COURT OF APPEALS, STATE OF COLORADO

2 East 14th Avenue
DATE FILED: April 5, 2019 8:36 AM
Denver, Colorado 80203 FILING ID: 7B6381A4DD9B1
CASE NUMBER: 2019CA621
Civil Appeal from Denver District Court
District Court Judge: Honorable Ross B.H. Buchanan
Case Number: 2015CV32305

TABOR FOUNDATION; COLORADO UNION OF

TAXPAYERS FOUNDATION; REBECCA R.
SOPKIN; and JAMES S. RANKIN, Plaintiffs-
Appellants,

v.

COLORADO DEPARTMENT OF HEALTH CARE

FINANCING; COLORADO HEALTHCARE
AFFORDABILITY AND SUSTAINABILITY
ENTERPRISE; KIM BIMESTEFER, in her official
capacity as Executive Director of the Colorado
Department of Health Care Policy and Financing;
COLORADO DEPARTMENT OF THE TREASURY;
WALKER STAPLETON, in his official capacity as
Colorado State Treasurer; and THE STATE OF
COLORADO, Defendants-Appellees, and

COLORADO HOSPITAL ASSOCIATION,

Defendant-Intervenor-Appellee.

John J. Vecchione (Va. Bar No. 73828)

Case No.:
Lee A Steven (DC Bar No. 468543)
R. James Valvo, III (Va. Bar No. 85448)
CAUSE OF ACTION INSTITUTE
1875 Eye Street NW, Suite 800
Washington, DC 20006
(202) 499-4232
john.vecchione@causeofaction.org
lee.steven@causeofaction.org
james.valvo@causeofaction.org

Counsel for Plaintiffs-Appellants

(Local counsel listed in signature block)
APPELLANTS’ NOTICE OF APPEAL

 
 

I. Nature of the Case

A. Nature of the Controversy

In 2009, the General Assembly authorized Defendant-Appellee Department of

Health Care Policy and Financing (“Department”) to levy the Hospital Provider
Charge. The purpose of this charge was to artificially inflate hospital costs to increase
the amount of federal matching funds available through Medicaid. Plaintiffs-
Appellants brought this case alleging that the charge was a “new tax” levied in
violation of the Colorado Constitution’s Taxpayer’s Bill of Rights (“TABOR”) because
it was not a fee-for-service transaction, was not reasonably related to the
Department’s costs of providing the service, and was levied without the requisite
TABOR vote.

In 2017, the General Assembly enacted Senate Bill 17-267 (“SB 17-267”), under
the pretense of addressing the sustainability of rural Colorado. Plaintiffs-Appellants
amended their complaint to challenge SB 17-267, alleging that the bill was enacted
in violation of the Colorado Constitution’s single-subject requirement because its
substantive provisions were not directly related to its stated purpose.

In addition to many unrelated provisions, SB 17-267 also created Defendant-

Appellee Colorado Healthcare Affordability and Sustainability Enterprise (“CHASE”)
as an allegedly TABOR-exempt enterprise. Plaintiffs-Appellants allege that the
General Assembly did not create a valid enterprise because it gave CHASE the power
to levy a tax when it transferred the Hospital Provider Charge—now the Healthcare
Charge—to its control.

Plaintiffs-Appellants further allege that, even if SB 17-267 did not violate the
single-subject requirement and the Healthcare Charge is not a tax, and thus CHASE
is a valid TABOR-exempt enterprise, SB 17-267 nonetheless violated the “state excess
revenues cap” because the General Assembly used the bill to convert the authority to
levy a revenue stream subject to TABOR from the Department to CHASE without a
corresponding full downward adjustment to the cap.

Defendants-Appellees and Defendant-Intervenor-Appellee Colorado Hospital

Association moved for summary judgment arguing that Plaintiffs-Appellants lacked
standing and that they were entitled to judgment as a matter of law on the merits.
Plaintiffs-Appellants also moved for summary judgment in their favor. On March 5,
2019, the district court issued a judgment and order concluding that all Plaintiffs-
Appellants had standing but finding Defendants-Appellees and Defendant-
Intervenor-Appellee were entitled to summary judgment. This appeal follows.

