Below is a Q&A that explains the Hospital Provider Fee (HPF) and the revenues associated with it.
One of Gov. John Hicklenlooper’s top priorities for the 2016 legislative session is to convert the Hospital Provider Fee to an enterprise fund exempt from TABOR limits. Before the start of the legislative session, Sen. Bill Cadman released a memo from Legislative Legal Services saying that such a conversion would be unconstitutional. In February, Attorney General Cynthia Coffman issued a legal opinion that said the opposite – that the HPF would meet the requirements of an enterprise fund. (See links below for PDFs of the two documents.)
Also, below is a sample board resolution concerning the Hospital Provider Fee, courtesy of Adams 12 Five Star Schools.
Q&A on the Hospital Provider Fee
Q: What is the Hospital Provider Fee (HPF)?
A: The HPF was created in 2009 by the Colorado Health Care Affordability Act. This 2009 legislation directed the Colorado Department of Health Care Policy and Financing to seek federal permission to collect a provider fee from Colorado hospitals. Following federal approval, revenues from the HPF were used to fund an expansion of Medicaid benefits and the Children’s Basic Health Plan. HPF was also used to compensate hospitals for uncompensated costs. These HPF revenues may not be used for any other purposes.
Q: How much revenue is generated by the HPF?
A: In the current 2015-16 fiscal year, the HPF is projected to collect about $805 million. In the 2016-17 fiscal year, the HPF will raise about $756 million, and in 2017-18 about $799 million. These state revenues are matched roughly dollar-for-dollar by federal dollars for the programs funded by the HPF.
Q: Is the HPF revenue counted against the state’s TABOR revenue cap?
A: Yes. All revenues raised by the HPF from Colorado hospitals are included in the revenues that count against the state’s TABOR revenue limit. The federal matching funds do not count against the TABOR cap.
Q: Will the state collect more revenues than the state’s TABOR cap permits over the next several years and, if so, what will happen?
A: The state must refund to taxpayers revenues received in excess of the TABOR revenue limit. Current projections show the state will collect revenues over the TABOR limit totaling $212 million in 2016-17 and $340.9 million in 2017-18.
Q: Has the state’s TABOR revenue limit been adjusted in some way to account for the additional revenues raised by the HPF?
A: No. The base year for calculating the state TABOR revenue limit is the 2007-08 fiscal year, before the HPF was collected or in the law.
Q: If the HPF had not been created in 2009, and the revenues it generates were not a part of the state’s budget, would Colorado exceed its TABOR revenue limit in the 2015-16, 2016-17 and 2017-18 fiscal years?
A: No. The HPF revenues would not exist if the 2009 Colorado Health Care Affordability Act had not been passed. Without those HPF revenues, the state would not exceed its TABOR limit for the next several years.
Q: Will funding for school finance be less as a result of the state revenues exceeding its TABOR revenue cap during the next several years?
A: Yes. The taxpayer refunds, now projected for the next several years, would be available to fund school finance if HPF revenues and the programs funded by HPF were not in the law. Almost certainly the legislature would not use all of those revenues for school finance, but school finance and other programs now on the chopping block would benefit if refunds were not necessary.
Q: Is there any way to exclude HPF revenues from revenues that count against the state’s TABOR cap?
A: Yes. It is possible to craft legislation that would create an enterprise to collect and disburse HPF revenues. TABOR explicitly provides that revenues collected and disbursed by an enterprise are not included in state TABOR revenues. For example, a number of years ago the legislature made Colorado’s universities enterprises so that tuition collected by the universities would not count against the state’s TABOR limit.
Colorado Association of School Boards
March 14, 2016
Legislative Legal Services memo