Colorado lawmakers playing chicken on bill to fund Colorado hospitals

A bill that would restore funding for hospitals in exchange for cuts to future budgets is “dead” if Democrats balk at those cuts, the bill’s Republican author said.

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District 1 Senator Jerry Sonnenberg. The first day of the Colorado state legislative session. Jan 11, 2017. (Kevin J. Beaty/Denverite)  legislature; copolitics; politics; legislative session; capitol; kevinjbeaty; denver; denverite; colorado;

State Sen. Jerry Sonnenberg on the first day of the Colorado state legislative session. (Kevin J. Beaty/Denverite)

A bill that would restore funding for hospitals in exchange for cuts to the rest of the budget in future years is “dead” if Democrats balk at those future cuts, the bill’s Republican author, state Sen. Jerry Sonnenberg of Sterling, said Monday.

SB17-267, “Sustainability of Rural Colorado,” gets its first hearing Tuesday in the Senate Finance committee. Sonnenberg said at a press briefing Monday that he believes he can get the bill out of committee, but he has “not confirmed” all the necessary votes. But the promise by Democrats in the House that they’ll change a major provision of the bill — one that would reduce future state spending — means the bill has a challenging road ahead even if it makes it out of committee.

“I’m willing to work with them on what that number is, but if they aren’t willing to reduce the TABOR cap, the bill is dead,” he said. “I’m willing to listen and see and have that conversation about what might work. It’s important that we do something here. … If they are ultimately going to take the TABOR cap and leave it where it is, the bill is dead. It won’t even go to conference committee. It’s done. It’ll die on the calendar.”

The bill moves a lot of money around in the state budget to provide more funding for rural schools, hospitals and roads, but the most significant aspect of the bill is a reclassification of the hospital provider fee into an enterprise fund. The hospital provider fee is collected on patient revenue, matched with federal dollars and redistributed to hospitals to increase compensation for Medicaid patients and off-set the costs of uncompensated care.

In recent years, the hospital provider fee has pushed the state budget over the revenue cap imposed by TABOR, so to avoid making cuts in other parts of the budget, lawmakers have reduced the amount of the fee that the state collects — which also reduces the federal match and funding for hospitals. The 2017-18 budget reduces the hospital provider fee by $264 million, which in turn means hospitals will lose out on $520 million. Some rural hospitals may have to close in the face of this financial loss, while others will face very difficult choices.

But moving the provider fee into an enterprise fund — a kind of self-contained government business — would exempt it from the TABOR revenue cap. That would insulate hospitals from the annual budget debate and insulate the rest of the budget from the fee’s revenue impact.

Democrats have tried to reclassify the hospital provider fee before, but most Republicans, including Sonnenberg, have not been supportive because they see it as an end run around TABOR. They didn’t want to expand Medicaid or institute the fee in the first place. But now hospitals in Sonnenberg’s northeast Colorado district are predicting dire consequences from the looming funding cuts. Democrats hailed Sonnenberg’s willingness to sponsor a bill to reclassify the fee. Senate Minority Leader Lucia Guzman even dropped her own hospital provider fee bill to sign on to Sonnenberg’s.

The trade-off that makes the bill palatable to more Republicans is a reduction in the TABOR cap by $670 million. All state departments would have to submit budgets next year that are 2 percent smaller, and the state budget would grow from this even more constrained limit going forward.

Last last month, House Majority Leader K.C. Becker, the Democratic co-sponsor in the House, said the reduction in the revenue cap would be “a problem for us” and added, “we know that we will be changing it over here.”

Asked about these comments, Sonnenberg sounded frustrated.

“They are gonna have to be reasonable,” he said of Democrats. “And I was working diligently in conversations before the bill was dropped. It has to be a give and take on both sides. I’m willing to give a little here. But I’m not going to give it all and have it be the same hospital provider fee they’ve brought time and time again.”

This framing would put Democrats in the position of being the party that killed a chance for real reform, as opposed to the Republicans who killed the reclassification in past years. Given that this is the Colorado General Assembly, with split control of the House and Senate, this is kind of par for the course, but the stakes are high.

On the floor of the House, Rep. Millie Hamner, the Democratic vice-chair of the Joint Budget Committee, called SB17-267 “a critical piece of legislation” that could improve the budget, which passed the House Monday with a single Republican vote. (It now returns to the Joint Budget Committee to reconcile or reject the various amendments passed in both chambers.) Hamner previously said it “doesn’t make intuitive sense” to reduce the TABOR cap.

And Speaker of the House Crisanta Duran stressed the need for bipartisan problem-solving. She asked her colleagues to think about rural hospitals and to “think about all the growth we’ve had in Colorado and how we ensure that quality of life will be just as good as it has been for many of us for the next generation,” an implicit call to reconsider the wisdom of reducing the revenue cap.

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