 
 

B. Judgment being Appealed and Jurisdiction

Plaintiffs-Appellants appeal the district court’s grant of summary judgment in

favor of Defendants-Appellees and Defendant-Intervenor-Appellee as contained in
the district court’s March 5, 2019 order. This Court has jurisdiction pursuant to
Colorado Appellate Rules 1(4)(a)(1), 3(d), and 4(a).

C. Resolution of All Issues

The district court’s March 5, 2019 order resolved all pending issues. To date,
no party has moved for attorney’s fees or costs.

D. Finality of Judgment

The district court’s judgment is final for the purposes of appeal pursuant to
Colorado Rule of Civil Procedure 54(b). The district court has granted summary
judgment for Defendants-Appellees and Defendant-Intervenor-Appellee in their
entirety and dismissed the case with prejudice.

E. Date of Judgment

The district court entered the order containing the judgment and dismissing
the case with prejudice on March 5, 2019.

F. – H. Post-Trial Proceedings

No motions for extension for post-trial relief were filed in this case. No motions
for post-trial relief were filed. No motions for extension were filed regarding the
notice of appeal.

II. Advisory List of Issues to be Raised on Appeal

Appellants intend to raise three issues on appeal:

A. The TABOR amendment to the Colorado Constitution requires districts

to obtain the consent of the people through a public vote before raising taxes, but
not before levying fees. The General Assembly created the 2009 Hospital Provider
Charge and the 2017 Healthcare Charge without a vote of the people. Are the two
charges at issue fees or taxes, and did the General Assembly violate TABOR when
it created them?

B. The Colorado Constitution’s single-subject requirement demands that

all of a legislative bill’s provisions relate directly to its subject. The General
Assembly stated that the subject of SB 17-267 was the “sustainability of rural

 
 

Colorado” but the bill contained numerous disparate provisions that applied to the
whole state and were not directed at rural Colorado. Did the General Assembly
violate the single-subject requirement when it passed SB 17-267 and, if so, are the
offending provisions severable from the rest of the bill?

C. TABOR exempts enterprises from its caps but requires that the
qualification or disqualification of an enterprise change the spending base and
future-year limits of a district. In 2017, the General Assembly created CHASE as
an allegedly TABOR-exempt enterprise but did not adjust the annual caps by the
requisite amount. Is the creation of CHASE the “qualification” of an enterprise
under TABOR, thus triggering a reduction in the spending caps?

III. Transcript

The trial court heard oral argument on the motions for summary judgment on
September 6, 2018. No evidence was taken during that hearing, and no trial-court
transcripts are necessary to resolve the issues on appeal.

IV. Magistrate Order

The order being appealed was issued by the Honorable Ross B.H. Buchanan, a
Denver district court judge. There were no magistrate orders issued in the trial court.

V. Counsel for the Parties on Appeal

A. Plaintiffs-Appellants

John J. Vecchione (VA Bar No. 73828)

Lee A Steven (DC Bar No. 468543)
R. James Valvo, III (VA Bar No. 85448)
CAUSE OF ACTION INSTITUTE
1875 Eye Street NW, Suite 800
Washington, DC 20006
(202) 499-4232
john.vecchione@causeofaction.org
lee.steven@causeofaction.org
james.valvo@causeofaction.org

Counsel for Plaintiffs-Appellants

Steven J. Lechner, Atty. Reg. No. 19853

LECHNER LAW FIRM, LLC
P.O. Box 351743
Westminster, CO 80035-1743

 
 

(720) 936-8363
steve@lechnerlawfirm.com

Local Counsel for Cause of Action Institute

B. Defendants-Appellees

Phil Weiser, Attorney General

Jennifer L. Weaver, First Assistant Attorney General, #28882
W. Eric Kuhn, Senior Assistant Attorney General, #38083
Ralph L. Carr Colorado Judicial Center
1300 Broadway, 6th Floor
Denver, CO 80203
Telephone: (720) 508-6145/6143
Fax: (720) 508-6041
jennifer.weaver@coag.gov
eric.kuhn@coag.gov

C. Defendant-Intervenor-Appellee

Sean R. Gallagher, #16863

Gerald A. Niederman, #12449
Bennett L. Cohen, #26511
1401 Lawrence Street, Suite 2300
Denver, CO 80202
(303) 572-9300
sgallagher@polsinelli.com
gniederman@polsinelli.com
bcohen@polsinelli.com

VI. Appendix

An appendix is attached to this Notice of Appeal containing a copy of the

judgment and order being appealed. There were no motions for new trial or to proceed
in forma pauperis.

