Introduction

The 2022 Colorado legislative session ended on May 11th after a frantic final week of debates. This year, Colorado’s General Assembly introduced over 650 bills to address long-standing issues, prepare for the upcoming election, and dictate the future of Colorado policy. This report summarizes 2022’s legislative actions and details some of the specific legislation which will impact the free enterprise system in Colorado across the following categories:

• Direct Costs
• Indirect Costs
• State Budget
• TABOR
•  Crime

Direct costs – Amidst rising inflation and a significant surplus of federal and state funds, legislators temporarily reduced taxes and fees, though nearly all those reductions either lowered future TABOR refunds, were paid for by general-fund transfers, or prevented tax increases rather than lowered existing rates.

• This year’s 12 most impactful bills will reduce net taxes and fees by $832 million against the baseline over FY23 and FY24. No 2022 bill imposes a major new tax or fee burden, which contrasts with the 2021 session’s $302 million net tax and fee increase.[i]
• $404 million of those tax and fee reductions are set to be paid for by projected TABOR refunds. This means that taxpayers’ 2024 and 2025 refunds will be reduced by a total of $118 on average. That money will instead benefit those who utilize the temporary tax and fee reductions that the bills implement.

Indirect Costs – Much like in previous years, many bills were passed during the 2022 session which will, in the long run, increase the regulatory burden upon Coloradans and add to the costs of doing business within the state. These bills, like new emissions regulations, new requirements for health insurers, and strict new building codes, will impact many different sectors of the economy and may affect Colorado’s competitiveness in the long run.

State Budget – This year, the legislature passed the biggest budget in state history; total government spending is set to increase by $1.35 billion to $38.1 billion—a level $7.5 billion higher than it was in FY19. Additional funding appropriated to the Department of Health Care Policy and Financing accounts for two thirds of the growth of General Fund spending. Housing priorities, too, will receive historic levels of funding.

TABOR - The latest economic and fiscal projections from the Colorado Legislative Council Staff indicate that more than $3.6 billion dollars will be refunded to Coloradans between FY22 and FY23 due to revenue growth in excess of the TABOR spending limits. During the 2022 session, legislators responded to this by drawing upon some of the surplus to fund a property tax cut and passing a bill which will send $400 of the excess to eligible Colorado income tax filers in advance of the scheduled 2023 refund.

Crime – In December of 2021, CSI’s Criminal Justice Fellows reported a significant increase in crime rate and identified several concerning trends affecting our criminal justice system. In response to these trends, crime was a top legislative priority during the 2022 session. Among the measures they passed are a heightened criminalization of fentanyl, new crime-prevention programs, and crackdowns on illicit business practices.

 

CSI Research: 2022 Session

CSI issued several reports related to key policy debates taken up during the 2022 legislative session. Links to those reports, related bill outcomes and key findings are provided below. [table id=7 /] Summary of Major Policy Areas Unemployment insurance:

• Background: Due to the influence of the COVID-19 pandemic and the state government’s policy responses, Colorado’s unemployment levels spiked in early 2020 and caused the state’s Unemployment Insurance Trust Fund to become deeply insolvent. The question before legislators during the 2022 session was whether to address this problem by replenishing the UI Trust Fund, and, if so, by how much.
• Legislative outcome summary: Two 2022 bills proposed to transfer money to the Trust Fund.
  • SB22-066 proposed to transfer $1.1 billion to the fund. It was postponed indefinitely before either chamber could vote on it.
  • SB22-234 proposed to transfer $600 million to the fund and increase some types of unemployment benefits permanently. It passed just before the end of the session.
• CSI key findings:
  • Colorado is one of only 9 states with an unemployment insurance program in debt to the federal government and has the 6th-highest debt among those states.
  • Between 2023 and 2026, Colorado employers stand to pay $4.2 billion more in state and federal UI taxes than they would at a pre-pandemic baseline.
  • SB22-234 would save employers $845 million by 2026.

PERA:

• Background: PERA’s current unfunded liability is $31 billion. Despite the passage of SB18-200 in 2018 which was intended to put PERA back on a 30-year amortization period, PERA’s declining funding status has already triggered 2 of the allowable 4 automatic increases in employee and employer contribution rates and reductions in retiree cost of living adjustments. PERA has reported that the legislative decision to not make the $225 million direct distribution to PERA on July 1, 2020 increased the unfunded liability by $993 million across all divisions.
• Legislative outcome summary: HB22-1029 proposed to transfer $380 million to PERA to make up for the missed payment and lost investment revenue in 2020. It passed on the last day of the session.
• CSI key findings:
  • The cost to Colorado schools to pay down the unfunded liability is $900 million annually or $16,000 per teacher.
  • The triggering of the contribution rate increases for employees and employers following SB18-200 cost an additional $180 million annually.

