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State budget pressure shrinks severance-tax funding Lake County relies on, DOLA official says
Summary
A Department of Local Affairs official told Lake County leaders that severance-tax and related extractive-industry funds that pay for local infrastructure have been drawn down by the state budget, leaving reserves vulnerable and making upcoming grant rounds likely smaller.
A Department of Local Affairs representative told Lake County commissioners and staff that state budget actions and volatile industry payments have reduced the pool of severance-tax and Energy Impact Assistance Fund (EIAF) money that the department normally allocates to local governments.
The DOLA representative said the department’s “bread-and-butter” programs—EIAF, severance-tax distributions and federal mineral lease funds—are used to invest in local infrastructure such as wastewater treatment and other capital projects. “A lot of the money goes directly to local governments,” the representative said.
Why it matters: Lake County has several active projects now that rely on those funds, and the department said its reserves are more exposed after recent budget sweeps. The DOLA representative said the legislature has taken about $45,000,000 from the department’s funds over the last year, and that a recent large ad valorem tax return had required use of reserves. “Long story short, we are gonna have a really weak round this next round,” the representative said.
The official described two causes: (1) statutory funds intended to support local government infrastructure are being used to fill gaps in the statewide budget, and (2) the underlying revenue stream—payments tied to oil, gas and mineral extraction—has been volatile and is expected to decline over decades. The department said it has had several “bumper years” recently, distributing roughly $400,000,000 to local governments over the last four years, but expects severance-related receipts to flatten.
County discussion focused on advocacy and next steps. Commissioners and staff asked whether statewide associations have addressed the issue; the DOLA representative said Colorado Counties, Inc. (CCI), the Colorado Municipal League (CML) and the Special District Association are likely to press that extractive-industry funds should remain for local use. The representative recommended engagement with those groups and with the Joint Budget Committee (JBC), which oversees the state budget.
The representative emphasized DOLA’s role in vetting eligibility for grants and providing technical assistance to counties. She described smaller DOLA programs the county may use—property taxation assistance, assessment appeals support and technical workshops—and offered training and recruitment resources as the county plans staff transitions.
Commissioners noted that the department’s funds are not general fund money and questioned how to protect those revenues. The DOLA representative summarized that the legislature can reallocate these funds through the normal budget process and JBC votes, and that local officials and associations should make the case that the statutory purpose of those revenues is to support local government infrastructure.
Ending: County staff and commissioners said they will follow up with CCI and other associations and promised further discussion in coming meetings. DOLA staff offered to provide contact information and technical resources and said regional staff will remain available to assist with grant, engagement and planning work.
