16 April 2009

More Pinnacol--er, or Rather Less

Mike Littwin nails the state's conundrum--now specifically the governor's--in his column today about budget woes and state seizures of funds that probably don't really belong to the state anyway.

"It is either a bad idea or a desperate idea, depending on whom you ask. Nobody really thinks it's a good idea, but the first rule of budgetary crises is that there are no good ideas."

That about sums it up. I wrote about the politicization of the Pinnacol plan here, and since that post, Denver has watched the issue spill into the streets. That same day, the state voted to seize the funds in question. Yesterday, lawmakers undid their work from earlier in the week by placing a hold on the bill's authorization. Today, the Denver Post reports, budget hashers are back to square one, and the politically untenable seizure of Pinnacol funds--which was at best a non-solution solution, since the funds were sure to be tied up in court too long to help the state's higher ed tab--is clearly not in the discussion.

I can't say I'm surprised to see the legislation fall through. Two things mattered a lot in all this. The first was that the funds for higher ed are needed urgently and immediately. Pinnacol got itself a bunch of lawyers and PR reps over the past week to make sure that, even if the state went ahead and voted to seize the money, the funds wouldn't actually be free any time this year. The second is that the money seized, $500 million, could only plug a hole in the higher ed budget for a single year. So not only is the seizure a politically toxic and extremely high profile gambit, but as solutions go, it sucks. The higher ed budget limps along for a year, but that's all.

To further complicate things for the state, Pinnacol's CEO Ken Ross has spoken publicly about ways Pinnacol may be able to "voluntarily help" the state by means of an "investment vehicle." Much as it may gall lawmakers to pay interest on monies believed to be in the state's coffers--right or wrong, we'd have to leave to the courts to decide--a well-constructed plan would almost certainly be a better fix for Colorado's universities, colleges, and community colleges than the slap-dash seizure. Instead of sapping the insurer for money this year, why not work with the insurer to put that surplus into play over the next five years? That, to my thinking, is the beginning of a sustainable solution.

And to further complicate the budget issues at hand, the governor has flatly declared that $300 million in higher ed cuts this year is simply not an option. Not only would the cuts make bad times worse across the state's campuses, but said cuts would disqualify Colorado from receiving $760 million in federal stimulus funds. Sorta puts the gov over the barrel, to say the least. He stayed behind the scenes and tried his best to let the sausage makers do the dirty work, but as Littwin points out, this is Ritter's problem now.

One thing to keep an eye on as the state debate over the public-private nature of Pinnacol Assurance continues: only one of the two bills passed this week has stalled. The other bill, SB 281, continues to wend its way toward law. And that bill puts Pinnacol firmly back under the state's auspices. From today's Post:

Though the bill transferring money from Pinnacol's assets is off the table, Senate Bill 281, which puts Pinnacol clearly back under state control and requires a state audit of the quasi-governmental agency continues to move forward. The bill also would require a study to decide the future of Pinnacol, including whether the state should sell it off.
The Denver Business Journal has more on the details of and arguments surrounding SB 281.

Somehow, I suspect, negotiations toward that "voluntary help" and "investment vehicle" Ken Ross mentioned last Tuesday have not gotten any easier this week.