Fentanyl:

• Background: Although the opioid crisis has been an ongoing public health issue since the late 1990s, Colorado’s policymakers, law enforcement, district attorneys, addiction rehab advocates, and researchers have recently narrowed their focus on Schedule II controlled substances and more specifically, fentanyl.
• Legislative outcome summary: HB22-1326 proposed to increase potential sentences for the distribution, manufacture, dispensation, and sale of fentanyl and enhance education, prevention, and addiction treatment. It passed on the final day of session.
• CSI key findings:
  • According to the Colorado Department of Public Health and Environment, there were 222 fentanyl-related deaths in 2019 and 540—a 143% increase—in 2020. By 2021, that number increased to more than 800 (an increase of 260% from 2019).
  • The lifetime costs of fentanyl related overdose deaths in 2021 was $11.1B.

Rent control:

• Background: HB22-1287 proposes a multitude of changes to Colorado laws pertaining to mobile home parks including the “Mobile Home Park Act” and the “Mobile Home Park Act Dispute Resolution and Enforcement Program.”  The changes address four basic themes: 1) rent control for residents who reside in third-party-owned manufactured home parks, 2) enhanced opportunity for tenants to pursue ownership of the whole park in which they are currently renting sites, 3) increased disclosure and tenant restitution requirements for landlords, and 4) increased tenant rights/protections.
• Legislative outcome summary: HB22-1287 passed on May 10th with the rent control provision removed.
• CSI key findings: CSI determined that the rent control provision would result in a decrease in the supply of mobile home parks.

 

Direct costs

Any legislation which produces a state- or local-government revenue impact causes a direct cost or savings to taxpayers. In the 2022 session, the legislature passed many bills which have such effects, but, unlike the last several sessions, this one will produce a net tax savings over the next two fiscal years.

• 12 bills passed during this session will cause one-year revenue impacts of more than $10,000,000.
• The largest permanent taxpayer cost increase will come from HB22-1414 (Healthy Meals for All Public School Students). Pending voter approval, it will increase taxes by $152 million.
• The largest taxpayer cost decrease will come from SB22-234 (Unemployment Compensation). The state estimates that it will save employers $290 million in state payroll taxes between FY23 and FY24 by preventing rate increases.
  • CSI’s analysis estimates that the bill will save employers a total of $845 million in state and federal payroll taxes by 2026.[ii]
• The net two-year tax and fee impact of the 2022 legislative session is a reduction of $832 million; this will cause a $404 million net TABOR refund reduction, which will reduce the average Colorado taxpayer’s total 2024 and 2025 refund by $118.
• The two-year tax and fee cuts alone total $1.018 billion. However, more than $896 million (88%) of the tax cuts either reduce future TABOR refunds, are offset by the General Fund, or prevent scheduled tax increases, rather than reduce costs from levels being paid today.
  • $423 million is paid for by future TABOR refund reductions,
  • $183 million of the short-term property tax cuts impacting local governments are offset by General Fund dollars, and
  • $290 million represents the avoidance of an increase in Colorado employers’ state payroll taxes as a result of replenishing the Unemployment Insurance Trust Fund.

Below is a list of the 12 largest direct costs that were passed this year. The rightmost column shows the amount that each bill’s fiscal note indicates is paid for by projected TABOR surpluses that otherwise would have been refunded to taxpayers in different manners. [table id=8 /] [table id=9 /] Selected bill summaries:

• SB22-234: Unemployment Compensation
  • “The bill makes several changes to the Employment Security Act, including suspending the solvency surcharge, expanding unemployment benefits, and creating two new cash funds. The bill makes a one-time transfer of $600 million to the newly created Title XII repayment fund.”
  • The $600 million transfer will bolster the Unemployment Insurance Trust Fund and reduce employers’ state and federal unemployment payroll tax rates over the coming years.
• SB22-238: 2023 and 2024 Property Tax
  • “The bill reduces property tax assessment rates and taxable valuations for the 2023 and 2024 tax years, and requires that the state government reimburse local governments for a portion of the resulting property tax revenue reductions.”
  • Coloradans will temporarily pay lower property taxes at the expense of an option to vote on a permanent tax break this November.
• SB22-119: Conservation Easement Tax Credit
  • “The bill makes changes to the Conservation Easement Tax Credit to allow taxpayers to reclaim disallowed credits from tax years 2000 through 2013”
  • This applies to landowners whose conservation easement tax credit claims were denied by the Department of Revenue between the stated years.
• HB22-1351: Temporarily Reduce Road User Charges
  • “Senate Bill 21-260 created phased-in road usage fees on gasoline and diesel fuel, and temporarily reduced the amount of the road safety surcharge, which is imposed annually when a motor vehicle is registered. This bill delays the start of the phased-in road usage fees from July 1, 2022, to April 1, 2023, and further reduces the amount of road safety surcharge for registrations in 2023.”
• HB22-1414: Healthy Meals for All Public School Students
  • “Conditional upon approval at the November 2022 election, the bill creates the Healthy School Meals for All program to provide reimbursement for free meals to all students, offer local food purchasing grants and increase employee wages.”

