Colorado Senate Votes to 500 million dollars from the Worker

The Colorado Senate has backed two measures aimed at taking $500 million from a state-created workers compensation insurance company to balance next year's budget over the objections of Pinnacol Assurance and the businesses that rely on it.

The bills, along with the overall $18.9 billion budget, now head to the House for consideration.

Despite the battle over the bills -- including a Pinnacol-organized rally at the Capitol before the vote -- company CEO Ken Ross and Gov. Bill Ritter said the two sides are still talking about other possible ways to avoid cutting higher education by $300 million.

Ritter said in a statement that such a large cut to state colleges and universities can't be allowed because it would cause the state to forfeit the entire $760 million it is getting under the federal stimulus package to restore budget cuts. That's because a $300 million hit would drop higher education below 2005 spending levels in violation of the stimulus act.

Ritter must spend most of the $760 million in stimulus money under his control on higher education and kindergarten through 12th grade schools. He plans to spend $150 million on higher education in the next fiscal year, $50 million more than originally planned, but he won't be able to if the $300 million cut stands. Ritter said he would continue to work with the Legislature's Joint Budget Committee on the issue.

"This includes ongoing discussions with Pinnacol Assurance and exploring other ways to close the remaining $300 million budget gap," he said.

Both Ritter and Ross declined to give details about the other alternatives but Ross has previously said it could involve an "investment vehicle" used by Pinnacol.

"I live here. I don't want to see higher education hurt in this state," said Ross, whose daughter is a student at the University of Colorado in Boulder.

Ross estimated an April 13 rally, including T-shirts and signs, cost several thousand dollars.

In between the initial Senate vote in favor of the Pinnacol bills and the recent vote, state Attorney General John Suthers ruled that Pinnacol's $2 billion in assets don't belong to the government and it would be unconstitutional to take them.

One of the Pinnacol measures (Senate Bill 273) tells the company to turn over $500 million from its approximately $700 million surplus. The other (Senate Bill 273) takes control of its money away from its board which would help the state defend its move against a legal challenge by Pinnacol. It would also require the company to use the remainder of its surplus to issue refunds to businesses with fewer than 50 employees.

Senate Majority Leader Brandon Shaffer, D-Longmont, argued the company has its roots in a state fund started in 1915 and that it was created as a political subdivision of the state using money from the state treasury. He said if the company were subject to taxes it would have to pay about $40 million a year.

"It pays no taxes and its massive surplus can be better spent on higher education," Shaffer said.

All but one Republican voted against the Pinnacol bills, calling them a move that would "make (Venezuelan President) Hugo Chavez blush." Three Democrats voted against the restructuring bill -- Sen. Paula Sandoval of Denver, Sen. Dan Gibbs of Silverthorne and Sen. Gail Schwartz of Snowmass Village. Gibbs and Schwartz also voted against the bill that would force Pinnacol to pay $500 million.

The Senate also approved other budget-balancing bills, including one that would suspend a $91 million property tax break for senior citizens.

Despite the largely partisan fight over the budget, 28 Republicans and Democrats joined to back a measure declaring a fiscal emergency, which would allow lawmakers to redirect $20 million raised by a tobacco tax approved by voters in 2004. That money would be used to pay for health care rather than smoking cessation and education programs.

The proposed overall budget, including money from fees and the federal government, would increase by 1.5 percent to $18.9 billion for the budget year that begins July 1. But the portion of the state budget paid for largely with tax dollars is expected to decline by half a percent to $7.5 billion.

Some parts of the budget, including prisons and kindergarten through 12th grade education, are increasing, but the Joint Budget Committee has proposed cutting $300 million from higher education because of an expected drop in tax revenue due to the recession.

Under the budget package, $300 million of the Pinnacol money would be used to reverse the higher education cut and the rest would be held in reserve in case the economy, and tax revenues, worsen.