Gov. Bill Ritter announced this week that in order to fill the $60 million hole in the state budget created by the lower payments from the feds, he will reduce spending by $6.2 million, with the remaining $53.4 million coming out of various cash funds–funds collected and intended for specific uses—as well as the anticipated revenue from fees on medical marijuana licenses.

Ritter said the revised budget will maintain the status quo while keeping Colorado on track for economic recovery.

“We are preserving essential services, protecting the safety net, minimizing pain and requiring shared sacrifices and shared solutions from everyone,” Ritter said. “This is a responsible plan that continues to position Colorado for a healthy and sustainable recovery.”

However, Senate Republicans issued a statement chiding the governor’s latest budget plan and calling for “new priorities in state spending and less reliance on federal dollars” in addressing the state’s budget shortfall.  Senate Republican Minority Leader Mike Kopp, of Littleton, said relying on money from the feds is not good financial planning and sets the state up for a fall when the federal funding falls short or runs dry, as it did this time.

“The Democrats’ partnership with Washington is not working for Colorado taxpayers,” said Kopp. “Colorado businesses and families cannot afford any more financial burdens because Democrats in the state legislature and Gov. Ritter speculated on federal funding and guessed wrong.”

Kopp said reliance on cash funds and anticipated revenue is not sustainable into the future.

“It is time we created real priorities in the state budget and stopped the budgeting gimmicks that have plagued the budget setting of the majority party,” said Kopp.

“This is a common-sense, fair, thoughtful and balanced plan to balance the budget,” said Ritter, speaking to members of the press gathered in his office this morning.

Most of the savings itemized in the proposal stem from anticipated federal money as well as reduced caseloads in Medicaid and the Children’s Health Plan Plus program while avoiding cuts to higher education or further cuts to K-12 education. Smaller adjustments include the transfer of prisoners to lower-cost facilities, eliminating some scholarships, a $900,000 cut in spending for a prison boot camp, and tapping into cash funds. An additional $15 million in revenue is anticipated to be generated by stepped up tax compliance programs in the Department of Revenue.

Ritter pledged to make every effort to protect public safety, protect the safety net for those in need, and to maintain programs that promote job creation and economic recovery.

“It will take all of us working together to make these difficult decisions and to keep positioning Colorado for a strong, stable, and sustainable economic recovery,” said Ritter.

Minority Republicans who have suggested across-the-board cuts to government bureaucracy as a more prudent path to balancing the budget took issue with the governor’s proposal.

“More than half of the proposed budget balancing was put on the federal government’s credit card, and a good portion of the rest of the measures are either gimmicks, cash transfers, or accounting misdirection all of which only result in pushing the really tough choices to next year,” said Senate Minority Leader Josh Penry, of Grand Junction.

Assistant Minority Leader Greg Brophy of Wray responded to the governor’s proposal with questions.

“Is the governor really saying that the only place left to cut in state government is prison beds, prison boot camps and college scholarships? Is the bureaucracy off-limits to the party in power? What part of across-the-board cuts isn’t clear to the party in power?” asked Brophy in a prepared GOP response.

The governor’s proposal will be taken under consideration by the Joint Budget Committee as it begins to formulate a 2010-11 budget for the governor to sign.

“This body has pitted business against education,” said state National Federation of Independent Businesses Director Tony Gagliardi, contending all Colorado will suffer if business is saddled with a heavier tax burden.

The Senate sponsor of the bills eliminating various tax exemptions and credits, Sen. Rollie Heath, D-Boulder, began today’s hearing in the Senate Finance Committee with an exhortation to the panel to consider what is at stake and to focus on things that matter most.

“The conversation is, ‘Is this a fair and equitable way to balance jobs and the needs of children?’ ” Heath said.  “It’s about the kids … those kids who are only in fifth grade once.”

Faced with a $1.3 billion budget shortfall next year amid revenue projections that indicate a much slower-than-anticipated recovery, Gov. Bill Ritter has proposed a slate of business-related tax credits and exemptions to eliminate either temporarily or permanently. Ritter’s plan would bring state coffers another $131.8 million.

