Legislative Session

2018 Legislative Outlook

Report written by Ed Bowditch & Jennifer Cassell, Bowditch & Cassell Public Affairs

Key Legislative Issues (as it relates to EDCC’s legislative platform):

The Second Regular Session of the 71st General Assembly of Colorado convenes on Wednesday, January 10, 2018, at 10:00 am. Per the Colorado State Constitution, the legislature will meet for no more than 120 days, with adjournment sine die occurring no later than midnight on Wednesday, May 9, 2018.

You can obtain additional information on the General Assembly, including contact information for legislators, information on bills that have been introduced, schedules for committee hearings, and links for listening to live audio broadcasts of legislative proceedings at the Colorado General Assembly homepage. The deadline schedule for the House and Senate is also available online. The House of Representatives and the Senate will be televised, both on the Internet and on Comcast cable television channel 165.


2018 LEGISLATIVE LEADERSHIP
The 2018 House and Senate leaders will be the same as the previous session:

  • House Speaker Crisanta Duran, D-Denver
  • House Majority Leader K.C. Becker, D-Boulder
  • House Minority Leader Patrick Neville, R-Castle Rock
  • Senate President Kevin Grantham, R-Canon City
  • Senate Majority Leader Chris Holbert, R-Parker
  • Senate Minority Leader Lucia Guzman, D-Denver

Three members of the General Assembly will be new in 2018. Dylan Roberts, currently a deputy district attorney in Eagle, was selected to fill a vacancy when then-Representative Diane Mitsch Bush (D-Steamboat Springs) stepped down to run for congress. Representative Clarice Navarro (R-Pueblo) was recently appointed as the Colorado Director for the Farm Service Agency, and a vacancy committee appointed Judy Reyher of Swink as her replacement. And a vacancy committee selected Shane Sandridge as the replacement for Representative Dan Nordberg (R-El Paso) who was recently appointed to serve as Regional Administrator of the Small Business Administration.

Also, State Senator Cheri Jahn, who is beginning her last year as a legislator, recently changed her voter registration from Democrat to unaffiliated. This changes the Senate party balance to 18 (Republican), 16 (Democrat), and one unaffiliated.


CHANGES AT THE FEDERAL LEVEL

Two federal issues will impact Colorado:

  • Tax Changes: Congress has passed the most significant tax changes since 1986, and its impact will affect Colorado’s General Fund revenue. Colorado is one of seven states that links its income tax to federal taxable income. With the reduction of federal exemptions and deductions, Colorado’s General Fund revenues will increase.
  • Health Care: After many failed attempts, the federal government has not repealed the Affordable Care Act, though President Trump did sign an executive order to eliminate payments to insurance companies that helped defray out-of-pocket costs for low-income individuals. In addition, one component of federal tax reform is the elimination of the penalty for not having health insurance. One upcoming key issue will be the re-authorization of the Children’s Health Insurance Program (CHIP). This currently provides health coverage for approximately 75,000 children and pregnant women in Colorado, and is not authorized at the federal level past January. Recently, the Legislative Joint Budget Committee approved a “1331” interim supplemental request to continue the program through February.

KEY ISSUES IN THE 2018 LEGISLATIVE SESSION

There are many high profile, key issues that will be discussed in 2018: transportation funding (again), affordable housing (again), PERA (back after a brief hiatus) and the state budget (every year). Each of these is discussed in more detail below. Of course, many more issues will be debated and discussed this session. Also, the legislature will inevitably discuss the unresolved marijuana tax policy issue from the 2018 special session which left nine special districts unable to collect their share of the statewide retail marijuana sales tax.

The 2018 Governor’s race will be the next area of political focus. For the first time in decades, Colorado will see open, contested primaries in both parties. This will also be the first election in which unaffiliated voters can choose to participate in primary elections.  There are multiple Republican, Democrat, and unaffiliated individuals who have announced their candidacy for Governor, and the election will be one to watch.

AGRICULTURE

Agriculture continues to play an instrumental role in Colorado by employing over 172,000 people and contributing over $7 billion a year to the economy. Colorado is a top producer of cattle, dairy, wheat, potatoes, and corn, and ranks first in millet production while being in the top 10 for nearly 25 different commodities. Colorado expects to export $2 billion in beef, wheat, feed grains, dairy, corn, and other crops in 2017.

During the 2017 interim, the Young and Beginning Farmers Interim Study Committee, met to discuss ways the state can better support young farmers and encourage more young people to enter the industry. One piece of legislation was voted out of committee to create an Agriculture Workforce Development Program within the Department of Agriculture to incentivize agricultural businesses to hire interns by offering reimbursements for costs of employment. Other topics of discussion included creating “agriculture districts” which would be areas of the state with tax incentives and credits to promote agriculture development and creating a grant program for students in agriculture education programs to also take business management courses.

