Legislators give Colorado businesses a working over
By Steve Raabe
The Denver Post
Colorado businesses endured a bruising legislative session in what some observers say was one of the tougher in memory for companies.
Charged with closing a huge budget shortfall, the Colorado legislature passed a slew of bills that eliminated tax exemptions long enjoyed by the business sector.
The removal of exemptions and tax credits is expected to cost Colorado businesses $100 million to $133 million a year.
Commercial interests won a share of political battles in the legislature. On balance, however, the session that ended Wednesday was perceived by some advocacy groups as hard on business.
"It's been one of the most difficult ever for businesses," said Dan Pilcher, senior vice president of the Colorado Association of Commerce and Industry.
In addition to the loss of tax exemptions on energy used in manufacturing, downloaded software and other expenses, bills that drew the ire of the business community included a new tax on soda and candy purchases, restrictions on payday loans and tighter sales-tax collection policies on online purchases.
Kelly Brough, president and chief executive of the Denver Metro Chamber of Commerce, described the legislative session as "tumultuous."
Chamber executives took issue with several bills passed this year but also noted that some measures favored the business community - particularly a controversial proposal that holds teachers accountable for classroom performance. Businesses backed the bill as a long-term solution for a better-educated workforce.
Other business victories
Other wins for the business side included allowing public colleges to raise tuition rates without legislative approval and the defeat of a bill that would have restricted insurance companies' use of video surveillance in suspected cases of workers' compensation fraud.
The mixed legislative results contributed to a sharp perceptual difference on the session's outcome.
While some business leaders cried foul, Gov. Bill Ritter and majority Democrats said businesses simply absorbed their fair share of the pain from resolving a $2.3 billion gap in the state budget.
"I reject the premise" that the legislative session was anti-business, Ritter said.
"We spread the difficult decisions (of balancing the budget) across people so there wasn't a great impact on any one community," he said. "We have been very successful in building a 21st-century, sustainable pro-business environment."
House Majority Leader Paul Weissmann said the business community's loss of $100 million in tax benefits represented a smaller share of the budget- balancing burden than other sectors.
He said budget cuts for K-12 education will total $360 million this fiscal year and $260 million next year. Higher-education spending was cut by $300 million.
"This was spread out and felt by everyone," Weissmann said of the funding cuts. "I don't think it was imposed overwhelmingly on business. If they truly were shouldering a fair share, their burden probably should have been higher."
One of the businesses that will be hardest hit by the tax-exemption rollback is Evraz Rocky Mountain Steel in Pueblo.
The firm estimates that it will pay about $2 million a year in taxes on energy used in steel fabrication - an expense that previously was tax-exempt.
Rocky Mountain Steel also may face higher electricity costs from a bill passed this year that mandates a conversion from coal to natural gas for generating power.
"We are disappointed at the number of anti-business bills that were passed during this session," said Ben Lutze, director of operations at the steel plant. "They have made Colorado companies less competitive during one of the most challenging economic times of our generation."
Arvada-based GS Vending said consumers will end up bearing the costs of a 2.9 percent tax on soda and candy - items that previously were exempt from state sales taxes.
The tax took effect May 1, and GS Vending already has raised prices on about 70 percent of its machines to cover the tax. The other 30 percent will follow soon, said Lou Langdon, president of the firm.
"We have to go out and raise prices on all our products, and customers are not happy about it," he said.
A unique set of factors
Officials at the Colorado Association of Commerce and Industry said the legislative session and its effect on businesses were shaped by a unique set of factors:
• Lingering economic weakness that reduced state tax collections and contributed to a record budget shortfall.
• A series of court decisions that gave the legislature more power to change tax policies under Taxpayer's Bill of Rights limitations.
• Democratic majorities in both houses and a Democratic governor.
"There were a lot of really bad-for-business bills," said Loren Furman, CACI's vice president of governmental affairs. "The result is that employers won't be hiring as many people, wages will be cut and businesses won't be investing as much as they would have."
But the alternative to higher costs for businesses would have been draconian cuts in government services that already are operating on lean budgets, said Rich Jones, director of policy and research at the Bell Policy Center, a liberal advocacy group.
"We've got to balance things here," he said. "We've already done an awful lot of cutting on public services and public programs."
The legislature's suspension of business-related tax exemptions should not have a negative impact on Colorado's commercial competitiveness, he said, because many other states don't provide the same incentives.
"It's not anti-business," Jones said. "Do we further cut K-12 and higher education, or do we continue providing a sales-tax credit on sodas? We think revenues are better spent on education."
Steve Raabe: 303-954-1948 or email@example.com
Wins and losses
Colorado businesses took many hits in the recently ended legislative session, but they also notched some victories. Business-advocacy groups rated the session this way:
• Passage of a bill that bases teachers' job security, in part, on student performance. The measure was widely supported by the business community.
• Defeat of a measure requiring the legislature to annually review business tax credits and incentives to determine whether they should be continued, repealed or modified.
• Approval of a bill allowing public colleges to raise tuition by up to 9 percent without legislative approval.
• Defeat of a proposal that would have restricted insurance companies' use of video surveillance in suspected cases of workers' compensation fraud.
• Passage of a measure tightening deadlines for taxpayers to file appeals on tax-deficiency notices.
• Approval of a series of bills that suspend or eliminate tax exemptions for businesses, valued at up to $133 million a year.
• Passage of a measure tightening collections of sales taxes for online purchases by requiring out-of-state companies to submit a list of their Colorado customers and their total purchases each year.
• Approval of a bill that limits the interest rates and fees on payday loans and allows borrowers more time to repay.
• Passage of a proposal that limits the amount of income- tax credits that companies with investments in enterprise zones can take.
• Defeat of a bill that would have mandated efficiency measures and cost savings in state and local governments.