//

//

 
 

DATED the 5th day of April, 2019 Respectfully submitted,

/s/ John J. Vecchione

John J. Vecchione, Va. Bar No. 73828
Lee A Steven, DC Bar No. 468543
R. James Valvo, III, Va. Bar No. 85448
CAUSE OF ACTION INSTITUTE

Counsel for Plaintiffs-Appellants

Steven J. Lechner, Atty Reg No. 19853

LECHNER LAW FIRM, LLC
P.O. Box 351743
Westminster, CO 80035-1743
(720) 936-8363
steve@lechnerlawfirm.com

Local Counsel for Cause of Action Institute

 
 

CERTIFICATE OF SERVICE

I certify that on the 5th day of April, 2019, the foregoing document was served
on the following counsel of record via U.S. mail and a courtesy copy also was provided
via electronic mail.

JENNIFER L. WEAVER, First Assistant Attorney General

W. ERIC KUHN, Senior Assistant Attorney General
Ralph L. Carr Colorado Judicial Center
1300 Broadway, 6th Floor
Denver, CO 80203
(720) 508-6145/6143
jennifer.weaver@coag.gov
eric.kuhn@coag.gov

SEAN R. GALLAGHER
GERALD A. NIEDERMAN
BENNETT L. COHEN
POLSINELLI PC
1401 Lawrence Street, Suite 2300
Denver, CO 80202
(303) 572-9300
sgallagher@polsinelli.com
gniederman@polsinelli.com
bcohen@polsinelli.com

MICHAEL FRANCISCO
Statecraft PLLC
620 N. Tejon Street, Suite 101
Colorado Springs, CO 80903
(719) 822-2809
michael@statecraftlaw.com

An advisory copy of Appellants’ Notice of Appeal has been served on the

Clerk of the Denver District Court as well.

/s/ John J. Vecchione

John J. Vecchione, Va. Bar No. 73828

 
 DISTRICT COURT, CITY AND COUNTY OF DENVER,
STATE OF COLORADO
DATE FILED: March 5, 2019 11:50 PM
Court Address: CASE NUMBER: 2015CV32305
1437 Bannock St., Denver, CO 80202

TABOR FOUNDATION, a Colorado non-profit corporation;

COLORADO UNION OF TAXPAYERS FOUNDATION a
Colorado non-profit corporation; REBECCA R. SOPKIN an
. COURT USE ONLY .
individual; and JAMES S. RANKIN, an individual,
Plaintiffs,
Case Number: 15CV32305
v.
Ctrm: 275
COLORADO DEPARTMENT OF HEALTH CARE POLICY
AND FINANCING; COLORADO HEALTHCARE
AFFORDABILITY AND SUSTAINABILITY ENTERPRISE;
KIM BIMESTEFER, in her official capacity as Executive
Director of the Colorado Department of Health Care Policy
and Financing; COLORADO DEPARTMENT OF THE
TREASURY; WALKER STAPLETON, in his official
capacity as Colorado State Treasurer; and the STATE OF
COLORADO, Defendants, and

COLORADO HOSPITAL ASSOCIATION,

Defendant-Intervenors.

ORDER RE: PARTIES’ MOTIONS FOR SUMMARY JUDGMENT

THIS MATTER is before the court on the Motions for Summary Judgment filed by all

parties on July 16, 2018.