The Colorado Department of Agriculture will have a legislative agenda this year to address modernizing the Nursery Stock Act to keep up with changes and growth in the industry. With the increase of millet production in the state and the popularity of the grain in health food, the Department will support legislation to redefine millet as an “agriculture commodity”. This will allow the Commissioner to call a market order for the millet industry to self-impose a fee to go towards research, promotion, and marketing. The Department is also requesting funds create a federal lands position to provide technical assistance and expertise on land management and regulatory issues to farmers and ranchers.

We will see a push to expand the sale of cottage foods to retail establishments, such as restaurants and natural grocers; however, such an expansion will not be met without concern. The Custom Processing of Meat Animals Act is up for sunset review this session with DORA recommending continuation of the program for thirteen years.

In partnership with Farm Flavor, CDA released the second edition of “Cultivating Colorado,” a publication highlighting agriculture, agribusiness, livestock, and food products in Colorado. The 2018 issue focuses on the longevity of the Brands Inspection Division within CDA, the thriving craft brewery industry, and the strength of the dairy industry.

ECONOMIC DEVELOPMENT

Over the past few years, Colorado has seen robust economic growth, though it has slowed recently. The state has a lower unemployment rate than the national average and is almost at full employment. In addition, Colorado ranks #1 in overall state economy by U.S. News and World Report and #1 in state job market by Wallethub. However, not every area of the state has seen the same robust growth and unemployment.

Along with the Department of Revenue, the Governor’s Office of Economic Development and International Trade (OEDIT) will be pursuing an initiative to alter the way business income tax is collected in the state. The new proposal follows the Multi-state Tax Commission model legislation and will change Colorado from using the single sales factor apportionment model to the market based sourcing model. Under this new model, companies pay state income tax in the state where the benefit of the service is received and subsequently used by the customer, thus companies will likely pay less tax in Colorado for sales to customers outside of Colorado.

OEDIT has two JBC requests this session: 1) Allocate $1.25 million to the Office of Film, Television, and Media and 2) Allocate $175,000 a year for the next seven years for the Advanced Industries Export Accelerator Program. The latter request will also require legislation to extend the program in statue until 2024.

EDUCATION (K-12)

The last two sessions have seen major debates around charter school funding, specifically, mandating that districts share funds from mill levy overrides with district charter schools. At the end of the 2017 session, the legislature passed a measure (HB17-1375) requiring districts to either share mill levy override dollars on an equal basis or on a per student basis.

Teacher Shortages
Colorado, similar to most states, will experience a teacher shortage in the next few years. Indeed, the shortage is already impacting certain types of teachers (math, science, and special education) throughout the state, and all types of teaching positions in sections of rural Colorado. Numerous national studies have documented the large number of teachers who will retire in the next decade. In 2017, the legislature adopted legislation requiring the Departments of Education and Higher Education to develop a strategic plan to address the teacher shortage. This report was released on December 1, and contains a variety of recommendations, including ensuring teachers have continual training and professional development. This can include focusing on teacher induction programs and alternative preparation programs, and better programs for preparing teachers to work in hard to serve areas. In addition, the report recommends supporting teaching as a career so that teachers remain in the classroom. The report also recommends a minimum salary for teachers. Currently, according to a Colorado Department of Education Survey, average teacher salaries range from high districts of Boulder ($72,951) and Cherry Creek ($69,110) to low districts Agate ($29,748) and Woodlin ($26,649).

Coloradans can expect bills to be introduced aimed at mitigating the teacher shortages in rural communities as well as hard to serve urban districts. Concepts include creating a teacher loan forgiveness program, an apprenticeship and/or mentorship program, and a teacher cadet program, among others.

Outside of teacher shortages, the legislature will likely debate suicide prevention for school students. Such legislation will include grant programs to train school personnel, and a recommendation of model suicide prevention policies.

K-12 Funding
There are two groups currently examining the state’s education system. In 2017, the legislature established a two-year Interim Committee on School Finance. It is unknown if they will have any recommendations for the 2018 session. Also, the Governor’s Office reestablished the Education Leadership Council to review coordination between K-12 and higher education.

Outside of the ongoing discussions in the interim committees, the School Finance Act, both the allocation of funds between districts and the amount of funds to be allocated, will be a critical discussion. To many, the 1994 School Finance Act is outdated; however, modifying or updating the Act is difficult without creating “winners and losers” among the districts. The Governor’s budget request will fully fund inflation plus enrollment and “buy down” the Budget Stabilization Factor (formerly the Negative Factor) by an additional $70 million. The average change in funding for districts is 5.2 percent, though this will vary widely based on enrollment changes.

