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April 15, 2009 08:27 PM UTC

Pinnacol Funds Bill Dies, Budget Plan In Chaos

  • 56 Comments
  • by: Colorado Pols

UPDATE: Governor Bill Ritter’s statement after the jump. Excerpt:

One idea to help ease the remaining $300 million budget shortfall was to tap into surpluses held by Pinnacol Assurance, the state’s largest workers’ compensation insurance company. Members of my staff and I have tried in good faith to reach an agreement with Pinnacol.

“However, there remain too many unresolved issues and questions for Colorado citizens and Pinnacol shareholders and customers. Therefore, with a budget deadline looming, I have halted negotiations with Pinnacol. Together with my budget office, the JBC and legislative leadership, we are now focusing on a number of other steps to erase the shortfall caused by the economic downturn, without devastating cuts to higher education.”

As the Denver Post reports:

The plan to transfer $500 million from Pinnacol Assurance, a state-chartered workers’ compensation fund, fell through today as lawmakers yanked the bill authorizing the raid.

Instead of using money from Pinnacol to balance the budget to avoid additional cuts to higher education, lawmakers now say they will look at finding more money in cash funds, possibly eliminating some tax exemptions and tax credits and making more cuts. One scenario being floated calls for about $210 million in revenue measures and about $94 million in cuts.

The demise of Senate Bill 273 came after a meeting between Gov. Bill Ritter’s office and legislative leaders this morning in which the Democratic governor’s administration said the Pinnacol transfer was not an option.

“We talked about where we go from here,” said Rep. Jack Pommer, D-Boulder, the chairman of the House Appropriations Committee, which was to consider the bill today. “I think we’ve all come to the conclusion that it (the Pinnacol raid) would be risky to try to balance to the $300 million (hole).”

We’re not sure what’s going on here, but we’re comforted by the fact that very few others know, either. The news yesterday was all about how the bill passed House Appropriations 9-3, and how Pinnacol was drawing heavy fire for lavish pay and costly furnishings at its headquarters.

And something…happened. Involving the Governor. We’re awaiting an explanation, and it had better be good. We enjoy a good partisan chess game like anybody, but we would really prefer not to screw the entire budget process just to deny Josh Penry another bogus talking point.

Developing, very tense discussions with the Joint Budget Committee underway as of this writing.

FOR IMMEDIATE RELEASE

WEDNESDAY, APRIL 15, 2009

CONTACT

Evan Dreyer, 720.350.8370, evan.dreyer@state.co.us

GOV. RITTER STATEMENT ON THE BUDGET

Gov. Bill Ritter issued the following statement today regarding the state budget and Pinnacol Assurance:

“Along with the Joint Budget Committee and bipartisan members of the General Assembly, I have worked extremely hard these past few months to balance the budget to protect as much as possible key priorities like education, transportation and health care, and help position Colorado for a strong recovery.  I look forward to continuing to partner with them as we finalize additional cuts and other balancing strategies.

“One idea to help ease the remaining $300 million budget shortfall was to tap into surpluses held by Pinnacol Assurance, the state’s largest workers’ compensation insurance company. Members of my staff and I have tried in good faith to reach an agreement with Pinnacol.

“However, there remain too many unresolved issues and questions for Colorado citizens and Pinnacol shareholders and customers. Therefore, with a budget deadline looming, I have halted negotiations with Pinnacol. Together with my budget office, the JBC and legislative leadership, we are now focusing on a number of other steps to erase the shortfall caused by the economic downturn, without devastating cuts to higher education.

“For the long-term, I believe we must examine Pinnacol’s legal and financial structure, its unique status as a non-taxable, state-created entity, and all aspects of the legislation that governs Pinnacol. This includes a financial and performance audit, an actuarial analysis of Pinnacol’s value and surplus, and a possible refund to its policy holders.

“I appreciate and applaud Senate Majority Leader Brandon Shaffer and the other bill sponsors for raising these important policy and fiscal issues.

Majority Leader Shaffer said: “Extraordinary times require us to make tough decisions. With the shortage of revenues and a severe recession, none of our budget choices are easy, and every decision draws support and criticism. What’s important is that funding for higher education is preserved. All of us pray that we steer the wisest course for a prosperous Colorado.”

# # #

Comments

56 thoughts on “Pinnacol Funds Bill Dies, Budget Plan In Chaos

      1. Under the rules of the federal stimulus, Colorado would have lost ALL of its state stabilization fund, about $760 million, if higher ed were cut below 2005-06 levels. It’s an all or nothing rule.

