In a legal opinion released yesterday, Colorado Attorney General Cynthia Coffman said she believes that the hospital provider fee can become a separate state enterprise, exempt from the Taxpayer Bill of Rights revenue limits.

“Considering both judicial interpretations of TABOR and the General Assembly’s prior decision to classify the HPF as a fee rather than a tax, organizing the HPF as an enterprise would not contravene the three considerations that determine an entity’s status as a government-owned business: An HPF enterprise would (1) lack the power to tax, (2) provide government services in exchange for involuntary fees levied on service recipients, and (3) be financially distinct from its parent agency,” Coffman said in the opinion.

The provider fee is a per-bed fee hospitals pay directly to the state. The money is matched with federal funds to provide health care to low-income residents of the state. It was established in 2008.

Coffman said TABOR was not absolute in its scope.

“TABOR is subject to both express exceptions and judicial decisions that have circumscribed its scope,” she said in the legal opinion. “…Among the entities excluded from TABOR are ‘enterprises,’ which TABOR defines as ‘government-owned business[es] authorized to issue [their] own revenue bonds and receiving under 10 percent of annual revenue in grants from all Colorado state and local governments combined.'”

It’s a fee, she said, because the intent of the fee is not to increase government revenue, but to trigger federal matching dollars to assist hospitals in providing health care to people without insurance.

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“But because money in the HPF Fund must be spent in specified ways-namely, to increase compensation paid to hospitals that provide care to low-income patients-it cannot be allocated to pay TABOR refunds,” she said. “Thus, as the HPF program grows, TABOR refunds caused by that growth must be paid at the expense of other programs that are funded through the State’s General Fund.”

The news was met with praise from the Colorado Hospital Association. For the first time, the state has hit TABOR revenue limits, meaning that it must refund money to the taxpayers — and cut millions from the budget to do it.  If the General Assembly acts to move the hospital provider fee into its own enterprise fund, the state will not meet revenue limits set forth by TABOR, a complex formula that combines inflation and population growth to define the revenue limit.

“Importantly, it also removes the provider fee revenue from the state’s TABOR calculation, which will allow the legislature to focus on funding critical issues such as transportation, education and health care,” said a press statement from the CHA. “It is widely agreed that the HPF should have been made an enterprise in 2009 when it was first created, and the legislature can and should take action to fix that mistake.”

 The attorney general’s opinion also aligns with a legal memo released in February by legal counsels to former Gov. Bill Owens and former Gov. Bill Ritter. The two agreed that the provider fee could legally be moved to an enterprise fund because it is a fee to hospitals, not a voter-approved tax.

John Suthers, mayor of Colorado Springs and former attorney general, supported the conclusion of the two attorneys’ memo in February. 

“CHA thanks Attorney General Coffman for her considered analysis and opinion on this important matter,” said CHA President and CEO Steven Summer. “By changing the existing HPF into an enterprise, the legislature can focus on prioritizing limited state funding to critical state priorities. The enterprise is a win-win for taxpayers, communities and the patients for whom Colorado hospitals provide care, and it is supported by a broad, statewide coalition of business organizations and other advocates. It’s time to stop wasting energy on excuses for why not to create an HPF enterprise and act. CHA urges the General Assembly to introduce and pass a bill establishing an HPF enterprise this year.”