In Chieftain op-ed, McElhany misled about lottery securitization proposal


Colorado Senate Minority Leader Andrew McElhany (R-Colorado Springs) misleadingly asserted in a guest op-ed in The Pueblo Chieftain that Gov. Bill Ritter (D) "refused" to consider school funding alternatives, such as securitizing the state lottery. In fact, a lawmaker who sought to put the issue on the 2007 ballot reportedly withdrew the proposal because of a legal opinion and the legislature's approaching adjournment, not because of any alleged opposition by Ritter.

In a May 13 guest op-ed in The Pueblo Chieftain, Colorado Senate Minority Leader Andrew McElhany (R-Colorado Springs) touted Republican actions in the recently adjourned 2007 legislative session and stated that by signing into law a proposal to alter the funding formula for public education, Democratic Gov. Bill Ritter "refused ... to look at credible funding alternatives that we implored him to consider, such as securitizing the state Lottery." McElhany's assertion distorted the history of bipartisan proposals to securitize the state lottery.

McElhany mentioned the lottery securitization proposal in a critique of Ritter and the state legislature's Democratic majority that emphasized a school funding plan contained in Senate Bill 199. As Ritter noted March 13 when he announced the Colorado Children's Amendment, the plan, which will freeze mill levy rates in order to shift much of the burden of K-12 funding to the local property tax base, will free up state funds -- including $84 million annually for additional public education funding. The plan is designed to ensure the solvency of the State Education Fund and protect the state's General Fund from further encroachment by constitutionally mandated increases in minimum per pupil K-12 spending.

From McElhany's op-ed, "Republicans fight ruling party on tax levies," in the May 13 edition of The Pueblo Chieftain:

Up against that taxes-and-trial lawyers approach to lawmaking, the governor's plan to raise property tax bills is all the more galling.

He and his legislative allies say they want the extra money to stabilize school funding, but the legislation that enacts the tax hike includes no guarantees whatsoever that the extra revenue will go to our schools in the years to come. In my experience after 13 years in the General Assembly, it is more likely to be sucked into the black hole of the state general fund and eaten up by new programs.

The governor refused as well to look at credible funding alternatives that we implored him to consider, such as securitizing the state Lottery. That would ensure it could continue to fund trails, parks and open space while also creating a sustainable revenue stream for our schools.

However, McElhany ignored widespread reporting about the bipartisan work on the lottery securitization proposal. As The Denver Post reported April 17, state Sens. Chris Romer (D-Denver) and Joshua Penry (R-Fruita) jointly had proposed that the General Assembly refer an amendment for the November 2007 ballot to sell operating rights to the state lottery as a means of generating revenue:

Colorado voters would be asked to sell an "operating concession contract" in the state lottery to a private company -- raising more than $2 billion -- under a constitutional amendment proposed today.

Sen. Chris Romer, D-Denver, said the state would collect a lump-sum payment that would be used for college scholarships, public schools, a veterans fund and state parks.

"When I asked my colleagues in the Senate if they would take the upfront payment if they won the lottery, 35 hands went up," Romer said. "We're just going to do what they said they would do: Take the upfront-payment option."

Romer and Sen. Josh Penry, R-Grand Junction, want to submit the question to Colorado voters. Their resolution, which would need support from two-thirds of the members of the legislature, is expected to be introduced this week.

The proposal caused an immediate stir at the Capitol, where House Republicans grasped onto the plan as an alternative to the school-funding proposal offered by Democratic Gov. Bill Ritter.

On April 18, state Senate Republicans announced on their official website that they were proposing "a variation" on the Romer/Penry proposal as "an end-run" around Ritter's school funding proposal:

Senate Republicans offered an end-run today on the governor's embattled plan to hike property taxes for schools, proposing instead to securitize the Colorado Lottery and use some of the proceeds to shore up school funding for the future.

The approach urged by the Senate GOP leadership -- a variation on another proposal announced this week to securitize the Lottery -- would maintain funding for popular amenities such as state parks, trails and open space, while also creating a secure, stable and sizable new funding stream for public education.

"This could be a real win-win solution as we search for a way to bolster school funding statewide," said Assistant Senate GOP leader Nancy Spence, the ranking Republican on the Senate Education Committee. "This would offer a major infusion of cash for education without leaning even harder on taxpayers."

Senate GOP chief Andy McElhany, of Colorado Springs, called securitization a "fair and equitable way to take care of our public schools."

"We have been concerned that the property-tax hike under consideration by the governor and some Democrats in the legislature is at best a Band-Aid," McElhany said. "It reaches deeper into the pockets of retirees on fixed incomes and mom 'n' pop businesses in some of the poorest school districts without fixing the underlying flaws in our system of school funding."

