Colorado Legislative Council Staff

STATE

REVISED FISCAL IMPACT

(replaces fiscal impact dated January 10, 1999)

TITLE:            CONCERNING THE REFUNDING OF STATE REVENUES IN EXCESS OF THE CONSTITUTIONAL LIMITATION ON STATE FISCAL YEAR SPENDING FOR ANY GIVEN FISCAL YEAR.

Summary of Legislation

            This fiscal note has been revised to reflect updated data provided in Table 2. This bill provides a method of refunding state revenues that are in excess of the state fiscal year spending limitation for any fiscal year commencing on or after July 1, 1998, as required by Section 20 of Article X of the State Constitution. The bill establishes a tax refund offset to be claimed on the state individual income tax return of qualified individuals. The definition of a “qualified individual” would remain the same as those who qualify for the current-year excess revenue refund.

            No later than October 1 of each year during which state revenues exceed the constitutional limitations, the Executive Director of the Department of Revenue is required to calculate the amount of the refund per taxpayer. The total amount to be refunded would exclude revenues that the voters statewide have authorized the state to retain and spend, and would be determined as follows:

            •   total excess state revenues would be divided by the number of qualified individuals expected to claim the refund;

            •   if the average refund per individual is five dollars or less, each qualified individual would receive an identical refund amount; and

            •   if the average refund per individual exceeds five dollars, then a three-tiered system would be established with a flat dollar amount for qualified individuals with adjusted gross income of $25,000 or less, and a flat dollar amount for qualified individuals with adjusted gross income greater than $80,000. For individuals with adjusted gross income greater than $25,000 but $80,000 or less, the refund would be a sliding scale based on a percentage of adjusted gross income. The adjusted gross income brackets would be indexed to the Denver-Boulder Consumer Price Index after the 1999 tax year.

            The amounts of the refund per qualified taxpayer would be doubled for taxpayers who file a married joint tax return.

            The bill would affect state General Fund revenues and expenditures, and is therefore assessed as having state fiscal impact. The bill would become effective 90 days after adjournment unless a referendum petition is filed.

State Revenues

            HB 99-1011 provides a method of refunding state revenues that are in excess of the state fiscal year spending limitation for fiscal years commencing on or after July 1, 1998, as required by Section 20 of Article X of the State Constitution, that the voters have not authorized the state to retain and spend. The amount of annual excess revenues to be refunded will depend on the amount of revenues received by the state in any given year, and will be affected by tax rate reductions, tax credits, income modifications, and other tax exemptions that may be established by law in the future. Therefore, the amount of the TABOR refund has not been estimated. For illustrative purposes, Table 2 on page 4 identifies the impact of HB 99-1011 assuming current law (no tax law changes) and an estimated amount of excess TABOR revenues of $575.2 million.

State Expenditures

            The Department of Revenue will incur administrative costs implementing the bill. The Department of Revenue will process 1,885,509 document returns affecting 2,672,467 qualified individuals. The itemized administrative costs of the bill are provided in Table 1.

Table 1. Summary of Department of Revenue

Administrative Expenses for FY 1999-00 and FY 2000-01

                            *Includes PERA at 11.4% and Medicare at 1.45% of salary.

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.

State Appropriations

            The fiscal note implies that the Department of Revenue would require an additional General Fund appropriation of $348,512 and 3.2 FTE in FY 1999-00 in order to implement the bill.

Departments Contacted

            Legislative Council Staff        Revenue

TABLE 2