Pot Tax Error Bill Speeds Through Senate, But Not Without Critics

Photo Credit: Brandon Marshall

A bill written to address a legislative mistake that is costing special districts across the state millions of dollars has moved forward in the General Assembly. SB 088, introduced by Republican Senator Bob Gardner, was introduced in the House on Thursday, February 1, days after passing its third reading in the Senate.

The bill went through the Republican-controlled Senate relatively fast, passing its third reading 24-10 without amendments. But it still had its fair share of criticism from Gardner’s fellow Republicans, including Senate Majority Leader Chris Holbert and Senator Kevin Lundberg. The pushback stems from the bill’s call for special districts to decide on their own whether or not to seek voter approval for receiving pot-tax funding. Like a potential resolution that came from the failed special session called by Governor John Hickenlooper last October, some Republicans feel that move violates the Taxpayer’s Bill of Rights.

“The clear fix to this problem would be to reestablish these taxes that are no longer through a vote of the people. Senate Bill 88 does not do that,” Lundberg said on the Senate floor January 30. “The cure does not meet constitutional muster.”

Gardner accepted that his bill had opponents during its most recent reading on the Senate floor, but he felt it was the right resolution for an error that demands a quick fix. “This is a bill that is not without its controversy,” he said on the Senate floor. “It is incumbent upon us to resolve that error in the best way possible. I do not use the word ‘fix,’ because that cannot be done.”

The bill aims to correct a 2017 measure that raised the state marijuana tax from 10 percent to the maximum of 15 percent while exempting retail sales from a 2.9 percent state sales tax. Exempting that revenue from the state sales tax unintentionally blocked nine special districts from receiving $4.4 million in the 2017-2018 fiscal year and could cut up to $8.6 million in the 2018-2019 fiscal year, according to an October fiscal note.

Notable special districts that have lost funding include the Regional Transportation District and the Scientific and Cultural Facilities District, which helps fund institutions like the Denver Art Museum, the Denver Zoo, the Denver Botanic Gardens, the Denver Museum of Nature & Science and the Denver Center for the Performing Arts. According to a report by Westword, RTD has lost an estimated $560,000 a month since the change took effect in July 2017, while the SCFD has lost around $56,000 per month. Gardner’s bill would give those districts the opportunity to receive funding going forward, but would not reimburse them for lost funding.

To resolve the error, Gardner’s bill reauthorizes retail pot for the 2.9 percent sales tax and doesn’t take a position on whether the special districts should be required to take the funding or not. By leaving it up to the special districts to decide whether to accept the funding, Gardner believes that the bill complies with TABOR despite disagreements from some of his colleagues.

The bill is cosponsored by House Majority Leader K.C. Becker and is expected to receive similar treatment in the House, where it already has thirty sponsors — just three representatives away from the House majority. It is currently under consideration by the House Finance Committee. Democratic representative Steve Lebsock, who currently faces multiple allegations of sexual misconduct, introduced a bill several days before Gardner’s that also addresses the pot-tax gaffe, but it currently has no sponsors and is not expected to pass the House; it will be heard by the House Finance Committee on Monday, February 5.