Colorado Legislative Council Staff

STATE

CONDITIONAL FISCAL NOTE

TABOR Refund Impact

General and Cash Fund Revenue and Cash and Cash Fund Exempt Expenditure Impact

TITLE:            CONCERNING THE PROVISION OF BASIC MOTOR VEHICLE INSURANCE FOR VEHICLES REGISTERED IN COLORADO, AND, IN CONNECTION THEREWITH, COLLECTION A PREMIUM FOR BASIC MOTOR VEHICLE INSURANCE COVERAGE WHEN GASOLINE OR SPECIAL FUEL IS PURCHASED, WHEN MOTOR VEHICLES ARE REGISTERED, AND WHEN DRIVERS’ LICENSES ARE OBTAINED.

Summary of Legislation

            The provisions of this bill would create a Division of Motor Vehicle Insurance in the Department of Revenue to provide basic motor vehicle insurance coverage. The insurance coverage would be provided to any person who holds a valid Colorado driver’s license and is operating a motor vehicle that is validly registered in Colorado or another state or a person who holds a valid driver’s license from another state and who is operating a motor vehicle that is validly registered in Colorado.

            *The cash fund exempt expenditures of the Department of Law would be out of the expenditures of the Department of Revenue and the Division of Insurance indicated above.

            The bill would authorize the division to assess a surcharge on gasoline and special fuels used by motor vehicles, drivers’ licenses, and motor vehicle registrations. The bill would authorize the division to contract with qualified vendors who would handle, receive and process claims, including the payment of such claims. The division would reimburse the vendors for all valid claims and would conduct audits of the vendors. The bill would authorize the division to issue revenue bonds to pay division expenses and insurance claims in the event of a revenue shortfall. The bill would refer this act to a vote of the people under the referendum clause of the state Constitution. It is assumed that the bill would take effect January 1, 1999, and the division would begin operating as an insurance underwriter sometime between July 1, 1999, and January 1, 2000.

State Revenues

            The Department of Revenue has indicated that it would be necessary to issue revenue bonds prior to July 1, 1999, to fund the initial operations of the division until the premiums begin to generate sufficient revenue to cover the costs of administration and the cost of claims. The premiums would be established to cover the following: (1) the costs of start-up and on-going administration; (2) the costs of claims and reserves; and (3) the costs of debt service. The department has indicated that it would establish the following fees for FY 1998/99:

            The amount of General Fund revenues collected on insurance premiums would decrease by an amount equal to the value of the premiums currently paid for the basic coverage and cannot be accurately estimated at this time.

TABOR Refund Impact

            Section 20 of Article X of the Colorado Constitution, limits the maximum annual percentage increase in state fiscal year spending. Once total state revenue from all sources that are not specifically excluded from fiscal year spending exceeds these limits for the fiscal year, the state constitution requires that the excess shall be refunded in the next fiscal year unless voters approve a revenue change as an offset. Based on the current Legislative Council economic forecast, it is projected that the state will be in a TABOR refund position during each of the next five fiscal years. Any increase or decrease in state revenue from changes in fees, fines, licenses, or other revenue sources will affect the amount of the state revenue to be refunded.

State Expenditures

            The expenditures of the Department of Revenue are estimated to total $3,091,210,627 for the first two years for an average expenditure of $1,545,605,532 each year.

            The Department of Personnel maintains a fleet of approximately 1,000 motor vehicles that would be subject to the $75 registration fee. It is estimated that the department would require an additional appropriation of $75,000 CFE to pay the additional motor vehicle registration fee.

            The Division of Insurance, Department of Regulatory Agencies, would require additional resources to administer complaints arising from the administration of additional claims. It is estimated that the division would require an additional cash funds totaling $33,295 in FY 1998/99 and $28,715 in FY 1999/2000.

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.

Election Expenditure Impacts (For Informational Purposes Only)

            A General Fund line-item in the 1998-99 Long Appropriations Bill will fund the costs of publicizing any initiative or referendum proposal in newspapers and for printing and distribution of the Blue Book to all electors. The General Assembly spent $291,267 GF for one state-wide ballot proposal on the November, 1995 ballot and $1,042,014 GF for the 12 proposals that appeared on the November, 1996 ballot.

            The 1996 General Election fixed costs for mailing the Blue Book to 1.35 million registered voters was $174,036 for postage and $3,800 for obtaining mailing addresses. These costs will be the same regardless of the number of issues on the ballot. Variable costs included: Spanish translation of $11,215; newspaper publication of $644,828; printing costs of $206,806; and other costs of $1,328. Total costs were $1,042,014 GF. Fixed costs totaled $177,837 and variable costs were $72,015 per ballot issue.

            Based on the costs incurred for the 1996 Blue Book, one ballot issue cost $249,852 to print and mail to the public. The $72,015 of incremental cost would be added for each issue to the basic mailing costs of $177,837.

Local Government Impact

            The costs of registration fees of local governments would increase to cover the additional registration costs as provided for in the bill.

Spending Authority

            This fiscal note implies that the Department of Revenue would require a cash fund appropriation of $1,985,055,495 and 35.5 FTE in FY 1998/99. Out of that amount, the Department of Law would require a cash fund exempt appropriation of $131,328 and 3.0 FTE. In addition, the Department of Personnel would require a cash fund exempt appropriation of $75,000 in FY 1998/99. The Department of Regulatory Agencies would require a cash fund appropriation of $33,295 and 1.0 FTE in FY 1998/99. Out of that amount, the Department of Law would require a cash fund exempt appropriation of $1,800.

Departments Contacted

            Revenue                      Personnel                    Regulatory Agencies