DENVER—A bipartisan plan to use nearly $2 billion in federal energy revenue to pay for higher education construction and larger scale projects in oil and gas communities was backed by the Senate Education Committee on Thursday.
The measure (Senate Bill 218), in the works since last year, is supported by state colleges and universities, the oil and gas industry, and communities at the heart of the energy boom. It would take most of the growth in federal energy royalties and place them in two funds—one for higher education construction and another for oil and gas cities and counties.
The state is forecast to take in $2.7 billion in royalties and bonus payments over the next decade. That doesn’t include bonus payments for leasing the Roan Plateau which could bring in several hundred million dollars more. Over 10 years, the higher education fund would be expected to grow to about $672 million while about $1 billion would go to projects in communities affected by oil and gas development.
David Skaggs, executive director of state Department of Higher Education, said the fund would help deal with a backlog of about $4 billion in construction projects. The state plans to leverage the money to jumpstart higher education projects.
The plan would help take some pressure off the rest of the budget if revenues drop during an economic downturn, but it doesn’t automatically provide any extra money to cover the day-to-day expenses at Colorado colleges and universities. A national study showed they are $800 million behind their peer institutions.
If there is a downturn, lawmakers would be able to vote whether to use the fund money to prevent operational cuts in higher education funding. Co-sponsor Sen. Josh Penry, R-Fruita, said lawmakers should have the flexibility to do that, but he warned it could also prevent the fund from growing into a true endowment like the states of Wyoming and Utah have.
“Then our legacy that we’re talking about with this legislation is gone,” Penry said.
The other co-sponsor, Sen. Gail Schwartz, D-Snowmass, acknowledged that this windfall still isn’t enough to meet all the state’s budget needs.
Meeker’s Town Administrator, Sharon Day, said her community needs the federal revenue because many of the welders and pipefitters that have moved into town to support drilling aren’t permanent residents paying property taxes. At the same time, she said, the energy industry is putting more demands on the water system there.
Given the boom-and-bust cycle of the energy industry, Day said she welcomed creating a permanent fund to help pay for bigger projects. She said Meeker won’t pay off the debt it incurred during the last boom until 2011. After the 1982 bust, she said, there were only 1,800 people left to share the burden, compared to 3,000 during the boom.
Penry said the plan is to use more of the money for larger projects, like road construction, rather than spreading out smaller grants like “marmalade” throughout the state, which he said has traditionally been the practice.
