TABOR may force Colorado to refund excess marijuana money to taxpayers

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DENVER -- Tax revenues from Colorado's new recreational marijuana industry are pouring into state coffers -- and that's actually a bit of a problem for lawmakers.

Taxpayers, however, may stand to benefit if lawmakers decide to refund the tax revenue that comes in above last year's $67 million first-year estimate.

According to a legal analysis conducted by the state and obtained by FOX31 Denver, the marijuana revenues are subject to the state's Taxpayer Bill of Rights (TABOR), which will require lawmakers to take action if tax revenues from the new legal marijuana industry exceed the estimated $67 million in annual revenue that was anticipated in the 2013 Blue Book analysis of Proposition AA, the new sales and excise tax rates voters approved in November.

The legal memorandum from the Office of Legislative Legal Services was sent to members of the Joint Budget Committee Monday night.

The report, obtained by FOX31 Denver, is the result of more than a week of legal analysis aimed at providing some certainty to the unanswered question of what happens if revenues come in above that $67 million estimate.

The most current Dept. of Revenue estimate forecasts that the state will take in $107 million, exceeding the Blue Book estimate by some $40 million.

The conclusion: the state must lower the tax rate and either refund the excess amount of revenues above the $67 million estimate or refer a measure to the November 2014 or 2015 ballot seeking permission from voters to let the state keep and spend all of the tax revenue from recreational marijuana.

"It's very difficult to figure out what the actual amount of marijuana tax revenue is going to be," said JBC Chairwoman Crisanta Duran, D-Denver, who notes that the state will update its revenue forecast, including marijuana tax revenue projections, on March 18.

"Ultimately, one way or another, the people of this state are going to have a great say about how this extra money is spent. We have to follow TABOR and either take the decision back to the people of Colorado and ask them to keep these dollars or we have to make a refund."

Rep. Cheri Gerou, R-Evergreen, also sits on the JBC but, unlike Duran, doesn't see a referred measure to the November ballot as a real option.

"I think probably what's going to happen is that, internally, the state will try and take care of it," Gerou said. "I think it's going to be a bit of a black eye if we have to go back to the voters with another amendment.

"We'll figure out where our revenues come in, figure out how much we need to reimburse on the sales tax and then we won't have to worry about this after this year."

Lawmakers have the option of simply lowering the sales and excise tax rates on recreational marijuana to bring the final revenue total in line with the $67 million Blue Book projection.

But that would likely impact the $40 million in annual excise tax revenue allocated to school construction through the Building Excellent Schools Today (BEST) program.

"We could lower the sales tax and not charge any sales tax, which would mean we wouldn't bring any money in but we also wouldn't be taking care of K-12 education with BEST," Gerou said. "So that's probably off the table."

It's still unclear whether all taxpayers or just those who bought recreational marijuana would be eligible for refunds, should the legislature simply decide to go that route.

In a separate memo prepared in advance of the JBC's Wednesday meeting, where lawmakers first discussed TABOR's impact on marijuana revenues, JBC staff acknowledges that the Office of Legislative Legal Services analysis is fluid, being something that's never happened before.

"This process is a new process as, to their knowledge, it has never occurred in the past," the JBC memo states. "Therefore, much of what is being discussed is still subject to change if interpretations change over time."

The state is also committed to the Blue Book estimate of $12.15 billion in total state fiscal year spending with the addition of the $67 million in additional marijuana taxes.

A refund would also be required should total state spending rise above that $12.15 billion mark; and, as of the December Legislative Council forecast, spending was projected to reach $12.167 billion -- $87 million over the Blue Book estimate.

Under TABOR, the most the state will be forced to refund is "100 percent of the amount of the tax" -- $67 million.

But if tax revenues or state spending trigger a refund, it's likely the money could come out of the state's general fund because so much of the marijuana revenues is already allocated for school construction and to reimburse counties for marijuana regulation expenses.

"It could actually cost the state money because we have legalized marijuana, but just for the first year," Gerou said. "In the the 2015-16 budget cycle, that's when we're in trouble."

Sen. Pat Steadman, D-Denver, was steamed at the TABOR snag, asking JBC staffers if it's ever possible to raise taxes when revenues are growing.

"Voters got exactly what they voted for and it's still a problem," Steadman said. "It's absurd."

Gov. John Hickenlooper has proposed a separate $116 million spending plan for marijuana revenues that are left over after paying for school construction and offsetting county expenses for regulating the new industry will be directed to drug awareness campaigns, among other things.

Hickenlooper's office acknowledged the legal analysis and noted that the question of whether marijuana revenues are subject to TABOR, and how so, is far from settled.

"This is an ongoing legal question, and we remain committed to respecting the will of the voters," said Hickenlooper's spokesman, Eric Brown.

State officials continue to examine legal questions around the issue.

One case they're reportedly looking at is the Colorado Supreme Court's 1994 decision in Bickel v. City of Boulder, which could be interpreted in a way that affirms the state's right to keep the additional revenue if it can be shown it made a "good faith estimate" of assessing what the marijuana revenue would be.



  • Hunter Truman

    When are we Coloradan’s going to get smart and throw TABOR out.. Let’s face it, the author of TABOR, Doug Bruce, was a crook. He is in JAIL! While he was using his Taxpayer’s Bill of Rights to lure us, he was stealing us taxpayers blind. TABOR was a smoke screen for a scheme to cover up his greed and thirst for power. TABOR is bad for our schools, our public safety and our public infrastructure. Plain and simple, why all of us taxpayers save on the average enough money to eat dinner our, our quality of life in Colorado crumbles. Elected officials, STEP UP and bury this dead horse we know as TABOR!

      • Hunter Truman

        Not looking for “Whip me, beat me, tax me more”, TABOR are takes already apporved and paid. No such thing as a free lunch. If we want a state that has decent services, infrastructure, education, etc. we can’t keeping robbing Peter to pay Paul. As Colorado declines, so do our property values, qulaity of life, etc.

        And, remember, this is supposed to be a democracry. Let the people vote. I’m not sure why the TEA Party is afraid of “the people”.

  • Renfru Muldoon

    TABOR has crippled the state. The state needs as much tax money as it can collect for repairs due to the floods and fires, highway upgrades and replacement, school upgrades and maintenance and other worthy projects. If a tax is collecting more money than expected then so be it. No body is forcing people to purchase marijuana as well as other taxable items.

    • Angee Perry

      I agree with you 100%. I voted yes for weed and don’t use any of it. I did it because I knew two things – people were already finding ways to get pot anyway, and because there are many areas in our state that need more funding (all of which you pretty much listed).

    • Snarky Cosmos

      It’s too bad Renfru or one of his buddies didn’t like my polite reply that he/she/they had KDVR whack my post concerning Colorado’s punishment of vacant land and business property owners with sky high property tax rates.

  • Duncan Wallace

    Isn’t it just amazing how heartwarming it is when “the LAW is the LAW (blah blah blah)” crowd starts singing a different song when they don’t like a LAW? They may by lame brained hypocritical partisan hacks but nobody can deny that they’re ever so adorable when they’re wallowing in their own hypocrisy! Can I get a picture?

  • Snarky Cosmos

    @Hunter Truman:

    All politicians regardless of party are afraid of the people, which is why they try to ban anything and everything and confiscate your money through ever higher taxes and fees.

    It’s all about control.

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