  1. Groff/Penry: 1.  Ritter, JBC and CO Pols: 0.

    It’s hard to believe that Democrats under the dome are — gasp — thinking about cutting budgets instead of ripping off business!  Kudos for Peter Groff (lemming in chief?) for standing up to Ritter and the JBC on this issue.  Time will show that he and Penry were right.

    I’m just hoping that my workers comp rates won’t go up now.  

    1. The 3% across the board doesn’t get us where we need to be.

      If CO were to cut Pinnacol loose- i.e., privatize it – and you paid market rates, your premiums would go up.

      If CO instead decides to legislate the reserve balance (not part of the current structure)  for Pinnacol and guarantee claims if reserves are inadequate (which I think is how it works now)  your premium should stay the same, which is much lower than market rates.

      1. You’re right…3% cuts with three weeks left in the session makes it very difficult.  If Governor Ritter and his budget people had been thinking ahead…they’d have started the cuts earlier.  With every day and week that passes the cuts will have to be deeper to balance the budget.

        Of course the Governor and the Legislature have spent a lot of irreplaceable time looking under every rock they can find to backfill the money.  Now they’ve run out of places to look and fees to raise.  Bill Ritter can barely balance his own checkbook.  It’s a bit much to ask him to balance the state’s.

        Is Bill Ritter a Josh Penry “Lemming”?

        1. Governor Ritter began massive budget cuts in April 2008 for the budget that began on July 1, 2008, but the decline in revenues has been far greater than anyone predicted. The Governor continued cutting the budget late last year and early this year. He has been on top of this all along.

          1. Colorado government employment growth in the past 2 or 3 years is among the highest in the nation, Republican36.  Medicaid and TANF spending are growing very, very fast.  Maybe he’s cutting something, but he hasn’t tried very hard.

            1. It is a federal program with federal matching funds. The federal government controls it.

              Are you denying he made the cuts I mentioned in my other post in this thread.

              Please site evidence that state employment in Colorado has risen more than almost any other state in the Union over the last two or three years. In stead of mere assertions, please site to the evidence.  

              1. KK made the accusation that the number of state employees has risen significantly under Gov. Ritter.  The graph you cite shows the growth of ALL government employment in Colorado (city, county, state & federal) since 1992. Colorado state government has less than 90,000 full-time and part-time employees. The graph does not indicate the growth of employees under Gov. Ritter and it certainly is devoid of any comparison between Colorado and other states that KK asserted without proof. Next time please cite to relevant data.  

                  1. submitted to the JBC. Rep. Marostica specifically mentioned CDOT and that that department can’t provide a number but it can and has. However, the number today for a given department may vary up or down during the fiscal year becasue of the seasons. Many departments have part time employees who are either needed only during the warm months (state parks) or during the winter months (snow removal). In fact, about 40% of our state employees are part-timers which is an indication of good management by Gov. Ritter and his predecessors. All of them have limited full time employees as much as possible to save money.

                    I don’t disagree with your goal of reducing the overall numbers of state employees and the present budget crisis is a good time to review and determine where cuts can be made. For example, during the Clinton administration, the federal government cut nearly 300,000 jobs by offering employees early retirement and a $25,000 severance package (after taxes about $18,000). Colorado probably doesn’t have any funds for a severance package at the moment but it certainly can look at each department and see where additional cuts can be made.

                     

                    1. Severance packages? I guess it is nice to live in your world. Try going from $68k to $10/hour for a white collar engineering job. That is what is happening out there today.

                      Think of the children that face the tax liability for your GM bailouts; what will their reaction be to your return to a 90% income tax?

                      Thousands of small businesses are facing extinction — the ones that pay all the taxes you and your bigger government crowd feed off of — where is their bailout, where is their severance package?


                    2. and President Obama’s as well. I’m starting to close in on retirement age but I have no plans to retire and fully expect that social security will be downsized out of necessity because we simply can’t afford it at the present levels. Our entire society, both the public and private sectors, have been living off debt financing for a very long time. The way I see it, because of the malfeasance on Wall Street, the value of much of the wealth we had has been destroyed and therefore, we no longer have the ability either in the public sector or private sector to finance a great deal of investment. We don’t have the assets to secure the loans.  

    2. Really, in the worst economic downturn since the Great Depression?  Colorado might actually have to cut some programs.  Unbelievable.  Even more unbelievable that last year we added almost 1,500 state employees to the system, and the current budget adds another 400.  Unemployment in this country is now at what 8.5%?  In Colorado state government it is 0%.

      Now Penry and Groff might finally get the chance to draft a bipartisan solution that makes some sense.

      1. Maybe if we all put on pink fluffy earmuffs and just keep shouting “cut spending” over and over maybe this will all go away.

