuant to the Joint Budget Committee’s budget policies, the following expenditures have not been included in this fiscal note:

 

               health and life insurance costs;

               short-term disability costs;

               inflationary cost factors;

               leased space; and

               indirect costs.



Spending Authority


            The fiscal note would imply that no appropriations or spending authority are required for FY 1998-99 to implement the provisions of the bill. The Department of Revenue would require an additional General Fund appropriation in the amount of $36,878 and 1.0 FTE in FY 1999-00. In order to comply with state fiscal year spending imposed by Article X, Section 20 of the State Constitution, the current General Fund expenditure for the property tax/rent assistance grant program and the heat/fuel expense grant program is identified in a footnote in the Long Appropriations Bill for informational purposes, as they are continuously appropriated by permanent statute. This would also be true for any increased program expenditures.



Departments Contacted


            Revenue