 

Indirect costs

Some bills passed during the 2022 session will increase costs for Coloradans without raising taxes or fees; most of these are strictly regulatory measures which cause no direct fiscal impacts. The direct savings coming to Coloradans as a result of this year’s legislation belies some potentially very high indirect costs of new regulations, especially health care and environmental ones. [table id=10 /] Bill summaries:

• HB22-1122: Pharmacy Benefit Manager Prohibited Practices
  • “This bill requires pharmacy benefit managers to reimburse pharmacies at certain rates, and also creates the 340B Prescription Drug Program Anti-Discrimination Act.”
  • A restriction upon the values of voluntarily negotiated contracts between pharmacy benefit managers and pharmacies could increase consumers’ drug prices and health insurance premiums.
• HB22-1244: Public Protections from Toxic Air Contaminants
  • “The bill creates a new program in the Department of Public Health and Environment to regulate toxic air contaminants based on adverse health effects. Toxic air contaminants are defined in the bill as hazardous air pollutants, covered air toxics [sic], and any other air pollutant designated by the Air Quality Control Commission.”
  • This bill gives a regulatory agency unchecked authority to limit emissions based upon undefined standards of health-hazardousness. This will increase the operating costs of every entity affected by these rules.
• HB22-1287: Protections for Mobile Home Park Residents
  • “The bill...prohibits a landlord from raising rent on a mobile home park lot if the landlord’s registration is not in good standing. The bill also extends many of the protections afforded to mobile home owners to non-owner residents, and permits residents, local governments, and nonprofit organizations to file complaints with DREP beginning July 1, 2024.”
  • A rent control provision, by far the most impactful aspect of the bill, was removed before passage. Still, the bill imposes regulations which will increase the costs of operating mobile home parks.
• HB22-1325: Primary Care Alternative Payment Models
  • “The bill requires the Division of Insurance within the Department of Regulatory Agencies, in coordination with the Department of Health Care Policy and Financing, the Department of Personnel and Administration and the representatives of the Primary Care Payment Reform Collaborative, as applicable, to create, implement, and evaluate standards, and promulgate rules around, the use of valued-based payments in the health insurance system.”
• HB22-1355: Producer Responsibility Program for Recycling
  • “The bill establishes a producer responsibility recycling program to provide convenient and equitable access to recycling services for covered materials to achieve recycling, collection, and postconsumer-recycled-content rate goals.”
• HB22-1362: Building Greenhouse Gas Emissions
  • “The bill requires the Colorado Energy Office (CEO) to identify for adoption three model codes for local governments and certain state agencies to adopt and enforce. It also creates two grant programs in the CEO to provide funding for state and local governments, utilities, non-profit organizations, and housing developers to purchase high-efficiency electric equipment.”
  • The building codes proposed to be adopted as a result of this bill are extremely expensive for homebuilders to uphold and will significantly increase already exorbitant housing prices.
• HB22-1370: Coverage Requirements for Health-care Products
  • “Beginning January 1, 2023, the bill requires that health insurance carriers that offer an individual or small group health benefit plan to Coloradans to offer at least 25 percent of its plans on the Colorado Health Benefit Exchange and at least 25 percent of its plans not on the exchange in each bronze, silver, gold, and platinum benefit levels in each service area as copayment-only payment structures for all prescription drug cost tiers.”
  • This requirement, especially in advance of the Colorado Option’s onset, will put even more cost pressure upon Colorado’s healthcare industry.
• SB22-230: Collective Bargaining for Counties
  • “The bill grants county employees the right to organize and engage in the collective bargaining process, as well as the right to refrain from these activities.”
• HB22-1006: Child Care Center Property Tax Exemption
  • “Under the state constitution, property used solely and exclusively for charitable purposes is exempt from property tax, unless otherwise provided by law. Under this constitutional authority, there is currently a statutory exemption for property used as an integral part of a childcare center. This bill expands [the] property tax exemption to include property that is rented or leased and used as an integral part of a childcare center.”
• SB22-124: SALT Parity Act
  • “Beginning in tax year 2018, the bill allows S-corporations and partnerships (pass-through businesses) to retroactively elect to pay their state income tax at the entity level, rather than the individual level. Additionally, the bill repeals the state income tax deduction for electing pass-through owners created by HB 21-1327, and replaces this deduction with a refundable tax credit equal to the electing pass-through business owner’s distributive share of the state income tax imposed on the electing pass-through entity.”

