A fairer royalty split

Bill would bolster higher ed, impacted communities

The Rocky

Wednesday, February 6, 2008

If you enjoy puzzles, then you could spend hours sorting out (and then trying to make sense of) the convoluted ways that Colorado's severance tax and mineral lease revenues are parceled out among state and local agencies.

So it's encouraging to see a bipartisan group of prominent lawmakers propose a plan to direct more of the revenues from federal lands for genuine public priorities. Under the current formulas, Colorado could easily squander an opportunity to let today's energy boom pay for long-term public needs.

Lawmakers are also mulling reforms in state severance tax distribution. But those changes could include a rate increase, or other changes that would require voter approval under the Taxpayer's Bill of Rights. Voters do not need to sign off on changes affecting federal revenues from leases and royalties.

The formula used to hand out this money - which totaled $144 million in 2006 and could soon surpass $250 million - can induce headaches. Half of the bonanza is supposed to support schools and local water projects and to compensate local communities that are impacted by mining and drilling.

The remainder goes to towns, counties, school districts and the Department of Local Affairs by a separate formula. In boom years, however, DOLA gets an ever-increasing cut. DOLA is supposed to fund projects related to energy production, but it hasn't always done so - and it has passed out the money with minimal public oversight.

From 2002 to 2006, funding to counties, towns and school districts remained flat. Yet DOLA's take surged from $7.4 million to $45.3 million. Along with projects that helped communities ease some of the stress from energy production, DOLA helped pay for rec centers, museums and government buildings.

Unfortunately, what state Sen. Chris Romer, D-Denver, calls a "slush fund" has friends in the Ritter administration, the legislature and local governments. A frontal assault on it may not be politically feasible.

Instead, a bill is in the works by Sens. Gail Schwartz, D-Snowmass Village, and Josh Penry, R-Fruita, along with Reps. Bernie Buescher, D-Grand Junction, and David Balmer, R-Centennial - all of whom sat on an interim legislative committee on energy revenues last year. It would protect funding levels for current mineral revenue recipients and direct the tens of millions expected from higher energy production toward sounder policy objectives.

Here's a rough outline. Funding for existing purposes will be allowed to grow by 5 percent a year. This may be the only way to prevent those who are happy with the status quo from killing sensible reforms.

Once that funding level is met, additional revenues will be split. Half will go to impacted local communities, using a tighter and more accountable DOLA formula that is being addressed in separate legislation. (That bill would also cover DOLA distributions of severance tax revenues.)

The other half will finance state colleges and universities - 80 percent of that going into a new Higher Education Permanent Fund and the remaining 20 percent into a Higher Education Infrastructure Fund.

The new permanent fund will be an investment vehicle that will build value over time; its earnings will supplement other state money that goes to colleges and universities. The infrastructure fund will provide additional revenues for construction needs on state campuses.

We'd like to cut DOLA out of any share of the additional revenue, but apparently that's not possible. Members of the interim committee may have found the only alternative that can allow Colorado to reap a durable legacy from today's energy boom.

• February 6, 2008

  3:33 a.m.

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  socrates writes:

  Where's renewable energy? Using the old energy economy to finance the new energy economy? That just makes sense.