Spence's and McElhany's proposal is similar to a Lottery securitization plan advanced by Republican Sen. Josh Penry, of Fruita, and Democrat Sen. Chris Romer, of Denver, in that it would let private investors acquire an interest in the Lottery in exchange for cash. Legislative policy staffers have estimated that $2.2 billion to $2.6 billion could be raised through securitization, with some $1.5 billion of those proceeds invested in a trust fund whose interest earnings would generously fund the current programs benefited by the Lottery. Some of the balance of the proceeds under that version of the plan would be used for college scholarship funds.

The latest GOP proposal would offer a twist on Penry's and Romer's plan by placing at least $330 million from the securitization proceeds into the state's permanent school lands trust fund. By law, that fund could not be diverted by future legislatures to non-education expenditures. Meanwhile, interest income from the added infusion into the permanent trust fund could shore up the State Education Fund and help cover the annual increases in public education funding required by the state constitution.

However, as the Post reported in two April 20 articles, Romer decided to withdraw his proposal, and -- contrary to Republican accusations -- Ritter had not pressured him to do so. One article reported that Romer decided not to pursue the proposal because the Office of Legislative Legal Services had determined that the proposal would constitute "a debt" -- a characterization with which Romer did not want the proposal to be associated:

Dreams of selling off the Colorado Lottery for a fat payoff were discarded like a losing scratch ticket Thursday after state legal experts gave an adverse opinion on the plan.

Sen. Chris Romer, D-Denver, said he would not seek a measure that would ask voters to sell a "concession contract" in the state lottery because he couldn't fix a legal opinion that referred to the proposed sale as the state taking on $3 billion in debt.

"I may be a freshman, but I'm not that stupid," Romer said.

The Office of Legislative Legal Services concluded that the state constitution requires ballot questions in odd years to be about taxes or debt. Officials in the office called it a debt because the proposal doesn't increase taxes.

Romer contends his proposal should qualify for the ballot as a "multifiscal-year obligation."

Romer's proposal crashed just two days after he touted the lottery-sale plan as a way to raise millions for college scholarships, public schools, open-space purchases and veterans services.

The article also noted that the proposal's introduction late in the legislative session contributed to its difficulty, as did concerns shared by Ritter and former state Sen. Norma Anderson (R-Lakewood) that some of the earmarks for spending the revenue generated by the securitization proposal would have conflicted with the constitutionally mandated spending targets of lottery revenue generated under state administration.

McElhany's assertion that Ritter "refused" to consider the securitization alternative to his school funding proposal echoed Senate Republican accusations that Ritter "kill[ed]" the securitization plan because it competed with his plan, as the Post reported in a second April 20 article, which appeared online only:

Senate Republicans today accused Democratic Gov. Bill Ritter of killing a bi-partisan proposal to sell the state lottery because it would compete with his plan to freeze property-tax rates for public schools.

Sen. Josh Penry, R-Grand Junction, said Ritter forced Democrats to scratch the lottery-privatization plan.

"There's no question that the governor put tremendous pressure on Democrats to kill it in its infancy," said Penry.

Penry and Sen. Chris Romer, D-Denver, had planned to sponsor a resolution asking voters to sell the lottery to a private company on a long-term contract.

On Thursday, Romer dropped the plan because he didn't like the proposed ballot language referring to the sale as "debt."

The article also reported that Romer and Ritter's spokesman denied that Romer was pressured to withdraw his proposal. It further noted that the timing of the proposal made it difficult to undertake late in the session, which was scheduled to adjourn May 9:

"That's baloney," Romer said of Penry's accusation.

"I had no phone calls from the governor," he said. "I was not called down. I am a huge supporter of the mill-levy freeze. I think the governor is rightly spending his political capital on the plan and I am actively working to get more votes for it in my caucus."

Evan Dreyer, spokesman for Ritter, said the governor did not pressure lawmakers to drop the proposal. Rather, Ritter thought it was a complicated deal that required more time to review than could be done before the legislature adjourns on May 9.

"On its face, the lottery idea is complex and requires more study than could be done in the next few weeks," Dreyer said. "There is also a legal opinion that raises additional questions."

Penry and Romer said selling the lottery could raise more than $2 billion for college scholarships, public schools, open-space purchases and veterans services. About $1.5 billion would be put into a trust fund that provided an annual stream of funding for programs.

Statehouse Republicans pounced on the plan as a potential replacement for Ritter's proposal to freeze property tax rates for school districts.

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