OFFICE OF THE BOARD OF COMMISSIONERS Phone: 970-336-7204 Fax: 970-352-0242 1150 O Street P.O.

Box 758 Greeley, CO 80632

COMMISSIONER EDITORIAL, OCTOBER 18, 2013: STATEHOOD INITIATIVE Author: Commissioner William Garcia Topic: Financing a New State
Date: 10/18/13 Contact: Jennifer Finch, 970-336-7203

When discussing a 51st State, questions arise regarding finances and budgets. An excellent point from which to begin this discussion is the findings of I-News, an arm of Rocky Mountain PBS, which prepared a study regarding fiscal aspects of a new state’s formation. This study found the counties considering formation of a new state generate nearly $470 million in state sales tax, income tax and vehicle registration fees, then contrasted current expenditures at nearly $515 million. If nothing changed and these numbers stood, a new state could not provide the same level of services without increasing its revenues. However, in reviewing the I-News study, the severance tax revenue amount is listed at $28 million. This is dated information gathered prior to the current energy boom. Recent severance tax estimates project that amount closer to $75.5 million. The I-News study appears to be largely accurate and with updated severance tax numbers would indicate a budgetary “push”. New state income: + New state severance taxes revenues: - New state expenditures: $470M $75.5M $515M $30.5M

Multiple factors affect the expenditure side of an imagined budget for a 51st State. Consider the centralization of services in the current state of Colorado. Revenues generated statewide are aggregated in Denver, managed through a centralized administration and then distributed throughout the state in a process of formulaic grants, categorical grants that dictate costly processes which must be followed to expend the funds, or state expenditures that involve hiring private contractors. Administrative cost is an expense incurred in controlling and directing an organization, including financing, marketing, accounting and contracting. Colorado, like any other government or organization, has administrative costs associated with services it provides. How much does this cost Colorado? That number is not known, but if we hold the state to the percentage that the American Institute of Philanthropy holds its top-rated charities, that number is 25% administration and 75% programs. That is almost $129 million in administration fees for Northern Colorado services!

Decentralization is the principle of delegating decisions from a statewide level to local governments and ensuring funding in a pass-through manner. Currently, the state duplicates staffing positions in a variety of fields in which services are provided by school district, county and local governments. Local jurisdictions have a better grasp on community needs and offer more flexibility to meet these needs than a centralized organization. Rather than duplicating accountants, engineers, road maintenance workers and educational administrators, doesn’t it make more sense to co-fund and co-locate these valuable services? It will undoubtedly result in lower cost and more self –sufficient communities able to promptly assess and address needs in an emergency situation. Our Northern Colorado counties have demonstrated the ability to address such needs in a prompt manner in our recent disaster. Forming a state based on a decentralized model would also limit the incurrence of unfunded mandates – those orders from on high that dictate how government is to be run, children are to be educated and additional paperwork is to be filled out without any funding to support the additional work required. Local decision makers and employees working side by side with state counterparts can identify where reasonable rules are needed and where they are unduly burdensome. For these reasons, a new Northern Colorado state would be fiscally sound under the current revenues and expenditures realized by Colorado’s administration. A new state utilizing decentralization would discover additional savings, provide greater local control and accountability, and mitigate the incurrence of unfunded mandates. The proven fiscal responsibility demonstrated by Weld County further illustrates that our current business model in which Weld has maintained for decades no short-term debt, no long-term debt, and no sales tax cannot only be realized but also sustained. 616