A lawsuit over how the Colorado Secretary of State’s Office is funded seems to have merit and could result in future headaches for state budget planners.
The suit filed by the National Federation of Independent Business contends $20 million in annual business licensing and regulatory fees are improperly funding other office functions, including elections.
It is difficult to argue otherwise, considering the office’s $20 million budget gets zero funding from the state’s general fund and $5.5 million is dedicated to elections.
The lawsuit raises the particularly thorny issue in Colorado of fees versus taxes.
Legally defined, fees are supposed to defray costs of a specific government service. Taxes raise revenues for general government expenses. Further, under the Taxpayer’s Bill of Rights, any new tax or tax increase must be voter approved.
The lawsuit effectively argues business fees are being used as taxes unapproved by voters.
The NFIB, the state’s largest small business organization, says businesses file about 750,000 documents every year and pay between $1 and $125 for each filing.
The fees have risen steadily. For Fiscal Year 1990-91, the department collected $4.91 million from those fees. In 2013-14, it collected $18.6 million.
Outgoing Secretary of State Scott Gessler said in a press release he is “sympathetic to (the lawsuit’s) concerns” and he has argued some of the same points to legislators.
Gessler cautioned the Joint Budget Committee against sending $2.5 million in business filing fees to counties to help defray their election costs, warning that it would be a “dead bang loser in court.” He may now get to see if his prediction was accurate.
The legislature will have many other money issues to contend with this year, but this lawsuit suggests business fees are being used improperly to fund elections. If so, some other funding mechanism will have to be found.
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