The package of 13 tax-policy bills, which began its course in the House last week, has been put on the fast track at the urging of the governor and embraced by Democratic leadership, but not without intense resistance by GOP lawmakers and the business community itself. They argue that jobs will be lost in an already-stressed economy.

Public education advocates, including the Colorado Association of School Executives, The Colorado Association of School Boards and The Colorado Education Association, came to support the measures, which they say would provide desperately needed funding for an education system that is already suffering a $140 million loss in this year’s budget.

Yet, Sen. Keith King, R-Colorado Springs, who runs a charter school in his community, said siphoning money away from business offers little guarantee that the funds actually will aid public schools given the state’s record on the subject. He cited the General Assembly’s decision to freeze the statewide property-tax mill levy in 2007, bringing in some $8 million a year that was supposed to assist public schools but, he said, never made it into the State Education Fund.

“How can this source of funding fund K-12 education when the property tax increase didn’t?” asked King, who added that an increase in personal income via jobs saved creates more money for the State Education Fund.

Proponents of the measures said they were trying to balance the relative merits of lower taxes for business with the revenue needs of education.

“The irony of this is that we are living in the seventh-wealthiest state,” Heath said. “Lets understand, we have already cut this budget by 25 percent.”

Republicans on the panel said if businesses are hit with lost revenue, they may not be able to weather the current recession without having to let employees go. That, they said, would drain the state revenue pool even further, rendering the issue of jobs for teachers moot.

“We have a fundamental disconnect on how to revive an economy,” said King.  “Do we protect government jobs against private sector jobs?”

A one point an exchange between a business owner who testified against the measures and Sen. Michael Johnston, D-Denver, provided a moment of comic relief at the hearing, drawing laughter from both the panel and the audience.

“I don’t want to balance this budget on the backs of your kids, said Johnston implying that schools would receive less funding without a sacrifice from business.

“My kids are homeschooled,” the witness deadpanned.

Gagliardi said businesses already are doing their part on behalf of schools.

“Business has paid more than its share—look at Gallagher,” he said, referring to a state constitutional provision keeping residential property taxes low at the expense of business property.

Yet, Sen. Evie Hudak, D-Arvada, suggested the business community was overstating the impact of losing the tax exemptions and credits .

“A few cents more?  Who’s going to even notice—the sky is not falling–the added revenue could cover the cost of 450 teachers,” said Hudak.

Debate over the bills continues Thursday.

“Colorado entrepreneurs are standing at the door, ready to lead our economy into the future, filled with opportunity–but only if our policy makers ensure that the right environment is in place to enable that to happen,” Dave Csintyan of the Colorado Springs Chamber of Commerce, told the crowd on the Capitol steps. Csintyan  spoke under a banner reading, “Colorado is Open for Business,” a theme organizers said is aimed at  state lawmakers who Wednesday began mulling a slate of bills that shut down tax credits and exemptions businesses say they need in order to compete.

Faced with a $1.3 billion budget shortfall next year amid dismal revenue projections, Gov. Bill Ritter has proposed a laundry list of 13 tax credits and exemptions to eliminate either temporarily or permanently. Ritter’s plan would bring state coffers another $131.8 million.

Lawmakers on Wednesday began the process of seeing the governor’s proposals–House Bills 1189 through 1200–through the legislative process. Majority Democrats on the House Finance Committee had approved several of the measures on party-line votes by late Wednesday evening, but only over dogged Republican opposition and after taking hours of testimony from business owners, employees and others who turned out to denounce the legislation.

Some of that sentiment spilled over into today’s rally. Business owner Bob Boswell said his Greeley restaurant has suffered during the economic downturn and has struggled to stay afloat for his customers, his employees, and for his community.

“Government should never be a contributing factor in the loss of jobs,” Boswell said.

Rifle businessman Phil Vaughn said he believes Colorado has what it takes to pull itself out of the recession because he recognizes what he calls a deep pool of talent of entrepreneurs and employees in the state.  However, he said he is worried government might hinder the recovery.

“If politicians will step out of the way and allow us to do our business, either through less regulation or more favorable tax structures, these entrepreneurs and employees will step up to the challenge,” Vaughn said. He also said he thinks fiscal reform is necessary, and he applauded efforts underway to look at constitutional provisions that constrain the budget in perhaps unnecessary ways.

