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.

Denver Post Against Pinnacol Plan

I wish I'd read this Denver Post editorial before writing my last post. The whole brewing partisan angle is pretty well expressed in the Post's opening lines:

Senate Democrats, for the second consecutive year, have passed a multibillion-dollar state budget that could well hinge on a positive court ruling.

We know it's extremely difficult to carve $700 million from a budget that contains little discretionary spending, but that's a terribly irresponsible way to govern.

The Senate late Thursday night passed a $17.9 billion budget that requires a $500 million raid on a quasi-public agency in order to avoid devastating cuts to higher education.

The piece goes on to paint the deal in a negative light. While I won't argue with the editors' negative opinion about the proposed legislation--I am not convinced of the overall value of seizing Pinnacol's assets to slap a band-aid on Colorado's higher-education woes for just a single year--I do feel strongly that the partisan narrative bears pointing out.

The Post editorial leaves out the fact that SB 273, one of two Pinnacol-related bills put forth by lawmakers, is sponsored by a pair of state Republicans, Sen. Al White of Hayden and Rep. Don Marostica of Loveland. Given that fact it seems a bit remarkable for the paper to frontload the conversation with "Senate Democrats . . . ."

Granted, Democrats make the majority in the Colorado senate, and Democrats may feel more compelled than many of their Republican counterparts to take any measure necessary to fund higher ed this year, but the Post seems to willfully ignore crucial information to understanding the issue. Democrats aren't simply steamrolling this through the assembly; Republicans are actively fighting amongst themselves over basic different interpretations of the law and how to solve sticky budgeting problems.

The paper's readers deserve at least a hint of the complex nature of the politics behind the proposed legislation. Even the Post editorial board would likely agree.

Colorado's Pinnacol Plan

The fight for control of $500 million of assets from Pinnacol Assurance is slowly but surely being framed as a partisan issue (see here and here), when in fact it is not so clearly partisan at all. For those not up on the debate: Can Colorado lawmakers dip into Pinnacol's $700 million surplus to support state universities, colleges, and community colleges this budget year? A pair of proposals to that effect have passed the state senate. In response, Pinnacol has lawyered (and PRed) up and is prepared to fight.

At issue is the confusing, public-private nature of Pinnacol Assurance. Channel 7 News has some good background here. The state of Colorado established the fund in 1915 to cover worker's compensation claims expected as a result of the state's passage of the Workers' Compensation Act. Pinnacol was seen as the "insurer of last resort" so that the state would not be saddled with the costs of workers' comp claims. Though Pinnacol's funds are privately owned, the Pinnacol board is appointed by the state and the company enjoys tax-exempt status. A group of lawmakers tasked with balancing the Colorado higher-ed budget sees Pinnacol assets as part of a pool of resources to be drawn into play.

Pinnacol has become the largest work-comp insurance agency in the state. The company argues compellingly that their surplus comes not from the state but from private employers, some 58,000 strong. Thus Pinnacol's funds very much represent private dollars and not state funds, no matter the state-sponsored nature of the firm nor the tax exemptions Pinnacol enjoys as a quasi-governmental institution.

Confused yet? There's more.

If we look at the bills actually submitted, Senate Bills 281 and 273, we'll see that the plans are sponsored by Democrat Brandon Shaffer and Republicans Al White and Don Marostica. The Colorado Independent has a rundown of some of the Republican in-fighting of recent days. While White and Marostica have angered their Republican colleagues, the Colorado Dems have also failed to present a united front on this issue. Sen. Dan Gibbs (Summit Co.) and Sen. Paula Sandoval (Denver) voted against their party.

Meanwhile, Attorney General John Suthers (R) has declared the proposed legislation unconstitutional, though it appears unlikely that Suthers will have the final word on the matter. (Some interesting legal insights here.) Also, former Republican governor Bill Owens came out with a strongly worded op-ed last week exhorting Governor Bill Ritter to veto any legislation that results from the current plan. It's worth pointing out that Ritter has remained cautious on the issue since before Owens spoke up and before Josh Penry framed the Pinnacol issue as a wedge in the race for governor's seat.

While Colorado Republicans attempt to paint the issue as a state seizure of private monies, it is also Colorado Republicans who, when faced with the budget shortfall, hit upon Pinnacol's assets as the answer. Skeptics argue that whatever the outcome of today's Senate vote, A) the funds will only tide the higher-ed budget over for a year, and B) lawsuits may tie the funds up for at least that long anyhow, thus rendering the legislation ineffective in the immediate term.

Whatever happens, watch for more of the same politicization to occur as Josh Penry continues to position for a run at the governor's office in 2010.