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Newspaper Article

    Severance Tax Idea

    BY Lynn Bartels
    02/08/2006
    by Lynn Bartels on 2/8/06.

    Colorado is rolling in oil and gas severance tax money, and a chunk of it should be used to help pay state residents' heating bills, say two leaders of the anti-tax movement.
    "If oil prices continue to shoot up, instead of the state getting a massive windfall, Colorado families get to offset their heating costs," Jon Caldara said Tuesday.

    Caldara, president of the Independence Institute, and Beth Skinner, state director of Colorado Freedom Works, have proposed a constitutional amendment they dub HEAT, or Home Energy Adjustment Tax-Rebate.

    The measure drew a rebuke from leaders on the Western Slope, where much of the tax money goes.

    Severance taxes are levied by the state on the energy industry to offset extraction impacts on local communities. The money helps pay for wear and tear on roads, burgeoning school populations and more stress on health care facilities.

    "This is a heist of monumental proportions and would be totally unfair to those counties that are affected," said Reeves Brown, head of Club 20, an influential Western Slope organization.

    "It's almost as if Jon Caldara lived in an area that doesn't have this development," he facetiously said.

    Caldara, a well-known maverick who led the attack on Referendum C last year, is from Boulder. The conservative think tank he leads is based in the metro area.

    Gov. Bill Owens' office said Tuesday he had not seen the proposal and so didn't want to comment.

    But Rep. Bernie Buescher, R-Grand Junction, was aghast when he learned of it.

    "This is a direct assault on rural Colorado," he said.

    Skinner dismissed Brown's and Buescher's comments, noting both supported Ref C, which suspended state spending limits, allowing the state to keep revenue that otherwise would have to be returned to taxpayers.

    "They like tax revenues," she said. "That way they can spend it on goodies."

    But Skinner and Caldara are not the only ones eyeing severance tax money.

    Chris Romer, president of Great Education Colorado, said his group has been in discussion with the oil-and-gas industry for nine months over using severance taxes to boost school funding.

    No decision has been reached yet, he said, about putting an issue on the November ballot.

    Last fiscal year, the state collected $152 million in severance taxes - $70 million more than had been projected when the budget was being prepared, budget director Henry Sobanet said.

    This fiscal year, which ends June 30, the state has projected a severance tax collection of $200 million.

    The state uses a formula to divvy up the money between schools, water projects, grants for local communities and state services. Fifty percent goes directly to the communities impacted by the drilling.

    Caldara and Skinner last week submitted their proposal to the Colorado Legislative Council, the first step in attempting to get an initiative on the ballot. Under their proposal, the amount of severance taxes collected in 2005 would be used as a baseline. After adjusting for population and inflation, any excess would be refunded to the taxpayers.

    Here's how it would work:

    The excess severance tax amount annually would be divided by the number of dependents claimed on full-year Colorado residents' state income taxes. During the first two weeks of October, a rebate check based on the number of dependents would be sent to each household.

    If there were no excess money, there would be no rebate. If checks were $5 or less, the state also would not have to issue a rebate.

    Caldara said he might adjust the baseline year to 2004, so taxpayers get a bigger rebate and the state gets less money.

    If that were the case and voters approved the measure, each Coloradan next October would get a check for around $16.

    Colorado severance tax collections

    Fiscal year Projected collection Actual

    2005-06 $200 million *

    2004-05 $75 million $152 million

    2003-04 $55 million $125 million

    2002-03 $55 million $33 million

    * Available after June 30