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Mar 27, 2012 5:53 AM by AP

Colo. senior tax break fight ends before it starts

DENVER (AP) - Colorado's improving economy has helped lawmakers avoid the most contentious debate of the year - restoring a suspended property tax break for senior citizens.

Lawmakers learned Monday that sunny fiscal projections - a revenue boost from personal income and business taxes - combined with money left over after budgeting completed so far renders moot a fight over the nearly $100 million tax break for seniors.

A Joint Budget Committee analyst delivered the news, and budget writers immediately moved to add $57.2 million to K-12 education. They're also weighing restoring between $23 million to $30 million to public colleges. They're allowing municipalities keep $30 million in severance taxes.

If those suggestions are approved by the whole Legislature, it would mean K-12 and colleges would experience little or no reductions in next year's budget, a rarity after several cash-strapped years.

But one remaining issue that will play out in the coming weeks is whether to cut 2 percent across all state agencies, a move some lawmakers warn will lead to layoffs.

The latest budget projections showed Colorado with nearly $200 million to spare after setting aside nearly $100 million to ease property taxes on some seniors. Lawmakers from both parties have eliminated the tax break in the past to balance the budget.

Getting the tax break represents a huge coup for Republicans, who were on a collision course with Gov. John Hickenlooper and fellow Democrats who insisted the state could not afford the tax exemption in the upcoming budget. Many expected a bitter election-year showdown over the question.

State voters approved the senior tax break in 2000, but lawmakers have had to suspend it to balance the budget in the depths of the Great Recession.

The exemption allows homeowners 65 and older who have lived in their homes for at least 10 years to deduct 50 percent of the first $200,000 of property value from their taxes.

Under current law, the tax break ranges from $292 for a $100,000 home, to $583 for homes worth $200,000 or more. It benefits an estimated 167,714 seniors, according to legislative staff.

With more money to spend, state budget writers also voted Monday to add an extra $57 million to public schools to avoid reductions in per-pupil funding as enrollment increases.

The budget is expected to be introduced in the House next week. The state has just over $8 billion to spend from the general fund next year, according to the governor's economists.

Monday's news means that both parties can declare victories in Colorado's split Legislature. Republicans who control the House can tout sticking up for the full senior tax break, while Democrats running the Senate may be able to boast they restored some education cuts.

"With today's budget announcement, we are showing everyone what our priorities are," said Republican House Speaker Frank McNulty, highlighting the tax exemption and reducing cuts to education.

House Democratic Leader Mark Ferrandino applauded the tax break for seniors and also celebrated the increased education funding.

"We will support solutions that restore some of the deep cuts we've made to education, and we will fight to protect the most disadvantaged Coloradans," Ferrandino said in a statement.

Despite the higher tax receipts, Colorado lawmakers still will have less to spend than before the recession began in 2008. That means that school cuts will be eased, but not erased. And budget writers are careful to point out that the bad economy swelled demand for state services such as food stamps and Medicaid, further straining finances.

Lawmakers are far from resolving all their differences on the state's expenditures. Most notable is a debate over whether lawmakers should cut all departments by 2 percent in exchange for the state contributing more to employees' health, life and dental benefits.

"It seems irresponsible to leave that in the budget," said Democratic Sen. Pat Steadman, a JBC member. "We're still negotiating."

Steadman said a letter from the Office of State Planning and Budgeting predicted that 2 percent cut would result in about 435 positions being eliminated across all departments. It's unclear how many of those positions are already vacant and which would be through layoffs.

Republican Rep. Jon Becker, another JBC member, isn't convinced there would be mass layoffs, saying that departments have been unable to tell lawmakers how many employees they have and how many positions are vacant.

"Now they're saying that 2 percent will harm them, so I'm not real apt to believe that that's the case," Becker said.

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