        Or, maybe government could actually be helpful and start acting in a counter-cyclical fashion to stop our economic tailspin.

        I mean, either way, they both sound reasonable to me.

  2. “We talked about where we go from here,” said Rep. Jack Pommer, D-Boulder, the chairman of the House Appropriations Committee, which was to consider the bill today. “I think we’ve all come to the conclusion that it (the Pinnacol raid) would be risky to try to balance to the $300 million (hole).”

    I believe it was sinking in that transferring the Pinnacol funds would not have gotten through the courts. There’s no doubt there would have been litigation filed immediately after passage and signing by governor.

    As I have said on previous posts, the policy holders would have sued Pinnacol for the money, so Pinnacol would be in the position of defending a complaint against its policyholders. Very likely this could have frozen any transfer of those funds until the resolution of the complaint, and its likely the policy holders would have prevailed in the complaint.

    Pommer’s statement certainly seems an admission that this wasn’t going to legally fly. Ritter came to that conclusion as well, and the Democrats in the legislature were told Ritter would likely veto the bills.

    1. Of course it would have gotten through the courts.  Whatever Ritter wants, he gets from the CO Supremes.  I’d guess that he doesn’t want to go in to 2010 having “balanced” two budgets with absurd measures that have to be challenged in court. It would sure be nice if he’d come out from under his desk and tell his constituents what HIS plan is for balancing the budget.  I’m guessing Brandon Shaffer feels the same way…

      1. Anything Ritter wants, the “CO Supremes” give him.  Undeniable proof of this fact is that one mill levy case in which the court found Ritter’s position more persuasive.  Yep, that one case proves, beyond all doubt, that Ritter owns the supreme court.  Thanks for the alert!

            1. You’ve got three (Mularkey, Martinez and Bender) who never, ever deviate from the Democrat/liberal line.  Rice and Hobbs on occasion get a conscience, but usually side with the far leftists/partisans on the court.  I don’t care who appointed them.  That’s the fact.

              1. …because every case (criminal, civil, water law, worker’s comp, elections, tax, property, torts, etc.) comes to down to a clear demarcation of the “Dems/lib” line.  And in every one of these cases, the justices you mentioned fall on one side.  You should write an article (maybe even a ouija board) about this amazing fact you discovered!

              2. four of the five GOP-appointed justices on the U.S. Supreme Court. You know the ones. . . Roberts, Scalia, Thomas and Alito. They do exactly what they were told.

  3. Let’s start with this point: taking the Pinnacol surplus was a bad idea, both legally and politically.

    I can’t be sure it would be unconstitutional, since Pinnacol is a state-chartered, quasi-governmental entity that pays no taxes. But there’s little doubt litigation would have ensued and so not much certainty about whether the general fund would get that money transferred into it was apparent.

    Politically, this idea was a really dumb one. The Pinnacol surpluses are not tax dollars. They are dollars paid to Pinnacol by private businesses for workers compensation insurance. I don’t see how, regardless of Pinnacol’s quasi-governmental status, that’s a fair approach. Dems would have paid a huge price next year if they would have done this.

    The other problem was that no one is talking about the kind of across the board cuts, furloughs, salary freezes and expanded hiring freezes that would have been necessary to make the case that the Pinnacol move was a “last resort.”

    The Dems are right that higher ed can’t take a cut of that magnitude and remain in its current form. But why isn’t there discussion of some restructuring? For example, consolidate the community college system. Or eliminate unnecessary academic programs at CU and CSU. Cut back on subsidies to athletic programs. Cut salaries paid to athletic coaches. Sell university assets, such as unused land.

    And there’s no reason why the state shouldn’t be talking about eliminating dated and marginally necessary agencies and programs.

    The public needs to see that the economic blow is being handled fairly. I’m not saying cut bedrock programs that assure public safety, a basic safety net, etc. But it’s hard to make a serious argument that all the fat is out of Colorado’s state government.

    Since the Dems didn’t make that case, the Pinnacol plan’s problems were magnified.

    As for Gov. Ritter, I’m not sure I agree that he’s been absent from the debate. He’s met with the Pinnacol people and has been involved behind the scenes in budget discussions. I think his style is to be collaborative with the legislature, not imperial.

    1. The Pinnacol surpluses are not tax dollars

      To the extent that these funds are tax-free because it’s a state agency they are dollars that should have been taxed.  The businesses that paid the premiums probably should have gotten refunds years ago since the Pinnacol surplus is way over the requirements.

