JBC authorizes draft to transfer interest from nonexempt cash funds to general fund to blunt TABOR impact

The Joint Budget Committee voted 6-0 to ask staff to draft legislation that would transfer certain treasury interest earned on nonexempt cash funds to the general fund for the current and next two fiscal years as a tool to reduce the fiscal pressure from TABOR refunds.

The measure is a staff‑led response to unexpectedly large interest earnings on state cash funds in FY 2023‑24. JBC staff told members that interest credited to many cash funds rose sharply as interest rates increased, and that interest earnings on a relatively small number of large funds accounted for the majority of the $187 million in TABOR‑counted interest in 2023‑24. The draft legislation the committee authorized would capture treasury pool interest on a targeted list of funds for FY 2024‑25 and FY 2025‑26 and would consider a broader, administratively complex mechanism for later years.

Why it matters: Under Colorado’s Taxpayer Bill of Rights (TABOR) framework, interest and income on many nonexempt cash funds is counted as revenue that can trigger refunds or reduce General Fund available for appropriation. Committee staff told members that capturing treasury interest and moving it to the General Fund could make an equivalent amount of General Fund available to pay the TABOR refund and to support General Fund priorities in 2024‑26.

What the committee approved and next steps

- The committee voted to draft a bill that for FY 2024‑25 would require the State Treasurer to transfer the treasury pool interest earned in specified annually appropriated nonexempt cash funds to the General Fund, and for FY 2025‑26 would amend those statutory cash‑fund provisions so interest is credited to the General Fund going forward. The committee directed staff to refine the list of candidate funds and to omit interest that is clearly loan‑payment interest tied to a revolving loan program.

- The committee also approved staff authority to develop an additional, longer‑term policy proposal that would cap interest retained in cash funds and transfer amounts above that cap to the General Fund in future years. Staff described the longer‑term option as administratively heavy (monthly monitoring across hundreds of funds) and recommended study over the interim before a large statutory change.

Key policy tradeoffs discussed

- Scope: Staff presented a short list of funds that generate large shares of interest (11 funds generated about 60% of FY 2023‑24 interest). The committee discussed excluding funds that support revolving loan programs (loan‑payment interest), funds with solvency concerns, and funds with legal restrictions on appropriations.

- Timing: The governor’s office proposed a broader change beginning FY 2026‑27 that would cap retained interest at a benchmark return and transfer the excess to the General Fund. JBC staff recommended limiting immediate statutory change to a smaller set of funds for 2024‑26 and studying a broader fix over the interim.

- Program impacts: Members pressed whether transfers would reduce program support or simply shift how interest is treated for TABOR purposes. Staff emphasized that for funds originally capitalized with General Fund, capturing interest ongoing is a defensible default; for fee‑funded programs, capturing interest can require fee increases to maintain service levels.

Votes at the meeting: The motion to draft implementing legislation and a related policy work package passed 6‑0. The committee also approved staff authority to work with the Office of Legislative Legal Services and the Office of State Planning and Budgeting on drafting and additional fund lists.