Finally, the question: does K-12 education need more money? In the November 2017 election, voters said a resounding yes – two thirds of the mill levy override elections passed at the local level. Those passing elections include Greeley (its first ever), some larger districts, (Colorado Springs D-11 and Mesa) and many smaller districts. Six districts that went to the voters failed. Herein lies the larger policy question about mill levy overrides – while obtaining local voter support is impressive, does the increasing reliance of overrides in selected districts indicate an imbalance of resources?

HIGHER EDUCATION

While there are some policy issues associated with the state’s system of public higher education, the most important issue is state support and the related issue of tuition policy. For the past few years, the Department of Higher Education and the Colorado Commission on Higher Education have submitted budget requests that emphasize the relationship between state support for higher education and tuition rates. In his budget request for FY 2018-19, the Governor requested an 8.5 percent increase in state General Fund support for the governing boards. With this level of state support, the Governor’s Office estimates that resident tuition increases can average approximately 3.0 percent.

Public institutions of higher education generally have access to two types of unrestricted funds: tuition and state support. In Colorado, as in many states, the level of state support varies based on economic conditions, though Colorado’s state support has declined in both real and inflation adjusted levels over the past ten years.

The issues of tuition and student debt have become national issues and raise some related policy questions: What is the role of the legislature versus the governing boards at setting tuition rates? Can the legislature establish a consistent tuition policy that recognizes all the unique attributes of Colorado’s state system of higher education including technical colleges, rural community colleges, rural four-year schools, and major research institutions? What is the relationship between tuition rates and student debt? Do tuition rates impact the types of students who participate in post-secondary education? Should any tuition caps be linked to percentage increases or dollar caps?

The Governor’s Office also submitted two higher education policy initiatives:

  • Emergency Completion and Retention Grant Program: This initiative includes a request of $1.5 million General Fund and is to be utilized to assist students who have “small unexpected financial events that…prevent them from retaining or graduating”.
  • Occupational Credential Capacity Grant Program: This initiative contains a request for $5.0 million General Fund. The intent is to increase the number of high-demand post-secondary certificate credentials, including concurrent enrollment students, Department of Corrections inmates, and other post-secondary students. This initiative involves a statutory change.

LOCAL GOVERNMENT

The 2018 session will see numerous pieces of legislation around attainable and workforce housing. With a large influx of people moving into the state, the rapid growth of property values, and the increasing real estate market, young adults and families are being priced out of markets. This is not an urban only issue; we are seeing the same trend in Colorado’s mountain and resort communities and rural areas of the state.

We anticipate legislation again focused on renters’ rights legislation to set new parameters around eviction processes including extending the allowable time period for paying back rents before being evicted. Strategies to create an affordable housing fund to facilitate affordable development and expanded affordable inventory vary, but concepts anticipated in this year’s legislation include implementing a document recording fee, a documentary filing fee, a real estate transfer tax, and an extension of a sales/use tax exemption for affordable developers.

For three years in a row, we have seen an attempt to allow storage units that have been condo-minimized to classify as residential property – this has been known as the “man cave” bill. It is not clear if the proponents will bring this legislation back. The Colorado Assessors’ Association is supporting legislation to allow for leniency if a property owner who intends to rebuild or locate a residential improvement on their property, but for certain circumstances has not been able to pour a foundation by January 1 of that year, to continue being assessed at the residential rate.

There will be a focus on broadband this session as well. The Governor has made it a priority to funnel more dollars towards areas of the state that have little to no Internet access. We will see a proposal to shift monies in the High Cost Support Mechanism Fund into a broadband-specific fund. Also, we will see a push from private carriers to prohibit cross-subsidization on the part of local governments, which may limit broadband access in areas of the state whose only option for Internet service is provided by the government.

The Colorado Civil Rights Commission is also up for sunset review with recommendations to extend the Civil Rights Division (CCRD) and Commission for nine years until 2027. The Commission is tasked with investigating discriminatory practices, making recommendations for policies, rules, and regulations aimed at addressing illegal discrimination, and reviewing appeals of CCRD discrimination cases.

PERA

Colorado’s Public Employee Retirement Association (PERA) provides a defined benefit retirement program for state employees, teachers, and certain local governments and special districts. PERA members are not covered by Social Security.

The contribution rates for each category (state, school, local government) may differ slightly, but in CY 2016 state employees contributed 8.0 percent of their salaries to PERA. Their employers contributed a base contribution of 10.15 percent. Two other employer contributions were authorized in recent years: the Amortization Equalization Disbursement (AED) and Supplemental Amortization Equalization Disbursement (SAED) are additional employer contributions of 4.6 and 4.5 percent, bringing the total employer contribution to 19.25 percent. The SAED is intended to be in lieu of salary increases.

Changes to the state’s Public Employees Retirement Association are introduced each year; however, broad bipartisan support is necessary for any substantive bill impacting PERA to pass.