Ritter administration spokesman Evan Dreyer said the governor understands the strain that Colorado businesses are facing, but he has a duty to address the gaping hole in the budget in order to provide needed services for all people in the state. Dreyer said the governor stands behind his tax proposals.

“We understand that this is difficult, but the governor’s proposal is a reasonable approach considering the majority of exemptions for business that have not been touched,” Dryer said.

Yet, another rally participant, Mark Moses, of Outback Steakhouse in Aurora, said he was so concerned about the impending effect of the legislation on his business that he stayed until 2 a.m. this morning at the House Appropriations committee meeting “fighting for the livelihood of his employees.”

The unusually long marathon hearing was the first opportunity for members of the public to weigh in on the measures.

Moses said that business owners are afraid that they will lose their businesses and that employees will lose their jobs because of what is happening at the Capitol.

“If you kill the golden goose you’ll kill the golden egg,” said Moses.  “You have to support small business. We are the goose that laid the golden egg.”

This week, the Colorado Association of Commerce and Industry release a new survey of CACI members, who said cutting the tax credits and exemptions would have an impact on their business decisions and could undermine their ability to stay healthy. Last week, three of the state’s other leading business organizations also expressed concern about the governor’s tax measures.

Faced with a $1.3 billion budget shortfall amid revenue projections that indicate a much slower-than-anticipated recovery, Gov. Bill Ritter has proposed a laundry list of 13 tax credits and exemptions to eliminate either temporarily or permanently. Ritter’s plan would bring state coffers another $131.8 million.

Business groups and their membership, who have been urging the governor to reconsider his proposal, will now be focused on state lawmakers, who will start deliberations on the measures tomorrow. That’s when the House Appropriations committee is scheduled to take up House Bills 1189 through 1200, comprising the administration’s proposed changes.

Sen. Linda Newell, D-Denver, who has roots in the business community, says she will be looking at each measure carefully with an eye toward how businesses will be affected, and she said she plans on talking with the business community before she makes any decisions on how to vote on the measures . Newell says the exemptions need to be re-evaluated to bolster sagging revenues for the state.

“We need more revenue at the state level, and if that means that we need to close some of those loopholes then, yes, that’s a better mechanism than it would be to go back out for a vote of the people (for a broader tax hike),” said Newell.

The state constitution’s Taxpayer’s Bill of Rights requires a popular vote on any tax hike, but the Colorado Supreme Court ruled last year that eliminating tax credits and exemptions, boosting state revenue, would not require a vote if the result didn’t raise the state’s year-on-year revenue overall. Looking at temporary rather then permanent revisions appeals to Newell because she thinks businesses would be more willing to accept it.

Loren Furman, of the Colorado Association of Commerce and Industry says that the Colorado business community has spoken and that they believe the repeals will take away jobs.

“Repealing these tax exemptions and credits will absolutely impact jobs in Colorado and businesses have said as much,’” said Furman, pointing to a new survey of CACI members, who unequivocally said they are against the proposed measures.

Rep. Bob Gardner, R-Colorado Springs, thinks that repealing the tax exemptions is not only bad for business but also a slap at Colorado’s constitution. Gardner said the legislature has no right to pass the measures without a vote of the people despite the state Supreme Court’s ruling.

“The fact of the matter is that it’s a new kind of tax,” he said. “It is a new tax that ought to go to the people of Colorado. In fact, all of these tax exemptions that are going to be heard on Wednesday ought to be considered by the people of Colorado.”

Of particular concern to Gardner is the repeal on the exemption for computer software that is procured by businesses through the Internet.  Under the Colorado Department of Revenue, non-tangible personal property is not taxed and what has been deemed as tangible personal property is subject to taxation.

“It’s not really an exemption,” Gardner said.  “Under our tax code, intangibles such as software have never been taxed. One of these bills would define, for the first time, software as tangible personal property.”

Gardner added, “It is going to affect our business climate. It is going to be to the detriment of jobs.”

Tony Gagliardi of the National Federation of Small Businesses, says the state cannot create jobs when it enacts policies that raise the cost of employment.

“Every time we turn around, the state is coming up with onetime fixes that impact us,” said Gagliardi.  “We’re to the point where there’s just no more to give up.”