Colorado Legislative Council Staff

STATE

FISCAL NOTE

TABOR Refund Impact

Cash Fund Revenue and Cash Exempt Expenditure Impact


Drafting Number:

Prime Sponsor(s):

LLS 98-805

Sen. Lacy

Rep. Grampsas

Date:

Bill Status:

Fiscal Analyst:

March 17, 1998

Senate Business Affairs

Will Meyer (866-4976)

 

TITLE:            CONCERNING THE ADMINISTRATION BY THE PUBLIC UTILITIES COMMISSION OF MECHANISMS FOR THE SUPPORT OF UNIVERSAL TELEPHONE SERVICE IN HIGH COST AREAS.



Summary of Legislation


            The provisions of this bill would make changes to the administration of the Colorado High Cost Fund. The Colorado High Cost Fund subsidizes the provision of basic local exchange telephone service to rural areas of the state in which the cost of service is inordinately high. The bill would change the mechanism by which the subsidy is collected and dispersed. Rather than the state collecting and remitting the subsidy between providers of telecommunication services (as provided for under current law), this bill would authorize the Public Utilities Commission (PUC) to direct these transfers through administrative order and thus eliminate the state from receiving this revenue. The bill would become effective April 1, 1998.


            The bill also would repeal the existing Colorado High Cost Fund and transfer the unencumbered balance remaining there as of April 1, 1998, to a new fund, designated as the High Cost Administration Fund, to pay the costs incurred by the PUC or its contractors in administering this direct transfer mechanism, referred to in the bill as the “high cost support mechanism”.


STATE FISCAL IMPACT SUMMARY

FY 1997/98

FY 1998/1999

FY 1999/2000

State Revenues

High Cost Fund - Cash Fund

Other Fund


($4,436,543)


($17,746,170)


($20,231,024)

State Expenditures

High Cost Fund - Cash Fund (Transfer)*

High Cost Administration Fund - Cash Fund

High Cost Administration Fund - Cash Exempt


($2,278,381)

 $2,278,381

$2,895




$11,541




$11,541

FTE Position Change

None

0.2 FTE

0.2 FTE

Local Government ImpactNone Identified.

            * Balance as of January 31, 1998.


Background. With the passage of HB 95-1335 in 1995, telecommunications in Colorado began the move from being a “regulated monopoly” to “regulated competition”. In 1996, when the Federal Telecommunications Act was signed into law, the way by which the federal government and the states shared the costs of providing high cost service to all citizens changed. Rural telephone providers in “high cost areas” have been able to offer local telephone service at rates comparable to urban areas to a great extent due to subsidies paid by urban area providers in “low cost areas”. In 1997, the Federal Communications Commission ruled to reduce the federal subsidies it collects by 75% and directed the states to develop mechanisms to continue to provide the high cost support mechanism. The PUC has estimated that the costs to the state to implement the required changes to the High Cost Fund, resulting from the enactment of the Federal Telecommunications Act and in addition to the costs to implement the provisions of this bill, total $91,071 and .4 FTE in the current fiscal year, $145,299 and 1.6 FTE in FY 1998/99 and $137,461 and 1.8 FTE in FY 1999/2000.


            The provisions of this bill would create a high cost fund mechanism that would allow providers of telecommunication services to remit to each other (rather than to the state) any subsidies required.



State Revenues


            The changes in FCC rule has resulted in a significant increase in the amount of subsidy collected by the states. It is estimated that the increased amount of subsidy that would be collected by Colorado would total $4,439,884 for the remainder of this fiscal year, $17,759,534 in FY 1998/99 and $20,244,388 in FY 1999/2000. It is currently estimated that the provisions of this bill would decrease the amount of net revenues collected by the state through the high cost fund by $4,436,543 in the current fiscal year, $17,746,170 in FY 1998/99, and $20,231,024 in FY 1999/2000. The estimates for the current fiscal year assume April 1, 1998, as the effective date of this bill. A later effective date would reduce the amount of the estimated decrease in state revenues. Net revenues are the total projected revenues less the costs incurred by the PUC or its contractors in administering the high cost support mechanism.



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 PUC has indicated that it would require additional personal services of a Rate/Financial Analyst III to establish and implement audit procedures to ensure that the subsidies that are paid and collected by providers of telecommunications services are adequate, timely, and correct. It is estimated that this would require additional personal services expenditures of $2,717 in the current fiscal year, $11,541 and 0.2 FTE in FY 1998/99 and beyond.


Expenditures Not Included


            Pursuant to the Joint Budget Committee’s budget policies, the following expenditures totaling $446 in FY 1997/98 and $1,783 in FY 1998/99 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


            This fiscal note implies that Public Utilities Commission, Department of Regulatory Agencies would require an increase in their current year spending authority of $2,895 and additional spending authority of $11,541 CFE and 0.2 FTE in FY 1998/99 to implement the provisions of this bill.


 

Departments Contacted


            Regulatory Agencies