PERA Proposal
The PERA Board adopted two policy changes in the last year that changed the projected long-term financial stability of the plan. First, they adopted a lower anticipated rate of return (7.25 percent) against which to consider their long-term investment performance. They also adopted new mortality tables to reflect increased life spans. With these two changes, the state’s retirement system is projected to have a $32 billion gap over the next 30 years. The system is not anticipated to run out of money in the short term, but in order to assure promised benefits are available in future years, the PERA Board made a series of legislative policy recommendations for 2018. These include:

Benefit Modifications

  • Increase eligibility for full retirement benefits for future employees.
  • Lower CPI for retirement payments from a cap of 2.0 percent to 1.5 percent.

Increase in Contributions

  • Increase current member contributions by 3.0 percent.
  • Increase future employee contributions by 2.0 percent.
  • Increase employer (taxpayer) contributions by 2.0 percent.

Other Changes

  • Modify calculation of PERA includable salary from net pay to gross pay.
  • Change the definition for part-time employees.

Governor Hickenlooper’s Proposal
In his budget request, Governor Hickenlooper endorsed the PERA plan – but with two significant changes. The Governor doesn’t support any increased rates for employers, and the Governor reduced the CPI increase for retirees from 2.0 percent to 1.25 percent.

Questions About PERA

  • The legislature debated and passed a PERA fix in 2010. Many people were under the impression that SB 10-001 would assure PERA’s solvency for the future. We have not experienced a market crash since 2010, how can PERA say they need additional money or reduced benefits?
  • Even with PERA lowering the 30-year rate of return from 7.5 to 7.25 percent, is this realistic?
  • What if PERA continues to earn less than 7.25 percent rate of return in each of the next few years? At what point should the state make policy changes to PERA to recognize the “new normal?”
  • Does the PERA Board have the right expertise – and level of independence – to manage this large entity?
  • What is the role of the legislature in providing PERA oversight? Are once a year presentations to the three oversight committees (JBC, Finance, Audit) sufficient?
  • Should the legislature consider more substantive changes to the state’s retirement program, such as a salary cap on PERA benefits, switch to a partial defined contribution plan for new employees, or other more substantive change to PERA?

TRANSPORTATION

After the failed attempt to pass HB17-1242, which would have referred to the voters a state sales tax increase to fund transportation projects throughout the state, it is unlikely we will see a similar initiative with strong, bipartisan support. Last year we saw a variety of bills dealing with transportation ranging from creating a new funding stream, prioritizing north I-25 projects, and authorizing transportation bonding. Given little action on this subject last session, it is possible we will still see attempts at funding transportation. We do know that the Greater Denver Metro Chamber of Commerce will spearhead an effort to place on the ballot a question to the voters to raise the state sales tax. The details of the initiative will be developed over the next several months.

As mentioned before, we will see a focus this year on safe driving. Legislation will be introduced to limit distracted driving – banning the use of mobile electronic devices while driving (except in emergency situations) and by creating stronger penalties for not wearing a seat belt (make it a primary offense for not wearing a seat belt).

2018 ELECTIONS AND BALLOT MEASURES
The 2018 Governor’s race will be the next area of political focus. For the first time in decades, Colorado will see open, contested primaries in both parties. This will also be the first election in which unaffiliated voters can choose to participate in primary elections. There are many questions surrounding this – how will unaffiliated voters vote? Will they participate in large numbers? How will the parties court these voters?

There are multiple Republican, Democrat, and unaffiliated individuals who have announced their candidacy for Governor. With no runoff required, candidates could win their party primary nominations with 20 to 25 percent of voter preference.

All statewide races will be contested in 2018 – Attorney General, Treasurer, and Secretary of State. All but the Secretary of State seat will have primaries.

Certainly, control of both legislative chambers will be highly contested in 2018. The Senate is the most vulnerable chamber to switching party control – the Republicans currently have a majority of 18 to 16. All eyes will be on a handful of competitive Senate races in the state. According to Legislative Council, six House members and eight Senate members will be term limited in 2018. Those subject to term limits include the Speaker of the House, the President of the Senate, and four of the six members of the Joint Budget Committee. With term limits and seats changing hands, we could see upwards of twenty new members for the 2019 session.

Ballot Measures
With the passage of the Raise the Bar ballot measure (Amendment 71) in 2016, and its geographic signature requirements, Coloradans should see shorter ballots in the future. Realistically, only issues with broad-based support throughout the state can reach the ballot – we would put education and transportation in this category.

Looking towards the 2018 election cycle, a number of measures have already been submitted:

  • Candidate Disclosure of Income Tax Returns
  • Transportation Funding
  • Limit on Local Housing Growth
  • Prohibit the Sale of Smart Phones to Minors Under 13
  • Increase Funding for K-12 Educationp

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