(The Center Square) – The Colorado Senate Appropriations committee passed two tax incentives aimed at job growth and childcare Thursday, along with a contentious $140 million healthcare funding bill.
The proposals come amid a tight state budget as the legislative session sprints to an end on May 13. One legislator warned that a potential recession could make the years-long tax incentive investments regrettable.
Concern was expressed for the bill to Extend Colorado Job Growth Incentive Tax Credit, House Bill 26-1014, which would run through 2035 for roughly $30 million. But the long extension timeline also applied to the Continuation of childcare Contribution Tax Credit, HB26-1004, which would not end until 2038 if passed and could cost a total of more than $400 million.
“One thing about this tax credit that I do like is that it’s a hard tax credit to get,” said Sen. Chris Kolker, D-Arapahoe and Jefferson counties, of the job growth incentive at Thursday’s meeting. “It does create jobs.”
The job growth tax credit is given to Colorado businesses for new jobs retained for a year and paid at least average wages in their county. Businesses have to apply for the credit, which pays for 50% of what is owed to the Medicaid and Social Security systems, or Federal Insurance Contributions Act.
The jobs tax break would cost the state an estimated $29.5 million in lost revenue over the next eight years, but based on the current version of the program, only about 60% of the tax credits would be claimed by businesses, or $17.7 million.
“There’s a world, perhaps in which childcare is free for the people of Colorado, and yet we have this tax credit hanging out, costing us money on the books,” said Sen. Jeff Bridges (D-Arapahoe, Denver and Jefferson counties), the committee vice chair.
The childcare tax credit is far more expensive than the job growth incentive bill. If passed, it would run for 10 years instead of eight.
“I do have concerns about that 10-year [period],” Bridges said.
The bill does not include a total cost estimate for the program running through 2038. But using the incrementally growing year-over-year cost from $44.1 million in 2028, the program would roughly cost $400 million in lost revenue, accounting for two half-funded years at the beginning and end of the program.
The childcare tax credit bill, which was unanimously voted for in the committee, would extend a program that refunds Coloradans for 50% of childcare contributions, up to $100,000 per year. The program allows for a variety of childcare contributions to count toward the tax credit, such as to childcare facilities, schools, related programs, childcare training provider programs and programs to help parents with childcare costs.
The bill’s fiscal report showed that 15,900 childcare contributions were claimed under the tax credit in 2023, worth $33 million, or $2,073 per credit.
The Senate Appropriations committee also took up a contentious healthcare funding bill that had been laid over from the previous day’s meeting.
One of the amendments was simply aimed at clarifying language around the bill, while the other, L.015, required the state’s budget committee to create a plan to find savings within the costly program.
Funding for the bill caused a flurry of arguments during the previous day’s committee meeting. The bill aims to fund the state’s subsidized health insurance program, but has run into a series of dead-ends amid the state’s $1.5 billion budget shortfall.
To work around the shortage of funding options, the Senate Appropriations committee agreed through gritted teeth to use up to $100 million in state bonds and $40 million in state reserves from a marijuana tax. The bill had previously proposed a one-time $40 million fee on health insurance companies, which was shot down due to its likelihood of raising insurance rates in the state.
None of the funding sources proved especially popular with many of the legislators. But they saw the bond-reserves solution as the least painful way to keep the 180,000-plus person subsidized health program afloat amid its own $140 million shortfall.
“Bonding is not what we do for one-time costs. This one of the craziest fiscal proposals I have heard in my 10 years in the legislature,” Bridges said of the proposed $100 million bond. “I am deeply concerned about it, but I have a commitment to cut the total amount, and I think that’s the most that I can get.”
The committee adopted two new amendments along with two that had been proposed during the previous day’s meeting. Despite his concern, Bridges helped narrowly pass the bill 4-3, with the committee Democrats carrying the vote along party lines. Democrats control the majority of both houses of the Legislature and their committees.
The subsidized healthcare funding bill will join the new jobs tax credit and childcare tax credit at the Senate Committee of the Whole where the Senate will debate the bills before being voted on. If voted through the Senate, the healthcare bill would go to the House, while the two tax incentives would land on Democratic Gov. Jared Polis’ desk to be signed into law.