      Or eliminate unnecessary academic programs at CU and CSU. Cut back on subsidies to athletic programs. Cut salaries paid to athletic coaches

      You might want to explore the Higher Ed budget.  The universities are almost self-funding for their professors & academics & athletics.  Even if they run a basket-weaving course that pays for itself, there’s no benefit to cutting it if it self-funds.

      The real tragedy is in the Community Colleges that truly do serve the community.  You can consolidate from all over the state and just put all of them on I-25 & I-70. That would be a real disaster for the students and for the local economies where the Community College may be the best employer.

      And there’s no reason why the state shouldn’t be talking about eliminating dated and marginally necessary agencies and programs.

      This is not some big brother “state”. It is insulting to the staff and Legislators who have been working for months to find exactly what you are talking about.  What, where, how much? You tell us where to find that $300 Million.  You can read the budget if you want, have you?

      The JBC and staff have spent person-years combing the budget.  The two R’s are fully on board.   The people on the JBC are in despair and desperation. They don’t have the luxury of uninformed ideological platitudes to help them sleep at night as they cut Meals On Wheels, Pre-School, Aid to the disabled and close prisons and schools.

      1. I didn’t say the state of Colorado has acted like a “big brother,” scary entity. All I’m saying is, as necessary as some programs are, we might not be able to afford them.

        And this isn’t ideological. When the income isn’t there, the expenses have to go down. We can’t run a deficit like they do in DC, after all, so really hard choices simply can’t be avoided.

        I would start by asking each department of the executive branch to cut spending for next fiscal year by 20 percent below this year. In addition, I would ask them all to reduce their workforce by ten percent.

        Then I would impose a four day per month furlough on remaining state employees not engaged in activities critical to public health and safety.

        I’d follow it by asking all senior employees in all agencies and all branches to take a ten percent pay cut, with junior employees to take a three percent cut.

        What agencies could be eliminated?

        Well, let’s start with the duplication of the state higher education department and the education department. Consolidate their functions and get rid of one of them.

        Then let’s turn to the judicial branch.

        Courthouses could be closed on Fridays. Staff at district and county courts could be reduced by three to five percent. Filing fees for litigation of all types could be raised by ten percent. To mitigate that, enact the proposed legislation that assures fairness in the award of costs to prevailing parties.

        Sentencing reform legislation could be enacted, reducing existing very long sentences for non-violent or victimless crimes.

        All general fund appropriations to the department of agriculture could be eliminated, resulting in that agency being exclusively funded by cash funds.

        The Department of Local Affairs could be eliminated, as its functions could likely be absorbed by a couple of staff members added to the governor’s office.

        I do not have the numbers these changes would produce, but I’d be willing to predict they’d take the General Assembly some reasonable distance toward preventing the $300 million higher education spending cut.

        As for Pinnacol, we have a basic disagreement. That some assets of Pinnacol could have been taxed, and weren’t, does not make those assets the property of the state government and does not make them a legitimate target for seizure.

        I think the General Assembly should compel Pinnacol to refund most of those reserves to the businesses that paid excessive premiums. And the legislature should also impose pay caps on Pinnacol managers and executives. But none of that will help with the budget crisis.

        Finally, the legislature needs to pass the Morse bill that would repeal Arveschoug-Bird. It also needs to close most tax exemptions.

        These ideas aren’t ideological. They’re practical.

  4. For a guy who’s such a “lousy” leader, he certainly seems to be able to keep winning important fights with the Governor and the JBC.

    I wonder what the next budget cut blackmail threat Ritter will come up with.  My money is on little children.  College kids just aren’t that sympathetic.  How about taking $300 million out of early childhood education for at risk children if we don’t hand over our piggy banks.  Why don’t we raise the fee for a marriage license to $500 to pay for it.

    Now instead of MANAGING the problem last fall and having departments come up with cuts that don’t impact services, we’ll now get a view of how the Bill Ritter Clown College handles having to cut the budget with three weeks left in the session.  I’ll bring the popcorn.

    1. Last Spring (2008) all the executive departments at Governor Ritter’s order were asked to make cuts in their budgets for the fiscal year that began July 1, 2008. For example, the Colorado Department of Transportation cut $300 million out of its budget in April 2008 for the budget year that began on July 1, 2008. In essence, CDOT cut out 25% of the agency’s budget in the Spring of 2008. These cuts weren’t done on a lark. They were made at the Governor’s request for the specific reason revenues were declining and he was keeping track of what had to be done to balance the state budget.

      Since the first $300 million dollar cut, CDOT, at the Governor’s request, has cut millions more out of the present budget beginning late last year through the early months of this year. Again, this was done becasue of the declining state revenues.