 

FY23 Budget

Colorado’s FY23 state budget, known by insiders as the “long bill,” passed and was sent to Governor Polis for approval on April 25th.

• Total state spending is expected to increase by $1.35 billion, or 3.7%, in the FY23 budget. Historic state tax revenue allowed the legislature to increase General Fund spending by $1.55 billion, or 12.7%, while cash funds and federal funds decreased by $360 million.
  • The FY23 total operating budget is set to be $7.5 billion larger than the FY19 budget. This is a 25% increase from the budget passed prior to the pandemic; General Fund spending is set to be $2.3 billion, or 20%, higher.
• Because projected revenue growth will be in excess of the TABOR expenditure growth limits, TABOR refunds are expected to be $2 billion in the current FY22 budget and $1.56 billion in the FY23 budget.
• 2 out of every 3 new dollars in General Fund spending, or $1.02 billion, will go to the Colorado Department of Health Care Policy and Financing, due to the ending of lower state Medicaid match rates.
• The FY23 budget raises state-government FTE (full-time equivalent) employment by 1.3%—a 52% increase from the annual growth amount originally requested by the governor.
• The FY23 budget will make historic levels of spending related to housing, made possible by federal COVID-19 stimulus. However, important questions remain about the extent to which it will have meaningful impact on h­ousing supply.

 

TABOR

The latest economic and fiscal projections from the Colorado Legislative Council Staff indicate that more than $3.6 billion dollars will be refunded to Coloradans between FY22 and FY23 due to revenue growth in excess of the TABOR spending limits. Many bills passed this session will impact the amounts of revenue that the state receives, and thus the amounts refunded to taxpayers in future years (as featured in the “Direct Costs” section), but two will change how revenue above the TABOR cap is spent. Though the methods for distributing TABOR refunds have been established in law since well before the 2022 session, these new bills will affect how Coloradans receive their TABOR refunds, when they receive them, and how much they get over the next several fiscal years. [table id=11 /] Bill summaries:

• SB22-233: TABOR Refund Mechanism for FY 2021-22 Only
  • “The bill creates a temporary TABOR refund mechanism to refund a portion of the state’s projected FY 2021-22 TABOR surplus. The new refund mechanism refunds $400 to each eligible taxpayer filing singly, and $800 to each eligible taxpayer filing jointly.”
  • The refund payments will draw from the government’s $2 billion TABOR surplus which would otherwise be refunded to taxpayers in full by existing means.
• SB22-238: 2023 and 2024 Property Tax
  • “The bill reduces property tax assessment rates and taxable valuations for the 2023 and 2024 tax years, and requires that the state government reimburse local governments for a portion of the resulting property tax revenue reductions.”
  • $225 million of the bill’s property tax relief will come out of the 2024 TABOR refund; this will reduce the average Coloradan’s share of that refund by about $55.

 

Crime

Since December, CSI has released several reports identifying Colorado’s recent crime spike and quantifying its costs. In the 2022 legislative session, lawmakers passed dozens of bills meant to help address that problem. Below is a list of several noteworthy crime bills that passed during this year’s session. [table id=12 /] Selected Bill Summaries:

• HB22-1326: Fentanyl Accountability and Prevention
  • “The bill modifies fentanyl-related criminal offenses, updates practices around dispensing opiate antagonists, creates an education campaign, broadens the scope of the Harm Reduction Grant Program, and makes requirements for continuity of care for individuals in the criminal justice system with substance use disorder.”
• SB22-001: Crime Prevention through Safer Streets
  • “The bill creates the Crime Prevention Through Safer Streets Grant Program in the Department of Public Safety (DPS). The grant program is intended to assist the DPS and local governments to evaluate and design safer streets and neighborhood models that discourage crime.”
• SB22-009: Recertification and Theft of Catalytic Converters
  • “The bill permits an individual to temporarily drive a car without a catalytic converter if it has been stolen, the theft has been reported to law enforcement, and the vehicle’s owner has ordered a replacement.... The bill clarifies that a catalytic converter is [a] major component motor vehicle part for the purposes of establishing the crime of operating a chop shop. The penalty for selling, transferring, or transporting an illicit part under this provision is a class 5 felony.”
• HB22-1099: Online Marketplaces and Third-party Sellers
  • “The bill outlines mandatory disclosures by third-party sellers utilizing online marketplaces, specifies enforcement authority, and states that failure to disclose the required information is a deceptive trade practice.”

© 2022 Common Sense Institute

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[i] The Steep Price Tag of the 2021 Legislative Session: | Common Sense Institute (commonsenseinstituteco.org)

[ii] Bill Spotlight: SB22-234 Unemployment Compensation | Common Sense Institute (commonsenseinstituteco.org)