Fiscal Impact Summary	FY 1999/2000	FY 2000/2001
State Revenues General Fund Cash Fund	-$2,930,000 -848,000	-$2,750,000 -1,028,000
State Expenditures General Fund
FTE Position Change	0.0 FTE	0.0 FTE
Other State Impact: TABOR Impact
Effective Date: Upon signature of the Governor
Appropriation Summary for FY 1999-2000: None
Local Government Impact: Reduces the amount of funding available for distribution to affected political subdivisions.

For taxable years commencing July 1, 1999, and thereafter this bill (as amended by the Senate Finance Committee, April 13, 1999):

• increases the amount of metallic minerals to be exempt from severance tax from $11 million to $19 million;

• exempts the first 625,000 tons of molybdenum ore produced each quarter of the taxable year;

• increases the amount of coal to be exempt from severance tax from 8,000 tons to 300,000 tons of coal produced in each quarter of the taxable year; and

• specifies that all investment earnings of the state Severance Tax Trust Fund and the Local Government Severance Tax Fund are to be credited to the respective funds rather than the state General Fund.

Severance tax distribution. The revisions to the exemptions for metallic minerals, molybdenum, and coal are estimated by the Department of Local Affairs to reduce annual total state severance tax revenue by an average of $3.777 million starting in FY 1999-2000.

Under current law, severance tax revenue is distributed on an equal basis to the Local Government Severance Tax Fund and the state Severance Tax Trust Fund. As a result of the increased exemptions per this bill, the annual distribution to each of these accounts will be reduced by approximately $1.889 million.

Perpetual base account and operational account. Under current law, moneys credited to the state Severance Tax Trust Fund are further distributed on an equal basis to the perpetual base account and the operational account to fund state programs. As a result of the increased exemptions per this bill, the annual distribution to each of these accounts will be reduced by approximately $945,000.

Moneys credited to the perpetual base account are used for loans for state water projects. Moneys credited to the operational account are used to fund projects established within the Colorado Oil and Gas Conservation Commission, the Colorado Geological Survey, the Division of Minerals and Geology, and the Colorado Water Conservation Board. These projects are related to the planning, management, and development of minerals, energy, geology, and water.

Investment earnings. Under current law, investment earnings of the state Severance Tax Trust Fund and the Local Government Severance Tax Trust Fund are credited to the state General Fund. The amended bill will retain investment earnings within each respective fund. As a result, the amended bill will reduce state General Fund revenue by $2.93 million for FY 1999-2000 and $2.75 million for FY 2000-01. Of these amounts, the state Severance Tax Trust Fund would receive $1.5 million for FY 1999-2000 and $1.5 million for FY 2000-01; and the Local Government Severance Tax Trust Fund would receive $1.43 million for FY 1999-2000 and $1.25 million for FY 2000-01, based upon the following assumptions:

• a Local Government Severance Tax Trust Fund balance of $26.059 million for FY 1999-2000 and $22.692 million for FY 2000-01.

Table 1 provides a summary of the amended revenue impact to the state Severance Tax Trust Fund and the Local Government Severance Tax Trust Fund.

The reduced state revenues will mean a reduction in the amount of future state funds required to be refunded to taxpayers under the terms of TABOR. Even though it applies to General Fund and cash fund monies, the TABOR refund is considered a General Fund liability for purposes of this analysis. As a result, the reduction in the TABOR refund will cause an increase in the state’s excess General Fund reserve. There will also be an increase in federal and state income tax liability for those companies with reduced severance tax payments.

Table 2 summarizes the net impact of this bill on these state obligations. The changes in Table 1 are changes from a base that includes continuing capital construction projects.

Table 2 - Summary- Other State Impact ($ Millions)	FY 1999-00	FY 2000-01
General Fund Revenue	($2.93)	($2.75)
General Fund Appropriations Cash Fund Revenues SB 97-1 Diversion	0.00 (0.84) 0.00	0.00 (1.03) 0.00
Controlled Maintenance Trust Fund Appropriations Excess General Fund Reserve	0.00 (2.93)	0.00 (1.90)
Federal Income Taxes Paid by Colorado Taxpayers	1.28	1.28
TABOR Refund (from prior year)	0.00	(3.78)

Moneys deposited to the Local Government Severance Tax Fund are distributed to those political subdivisions socially or economically affected by the mineral or mineral fuel operation subjected to the severance tax. This bill will annually reduce the total amount of moneys available for distribution to those local government entities by approximately $459,000 in FY 1999-2000 and $641,000 in FY 2000-01.

This fiscal note would imply no new state appropriations are required for FY 1999-2000.

Table 1 - Revenue Impact	FY 1999-2000	FY 2000-01
Severance Tax Trust Fund - exemption increase	($1,889,000)	($1,889,000)
Severance Tax Trust Fund - investment earnings increase	1,500,000	1,500,000
Local Govt Severance Tax Trust Fund - exemption increase	(1,889,000)	(1,889,000)
Local Govt Severance Tax Trust Fund - investment earnings increase	1,430,000	1,250,000
Net Cash Fund Revenue Impact	($848,000)	($1,028,000)