      Further, for the budget that is being considered by the General Assembly right now, the Colorado Department of Transportation at the governor’s request has cut an additional $130 million out of the budget which begins on July 1, 2009. These cuts have been ongoing throughout the other executive departments since early in 2008.

      Your assertion that Governor Ritter sat back and did nothing to respond to the severe decline in state revenues is baseless.  Please get your facts straight next time.

      By the way, what is Sen. Penry’s plan to fund higher education. The Republicans on this blog have been saying for days that he has a plan and yet on every single ocassion when someone has asked for it, not one of you can articulate what it is. I don’t think he or the other Republicans has a plan which speaks volumes about their leadership ability.

       

      1. Ritter can’t see the forest for the trees and is uncomfortable putting all his eggs in one basket.

        Now, healthy debate is as American as apple pie, but Dave is right, it is time to get our feet wet.

        We have to give a take, go with the flow and, who knows, go out on a limb.  A good rule of thumb, kind of a gut reaction, is if it ain’t broke, don’t fix it!

        But Ritter, who is still a little wet behind the ears, led legislators down the garden path on this. He’s loose as a goose and no spring chicken!  You know, one flower does not bring spring.

        In any case, outside the box is where we must be.  Only the strong survive! So out with the old, in with the new, pull it up by the roots, read the tea leaves and put it in your pipe and smoke it.  

        And, Jamba, if friends were flowers, I’d pick you.

        1. I am working on a solution every friggin’ day down at the capitol.  I am trying to figure out what the hell Ritter, freshmen legislators and other ‘big brain’ folk are planning to do now that they have mucked up a perfectly good process.

          So, after your next coffee sit down with a federal elected official, why don’t you come on down to where the real fighting occurs and learn a thing or two about how we do things downtown!

          I’ll be a snide as I want because if you can’t laugh and make fun of things, it is time to quit being you.

          1. Lest we forget, amidst all the turmoil over the budget cuts, a moment of reflection for all the experience we tossed to the curb due to term limits (on both sides of the aisle) — Norma Anderson and Andrew Romanoff at the top of my list.

          2. I understand everyone down at the capitol is trying to figure out how to make this work. But I don’t understand why they won’t look at some radical things that could make a giant difference. I’m not saying do them, I’m saying look at them to see if they might work.

            ps – I have interviewed Ritter, Romanoff, Penry, Shaffer, Heath, & Levy down there at the capitol. And I have asked about 10 others in the leg.

            1. I would like to see them replace the software they use in the driver’s license offices with something more up to date. Watching how inefficient that interface is is painful.

              They could easily make it twice as fast, which would drop the required headcount for those offices in half. And a program like that could be written by a strong programming team in under a year.

              1. Dept of Revenue is getting a new computer system this next year to replace the one they still have from the early ’70s.  About time too.

                Now, with our track history of computers and software in this state, we’ll buy a brand new system, the vendor will go bankrupt or be indicted for various fraudulent accounting schemes. We’ll have to get another vendor to iron out the bugs and compatibility issues and, if everything goes to plan after that point, we’ll have new DMV computers by 2020.

                Or maybe the computer system will work great (see I’m an optimist at heart).

            1. Since the “war on drugs” is a dismal failure just as alcohol prohibition was.

              US consumers now spend $13 BILLION a year on importing Mexican pot. Screw the Mexicans. Lets put own own people to work growing a cash crop and tax it.

              The Mexican drugs wars would stop overnight, since there wouldn’t be any more demand for their product. The drug cartels would have to get into another line of business, like subprime mortgages or something.  

            2. Your simple solution is simple.  But even suggesting this under the dome is bad juju for elected officials.  

              In a different thread there is a discussion about sentencing reform, this is as close as we’ll get to the idea of legalizing marijuana.

  5. Far more leadership coming out of the Senate leadership (both sides) than from the entire first floor of the Capitol!  Groff will be missed on many issues.

    1. I suggested in an earlier post that all executive branch agencies be cut by twenty percent.

      Leaving out Corrections, Education, and HCPF, taking that approach with the others,  plus the legislative branch, and eliminating DOLA and general fund appropriations to Agriculture saves about $200 million in general fund spending.

      If the judicial branch recommendations are adopted, a few more bucks are found.

      As for Education, I suggest cutting all programs and activities for which spending growth is not mandated by Amendment 27 by the same twenty percent.

      At Corrections, sentencing reform along the lines I suggested should permit at least some room for spending cuts there. And, yes, it might be necessary to close one or two low-security penitentiary facilities.

      These rough estimates are based on the JBC’s briefing documents for the FY 2010 budget.

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