Senate sees high drama as planned budget cuts shift to insurance fund

DENVER - Capping a day of confusion and controversy, the state Senate gave initial approval Thursday night to a 2009-10 state budget that avoided deep cuts in higher education by raiding a state workers' compensation insurance fund.

Legislative leaders from both parties said it was unacceptable to pass a budget with a $300 million hole in funding for the state's public colleges and universities, which could only have been repaired by closing schools or freeing them to charge market rates for tuition.

By taking the $300 million from a surplus held by the insurance fund, the Senate made campus closures less likely, and it voted to prevent tuition increases from exceeding 9 percent on average.

But the Senate action was preceded by a scorching debate over whether the move is legal, and even its supporters acknowledged that it could be struck down in court.

The problem is that the insurance fund, called Pinnacol Assurance, was created by statute as a division of the state government, but the law also says it is supposed to be operated as if it were a private mutual insurance fund, owned by its policy-
holders.

"It is a state asset. It is a state agency," said Sen. Al White, R-Hayden, who, as a member of the Joint Budget Committee, incurred the wrath of Republican leaders by incorporating the Pinnacol raid into the budget package.

Sen. Shawn Mitchell, R-Broomfield, spoke for the rest of the Republican minority when he said Pinnacol's money belongs to its 58,000 policyholders. He called the raid "a plundering of private property." "It's not the state's money," Mitchell said. "And when we try and grab it, there will be litigation, the money will not flow, higher ed won't receive it, and we'll be right back in this dilemma."

Senate Minority Leader Josh Penry, of Grand Junction, said that if Pinnacol makes good on a threat to challenge the transfer in court, then the whole budget collapses.

"Between four and seven college campuses will close if this scheme that you call a budget doesn't carry forward," Penry said. "These cuts were made on the backs of college kids."

The budget process took a turn for the surreal Thursday morning, when Senate President Peter Groff, D-Denver, announced that after consulting with Republican leaders, the Senate was rejecting the budget bill and sending it back to the Joint Budget Committee for revision.

Normally, if a bill arrives in the Senate or House and enough members decide they want to change it, they amend it themselves. Rejecting the bill was a parliamentary move without precedent in state history.

"There is just I don't think any way that I could vote for this budget in its current form," Groff told a meeting of Senate Democrats.

Penry described the move as "a positive first step in restoring some sanity to the budget."

"We've given them a few ideas," Penry said, "and we're going to send the budget writers back to the drawing board and let them wrestle with the scope and the details."

But the Joint Budget Committee angrily rejected the rejection, sending the budget bill back to the Senate unamended.

One of the two Republicans on the six-member JBC, Rep. Don Marostica of Loveland, said Penry "should go jump in a lake. Tell him to go first, and all the lemmings will follow."

"We need a unanimous vote here," Rep. Jack Pommer, D-Boulder, said of the JBC's rules. "And that means we have to cooperate."

"But it's because we don't have enough revenue to run the state," he continued. "So we're put in the position of taking too little money and trying to spread it around. And I think we all worked really hard on it.

"And the idea that somebody can sit over in the Senate, never once come over here to ask what we're doing, and then imply that somehow we just tossed over some paper and we should take another look at it - I find that very irritating."

Reducing the list of products and transactions that are exempt from state sales taxes was an alternative touted by several senators as a way to close the budget gap without raiding Pinnacol.

Such repeals would take effect Jan. 1.

Contact the writer at 476-1654. Gazette writer John Schroyer contributed to this report.