Colorado Legislative Council Staff

STATE

REVISED FISCAL NOTE

(Replaces Fiscal Note dated April 13, 1998)

TABOR Refund Impact

Cash Funds Revenue and Expenditure Impact

Cash Funds Exempt Expenditure Impact

Federal Funds Expenditure Impact

TITLE:            CONCERNING CASH FUNDS OF THE STATE, AND MAKING APPROPRIATIONS IN CONNECTION THEREWITH.

Summary of Legislation

             *Administrative expenses may be incurred in order to comply with the requirements of the bill. These expenses have not been estimated but may be significant for some departments..

            This reengrossed bill would require that if the uncommitted reserves of a state cash fund exceeds 16.5 percent of the amount expended from the cash fund during that fiscal year, the fee must be reduced by the entity that collects the fee. The time period over which the fund balance must be reduced to 16.5 percent of expenditures would depend on the amount of uncommitted reserves in the fund:

            •   if the uncommitted reserves exceed 16.5 percent of the amount expended from the fund during FY 1997-98 but is less than 50.0 percent of the amount expended, the fee would be reduced by an amount such that the uncommitted reserves would be 16.5 percent or less of the amount expended from the cash fund for FY 2000-01 at the end of FY 2000-01;

            •   if the uncommitted reserves are 50.0 percent or more of the amount expended from the fund during FY 1997-98, the fee would be reduced by an amount that would reduce the uncommitted reserves to 16.5 percent or less of the amount expended from the cash fund for FY 2002-03 at the end of FY 2002-03.

            This reduction in the uncommitted reserves would not apply to any cash fund for which a reserve amount is specified in the state Constitution or for which a reserve amount is otherwise established by law. Additionally, cash funds specifically excluded from the limitations imposed by the bill include:

            •   any cash fund for which revenues are derived solely from fees established by the federal government;

            •   any cash fund for which revenues are derived by fees set by the Colorado Supreme Court in the exercise of its exclusive authority to regulate the practice of law;

            •   any cash fund that is established to fund capital construction;

            •   any cash fund for which the reserve amounts are based on actuarial requirements;

            •   any trust fund;

            •   any cash fund with uncommitted reserves of less than $50,000;

            •   the Highway Users’ Tax Fund and the State Highway Fund (except for the emergency medical services account, the distributed data processing system special purpose account, and the air account;

            •   the Petroleum Storage Tank Fund;

            •   the Hazardous Substance Response Fund;

            •   the Land and Water Management Fund; and

            •   the Brand Inspection Fund.

            The uncommitted reserves of any cash fund not specifically exempted would not be allowed to exceed 16.5 percent for FY 2002-03 and each fiscal year thereafter. However, for fiscal years beginning on or after July 1, 2002, the Joint Budget Committee may grant a waiver of the target reserve for an entity that demonstrates a specific purpose for which the entity needs to maintain uncommitted reserves greater than the target reserve for a specified limited period of time.

            The bill makes several changes in appropriations in certain funds:

            •   $1 million would be deducted from the Department of State Cash Fund and would be transferred to the State Public School Fund. The appropriation made in HB 98-1234 to the Department of Education, Public School Finance for total program would be adjusted by reducing the General Fund appropriation by $1 million and increase the appropriation from cash funds exempt by $1 million;

            •   $600,000 would be appropriated from the Department of State Cash Fund to the Department of State for reimbursement of county clerk and recorders for 1997 election costs for FY 1997-98;

            •   $93,800 would be deducted from the Colorado Disabled Telephone Users Fund and would be transferred to the Reading Services for the Blind Cash Fund;

            •   $1 million would be deducted from the Department of State Cash Fund and transferred to the Colorado Economic Development Fund;

            •   $1,700,000 would be deducted from the Department of State Cash Fund and would be transferred to the Children’s Basic Health Plan Trust Fund; and

            •   the appropriation to and the amount of federal funds anticipated to be received by the Department of Health Care Policy and Financing, Other Medical Services, for HB 97-1304 Children’s Basic Health Plan would be increased by $5,056,514. Of this amount, $1,700,000 would be cash funds exempt and $3,356,514 would be federal funds.

            The Office of State Planning and Budgeting would be required to annually review the total amount of revenues credited to cash funds and to provide a report of its findings to the State Controller. The State Controller would prepare a report that ascertains the amount of uncommitted reserves credited to each state cash fund.

            The bill is assessed as having cash funds revenue and expenditure fiscal impact. The bill would become effective upon signature of the Governor.

State Revenues

            As the fees for certain cash funds are reduced, state revenues will be reduced accordingly. Funds that have uncommitted reserves of between 16.5 percent and 50.0 percent of the amount expended during FY 1997-98 will have until the end of FY 2000-01 to reduce the fund balance to 16.5 percent or less of FY 2000-01 expenditures through fee reductions. It is assumed that the fee reductions will not begin before January 1, 1999. Therefore, these fund balances will be reduced over a 2.5 year period. Funds that have uncommitted reserves in excess of 50.0 percent will have until the end of FY 2002-03 (4.5 years) to reduce their uncommitted reserves to 16.5 percent or less.

            An analysis prepared by the Office of State Planning and Budgeting has identified 57 cash funds that have uncommitted reserves in excess of 16.5 percent of expenditures that would be affected by the bill. The combined excess reserves in these funds totaled $42,986,318 at FY 1996-97 year end. The 29 funds that had uncommitted reserves of between 16.5 percent and 50.0 percent of expenditures would be required to reduce their uncommitted reserves to 16.5 percent of FY 2000-01 expenditures over a 2.5 year period.

            The 28 funds that had excess uncommitted reserves greater than 50.0 percent of FY 1996-97 expenditures would be required to reduce their uncommitted reserves to 16.5 percent of FY 2002-03 expenditures over a 4.5 year period. Based on FY 1996-97 data, Table 1 identifies the projected cash funds fee revenue reductions that would occur annually between FY 1998-99 and FY 2002-03 in order to comply with the requirements of the bill to reduce the excess fund balances.

Table 1. SB 98-194 Projected Cash Funds Balance Reductions

             *FY 1996-97 uncommitted reserves expressed as a percentage of annual expenditures.

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

            Administrative expenses may be incurred by some departments in order to comply with the bill’s requirement to reduce fees on some cash funds. For example, some fee reductions may require rule making expenses in order to reduce the fee. In addition, notification of applicants regarding the changes in the fee structure may be necessary in some instances. These notifications will require postage, printing, and processing. Some fee application forms may also require modification. Costs associated with these administrative expenses have not been estimated. It is assumed that any administrative costs necessary to comply with the required fee reductions will be paid for from the uncommitted reserves balances that the bill is intended to reduce.

Spending Authority

            The bill contains several transfers to existing appropriations. These transfers are identified in the bill summary section of the fiscal note.

Departments Contacted

Office of State Planning and Budgeting         Joint Budget Committee         Legislative Council Staff