INTRODUCTION

For ten years, the Colorado General Assembly has attempted to address the persistent

problem of uninsured and uncompensated health care administered by Colorado hospitals in their

emergency departments and elsewhere, first by means of the Hospital Provider Fee (“HPF”)

Program administered by the Defendant Colorado Department of Health Care Policy and

1
Financing (“Department” or “HCPF”), then through the Healthcare Affordability and

Sustainability Fee (“HASF”) Program administered by the Colorado Healthcare Affordability

and Sustainability Enterprise (“CHASE”). Under both programs, fees have been collected from

hospitals in order to allow the state to obtain matching funds from the federal government

pursuant, in part, to its efforts to expand eligibility for Medicaid as part of the Affordable Care

Act. The aggregate of state and federal funds have then been redistributed to the hospitals in the

form of supplemental payments designed to reduce the amount of uncompensated medical

services, as well as expand the Medicaid population, thereby decreasing the number of

Coloradans without health insurance, as well as other services.

This case involves the question of whether these two programs violate the Taxpayers Bill

of Rights (“TABOR”), Colo. Const., art. X, § 20, in several respects. Plaintiffs contend that both

programs constitute taxes, as opposed to fees, upon which the voters were not allowed to vote,

and therefore require refunds under TABOR. Plaintiffs also contend that the advent of CHASE

amounts to the qualification of an enterprise within the meaning of TABOR, requiring a

retrospective downward adjustment of the excess state revenue cap in excess of that enacted by

the legislature, and corresponding TABOR refunds. Plaintiffs also contend that CHASE and

HASF are unconstitutional because their enabling statute violates the Constitution’s single

subject requirement. Colo. Const., art. V, § 21.

Defendants Department and CHASE counter that both programs involve fees, rather than

taxes, and therefore are exempt from TABOR. They also contend that the legislature created

CHASE and the HASF, rather than the HPF Program becoming qualified as an enterprise within

the meaning of TABOR, and that therefore no downward adjustment to the excess state revenue

cap was required. Defendants also contend that the enabling legislation did not violate the single

2
subject requirement. Defendant-Intervenor Colorado Hospital Association was allowed to

intervene, and has taken positions in support of the Department in its Motion.

Each party filed a Motion for Summary Judgment on July 16, 2018, a Response on

August 6, 2018, and a Reply on August 20, 2018.1 Oral argument was had at a hearing held on

September 6, 2018.

The court, having reviewed all of the briefing and all exhibits and attachments thereto,

and having considered counsel’s arguments at the hearing, the court record, the applicable law,

and being otherwise fully advised in the premises, FINDS and ORDERS as follows.

UNDISPUTED FACTS

The following facts are undisputed.

1. In 1992, the voters of Colorado adopted TABOR, which requires voter approval for “any

new tax, tax rate increase,… or a tax policy change directly causing a net tax revenue gain to any

district.” Colo. Const., art. X, §20(4)(a). TABOR also set limits on the amount of revenue the

state may collect and spend per fiscal year, adjusted annually for inflation and population

growth, and required refunds of revenue exceeding the spending limit. Id., § (7)(a) and (d).

2. In 2005, the voters adopted a referred measure, known as Referendum C, which provided

a five-year “timeout” from the application of the spending limits under TABOR. C.R.S. § 24-77-

1
The Department filed a Motion to Dismiss on September 2, 2015 pertaining to the then-existing HPF Program.
Following the legislative repeal of that program and the creation of CHASE and the HASF Program, and the
Plaintiffs’ filing of their First Amended Complaint, Defendants filed a Supplement to Motion to Dismiss on
September 7, 2017. Finally, Defendants filed a Second Supplement to Motion to Dismiss on February 23, 2018,
following Plaintiffs’ filing of their Second Amended Complaint. Because the issues raised in these Motions and
Supplements are essentially the same as are dealt with in the parties’ Motions for Summary Judgment, and the court
has now had the benefit of a more fully developed factual record, Defendants’ Motion to Dismiss, Supplement to
Motion to Dismiss, and Second Supplement to Motion to Dismiss are HEREBY DENIED AS MOOT.

