Don't like to read?
Last Monday, Colorado Gov. John Hickenlooper unveiled the state’s $26.8 billion proposed budget for next fiscal year. The budget includes $167.2 million in tax rebates for Colorado taxpayers, including $30.5 million in rebates due to total state revenue that was higher than predicted. Under the Colorado Taxpayer’s Bill of Rights (TABOR) the state must either refund the excess amount above the estimate,or add a measure to a future ballot asking the voters to let the state keep and spend the surplus.
The rebates are mandated by TABOR, because the revenue from marijuana sales is different than projections included in the election book for the 2013 Proposition AA. Under TABOR, since the estimate was off, the state has to either refund the excess cash or go to voters to ask if the state can keep it.
The budget proposal was announced one day before the Nov. 4 election that gave Hickenlooper another term. The spending plan includes a 7 percent increase from the current year’s budget, representing $1.7 billion in new spending of state and federal money. $908 million in state spending includes $107 million in additional funds for higher education, $103 million for road projects and a 2 percent pay hike for many state employees.
Colorado’s economy is improving, but much of the new money is due to tax collections exceeding the state’s revenue cap, triggering rebates under TABOR for the first time in 15 years. The provision requires refunds if the revenue is greater than the rate of population growth and inflation. Unless, that is, the voters decide to return the money.
Hickenlooper’s budget directs $167.2 million of the TABOR rebate for fiscal year 2015-16 toward a tax credit for low income workers, along with sales tax refunds. He did not address exactly how to rebate the $30.5 million portion for recreational pot taxes, that decision being left to state lawmakers.
The rebate issue became a campaign issue last month when the governor was noncommittal on whether he would endorse a tax rebate, or if he would ask voters for permission to spend it. At a gubernatorial debate Oct. 24 he did commit to a rebate.
Vice Chairman of the Joint Budget Committee Sen. Pat Steadman said the overage is not happening because the taxes are exceeding the estimates, but rather because the economy is growing. Hickenlooper stated that “Colorado’s economic activity continues to outperform the national expansion,” and said looking ahead, the most likely scenario is for that momentum to continue.
Lawmakers have the option to lower excise and sales tax rates on recreational pot to bring the revenue in line with projections, but that would most likely impact $40 in annual excise tax revenue that has been allocated to school construction. Rep. Cheri Gerou, a member of the Joint Budget Committee, said lowering the sales tax rate would mean the state could not take care of K-12 education under BEST, the Building Excellent Schools Today program.
So much of the marijuana revenue is allocated for school construction and reimbursing counties for regulation expenses that it is possible that the cannabis refund would have to come out of the state’s general fund. It is uncertain how the pot tax rebate will be handled, whether it will go to all Colorado taxpayers or only to those who bought recreational marijuana. Gerou said that despite the higher-than-projected revenue, legalized recreational marijuana could actually cost the state money in this first year.
By Beth A. Balen
Image by Bob Keefer – Flickr