Colorado Legislative Council Staff

STATE

REVISED FISCAL NOTE

(replaces Fiscal Note dated April 14, 1998)

TABOR Refund Impact

General Fund Revenue and Expenditure Impact

Cash Funds Revenue and Expenditure Impact

Local Funds Revenue and Expenditure Impact

Federal Funds Expenditure Impact

TITLE:            CONCERNING THE REGULATION OF RETAIL FOOD ESTABLISHMENTS.

Summary of Legislation

This fiscal note is revised to reflect a reduction in federal funds for the retail food establishment protection program and make technical corrections.

            The bill, as amended by the Senate HEWI Committee (Senate Journal, April 16, 1998, pp. 848-849), repeals and reenacts the Food Protection Cash Fund Act as the Food Protection Act, and includes the following provisions:

            •   redefines “retail food establishment" to include: (1) food establishments that sell food for off-premises consumption and, (2) food service establishments that prepare and serve food for on or off-premises consumption;

            •   increases license fees;

            •   requires that all retail food establishment license and other fees collected by the Department of Public Health and Environment (DPHE) under the Food Protection Act be credited to the Food Protection Cash Fund, but continues to require that fees collected by a local board of health be deposited in the appropriate county, district, or regional health department fund;

            •   eliminates the requirement that such fees be credited to the General Fund;

            •   as amended, stipulates that $20 of each fee collected by a local board of health shall be used by DPHE pursuant to Section 25-4-1604 (1) (a), (1) (b), (1) (c), (1) (f), (1) (g), and (1) (i) of the bill; and

            •   is effective July 1, 1998, and shall apply to acts committed on or after said date.

State Revenues

            Collection of Fees. The bill increases license fees and establishes new fees as noted in Table 3 on page 5 of this fiscal note. All fees collected by the department shall be transmitted to the State Treasurer and credited to the Food Protection Cash Fund. Twenty dollars of each fee collected by a local board of health shall be transmitted to the State Treasurer and credited to the Food Protection Cash Fund, and the remainder shall be retained by the local board of health and deposited in the appropriate local board of health cash fund to pay expenses of a retail food establishment protection program.

            Total revenue collections under SB 98-189 are estimated at $1,805,395 for FY 1999-00; total revenue collections under current law are estimated at $1,162,375 for FY 1997-98. Because licensure of retail food establishments operates on a calendar year, the majority of fees are collected in the first six months of the fiscal year. Thus, for FY 1998-99, collections will be less (based on only six months of the fiscal year). Approximately 80 percent of total fee collections will remain at the local level and 20 percent will be forwarded to the state.

            Civil Penalties. The bill changes the statutes regarding civil penalty amounts for noncompliance. Currently, DPHE or a local board of health may assess a penalty of up to $50 for each day of violation of Part 16 of Article 4 of Title 25, C.R.S. SB 98-189 repeals Part 2 of Article 44 of Title 12, C.R.S., and incorporates current civil penalty amounts identified in Section 12-44-212, C.R.S., into Section 25-4-1611 of the bill. Thus, under SB 98-189, DPHE or a local board of health, after issuing a written notification for noncompliance and allowing reasonable time to comply, a licensee or other person operating a retail food establishment for violation of Section 25-4-1610 of the bill shall be subject to a civil penalty of not less than $250 and not more than $1,000. After subsequent follow-up inspections and continued noncompliance, DPHE or a local board of health, after issuing a second written notification of noncompliance, may assess a civil penalty of not less than $500 and not more than $1,000. A licensee or other person operating a retail food establishment may be assessed a maximum of three civil penalties in any calendar year. Whenever a third civil penalty is assessed in a calendar year, DPHE or a local board of health shall initiate proceeding to suspend or revoke the license. All penalties collected by DPHE shall be transmitted to the State Treasurer and credited to the Food Protection Cash Fund. All penalties collected by a local board of health shall be deposited in the appropriate local board of health cash fund and used to pay expenses related to the inspection of retail food establishments. Total revenue collected through civil penalties is estimated at $5,600; an amount constant with civil penalties collections for FY 1997-98.

            Table 1 provides a comparison of revenues that support the retail food establishment protection program under current law and SB 98-189.

TABLE 1: Revenues for the State Retail Food Establishment Protection Program

* Federal funds are shown for informational purposes only; they are not appropriated.

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

            Current Practice. The Department of Revenue collects fees and issues food licenses for retail food establishments. The Department of Public Health and Environment provides direct inspection services and statewide coordination of the retail food establishment protection program.

            The bill neither increases nor decreases workload in the Department of Public Health and Environment and the Department of Revenue. The bill changes the fee structure for how the program will be funded. Programmatically, the Division of Consumer Protection will continue to provide inspection services to 14 counties (wherein no local program exists), and statewide coordination and assistance to the remaining 49 counties which have local inspection programs. Table 2 provides a comparison of funding sources to support the 4.7 FTE in the current state retail food establishment protection program and under SB 98-189. Because licensure of retail food establishments operates on a calendar year, the majority of fees are collected in January through March. Thus, for FY 1998-99, collections will be for approximately six months of the fiscal year. Collections and cash fund support for the program will be fully implemented in FY 1999-00.

            General Fund support for the program will be reduced due to fee increases established in SB 98-189, but they are inadequate to fully cash fund the program. In FY 1999-00, approximately 84 percent of the program’s costs can be cash funded with the remaining 16 percent requiring General Fund. [NOTE: DPHE indicates that federal funds currently available to support the program will be reduced in FY 1998-99 and no longer available in FY 1999-00.]

TABLE 2: Comparison of Expenditures by Funding Source for the State

Retail Food Establishment Protection Program

* Federal funds are shown for informational purposes only; they are not appropriated.

Local Government Impact

            There will be an increase in fees collected and retained by local health departments to support their respective retail food establishment protection programs. Local governments retain approximately 80 percent of total revenue collected.

Spending Authority

            The fiscal note indicates that for FY 1998-99, the Department of Public Health and Environment, Consumer Protection, should receive an appropriation with no net increase or decrease in funding, but one which adjusts the funding splits accordingly: a $60,637 General Fund reduction, a $67,252 federal funds reduction, and an increase of $127,889 in cash funds from the Food Protection Cash Fund.

Departments Contacted

            Public Health and Environment

            Revenue

Omissions and Technical or Mechanical Defects

            Although not explicitly stated in the bill, it is assumed that the Department of Revenue will continue to collect fees and issue licenses.

Fee Impact on Individuals, Families or Business

            Pursuant to Section 2-2-322, C.R.S., which requires legislative service agency review of legislative measures which include the creation or increase of any fee collected by a state agency, the following analysis is provided. The Consumer Protection Division, estimates that there are 1,920 retail markets and 11,983 food service establishments in the state. Table 3 on page 5 provides an estimate of total revenue anticipated as a result of fee changes established in SB 98-189.

TABLE 3: RETAIL FOOD ESTABLISHMENT FEES

* Fee assessed on 1,615 establishments; 1,920 establishments are fee free (approximately 54% in the 0-100 Seating Capacity aren’t assessed a fee).