3
103.6 (1)(a). Pursuant to Referendum C, a new “excess state revenues cap” was created as the

new limit on state revenues and the trigger for refunds under TABOR, based upon the revenues

which the state collected in Fiscal Year 2007-2008. C.R.S. § 24-77-103.6(1)(b) and -

103.6(6)(b)(I)(B).

3. Title XIX of the federal Social Security Act established the Medicaid program, under

which the federal government provides funding to states that implement medical assistance

plans. See 42 U.S.C. §§ 1396a-1396b. The Department administers Colorado’s Medicaid

program pursuant to the Colorado Medical Assistance Act, C.R.S. § 25.5-4-101, et. seq. For a

participating state, the federal government pays Medicaid funds “equal to a percentage of the

total amount spent by the state on its Medicaid program.” 42 U.S.C. § 1396b. In other words,

Medicaid provides matching federal funds to states participating in the federal program

4. In 2009, the general assembly enacted House Bill 09-1293 (“HB 09-1293”), which

created the HPF Program administered by the Department. 2009 Sess. Laws Ch. 152. Under the

HPF Program, most of the hospitals in Colorado (excluding psychiatric hospitals and

rehabilitation hospitals) were assessed a hospital provider fee, which was utilized to obtain

matching federal funds, then the aggregated funds were redistributed to hospitals within the state

of Colorado, some of which had not contributed a HPF in the first instance. The HPF Program

was codified at C.R.S. § 25.5-4-402.3 (2009).

5. The legislative declaration accompanying HB 09-1293 indicated that the general

assembly’s purposes in enacting the HPF Program were several, including (1) providing a payer

source for some low-income and uninsured populations who may otherwise be cared for in

emergency departments and other settings, (2) reducing the underpayment to Colorado Hospitals

participating in publicly funded health insurance programs, (3) reducing the number of persons

4
in Colorado who are without healthcare benefits, (4) reducing the need of health care providers

to shift the cost of providing uncompensated care to other payers, and (5) expanding access to

high-quality, affordable healthcare for low-income and uninsured populations. 2009 Sess. Laws

Ch. 152, § 1, at 634; C.R.S. §25.5-4- 402.3 (c)(I)-(V).

6. Because the HPF Program did not exist at the time, its revenues were not included in the

calculation of the original excess state revenues cap, which was based upon revenue collections

from FY 2007-2008. C.R.S. § 24-77-103.6 (6)(b)(I)(B). However, fees collected under the HPF

Program counted against the TABOR spending limits established under §(7) of TABOR.

7. During the 2017 legislative session, it became clear to legislators that projected revenues

under the HPF Program would cause the state revenues to exceed the excess state revenues cap,

triggering TABOR’s refund provisions. Recognizing that circumstance, the general assembly

enacted the Colorado Healthcare Affordability and Sustainability Enterprise Act of 2017 as part

of Senate Bill 17-267 (“SB 17-267”). SB 17-267, which was signed into law by Governor

Hickenlooper on May 30, 2017, simultaneously terminated the HPF Program, and created

CHASE and the HASF Program. The legislation indicated that CHASE was to be a

“government-owned business within the state department for the purpose of charging and

collecting the [HASF], leveraging [HASF] revenue to obtain federal matching money, and

utilizing and deploying the [HASF] revenue and federal matching money to provide the business

services specified in subsections (2)(d)(I) and (2)(d)(II) of this section to hospitals that pay the

[HASF]” SB 17-267, §17, at 19; C.R.S. § 25.5-4-402.4(3)(a)(2017). The legislative declaration

also provided that, so long as CHASE qualifies as an enterprise under TABOR, the revenues

from the HASF would not constitute state fiscal year spending, as defined in C.R.S. 24-77-102

(17), or state revenues, as defined in C.R.S. 24-77-103.6 (6)(c) and do not count against either

5
the state fiscal year spending limit imposed by TABOR, or the excess state revenues cap, as

defined in C.R.S. 24-77-103.6 (6)(b)(I). SB 17-267, § 17, at 19; C.R.S. § 25.5-4-402.3 (2)(g).

8. SB 17-267, which contained many other sections besides those creating CHASE and the

HASF, was entitled “Concerning the Sustainability of Rural Colorado.”

9. SB 17-267’s legislative declaration was substantially identical to that under the HPF

Program, but added that CHASE was to provide additional business services to hospitals paying

the fee, including (1) consulting to improve cost efficiency and patient safety, (2) advising

regarding potential changes to federal and state laws and regulations governing the provision and

reimbursement for medical services under programs administered, (3) providing coordinated

services to hospitals to help them adapt and transition to new or modified performance tracking

and payment systems for programs administered, and (4) any other services to aid hospitals in

efficiently and effectively participating in programs administered, and providing funding for and

implementing, the healthcare delivery system reform incentive payments program. SB 17-267, §

17 at 18 and 22-23; C.R.S. §§ 25.5-4-402.4 (2)(c)(VI) and -402.4 (4)(a)(IV).

Additional facts will be summarized as they are relevant to the specific issues raised by the

parties’ motions.

STANDARD OF REVIEW

Summary judgment is proper only when the pleadings, affidavits, depositions, or admissions

establish that “there is no genuine issue as to any material fact and that the moving party is

entitled to a judgment as a matter of law.” C.R.C.P. 56(c); see also Huydts v. Dixon, 606 P.2d

1303, 1306 (1980). “A material fact is a fact that affects the outcome of a case.” Trigg v. State

Farm Mut. Auto. Ins. Co., 129 P.3d 1099, 1101 (Colo. App. 2005). “A court must afford all

favorable inferences that may be drawn from the undisputed facts to the nonmoving party, and

6
must resolve all doubts as to the existence of a triable issue of fact against the moving party.”

Cotter Corp. v. American Empire Surplus Lines Ins. Co., 90 P.3d 814, 819 (Colo. 2004).

On summary judgment, the court’s “role is simply to determine whether the evidence

proffered by plaintiff would be sufficient, if believed by the ultimate factfinder, to sustain [a]

claim.” Jones v. Barnhart, 349 F.3d 1260, 1265-66 (10th Cir. 2003). Because summary judgment

denies the nonmoving party the right to a trial, it is a “drastic remedy” that is “appropriate only in

those circumstances where there is no dispute as to material facts and thus no role for the fact

finder to play.” Mt. Emmons Mining Co. v. Crested Butte, 690 P.2d 231, 239 (Colo. 1984)

(court’s emphasis). Summary judgment must be granted only when the legal standard is met. Id.

The parties agreed in the briefing, as well as at the hearing on September 6, 2018, that this case

can be decided on summary judgment.

This case raises the constitutionality of both the HPF Program enacted by HB 09-1293, as

well as CHASE and the HASF enacted by SB 17-267 under TABOR. Statutes are entitled to a

“heavy presumption of constitutionality” which can be overcome “only if it is shown that the

enactment is unconstitutional beyond a reasonable doubt.” Barber v. Ritter, 196 P.2d 238,

247(Colo. 2008).

ANALYSIS

I. ALL PLAINTIFFS HAVE STANDING

Defendants and Defendant-Intervenor challenge the Plaintiffs’ standing to bring their claims.

Standing is a matter of subject matter jurisdiction, and this court does not have jurisdiction over

the case unless the Plaintiffs have standing to bring it. Hotaling v. Hickenlooper, 275 P.3d 723,

725 (Colo. App. 2011). Thus, the court must determine the standing issue before reaching the

7
merits. Barber v. Ritter, 196 P.3d 238, 245 (Colo. 2008); Ainscough v. Owens, 90 P.3d 851, 855

(Colo. 2004).

The Supreme Court has adopted a two-part test to determine whether a particular party has

standing to bring a claim, which applies in the context of a TABOR challenge. The plaintiff

must demonstrate that it has (1) incurred an injury-in-fact, (2) to a legally protected interest, as

contemplated by statutory or constitutional provisions. Barber v. Ritter, 196 P.3d 238, 245

(Colo. 2008) (citing Wimberly v. Ettenberg, 570 P.2d 535, 538 (Colo. 1977) and Dodge v. Dept.

of Soc. Servs., 600 P.2d 70, 71-72 (Colo. 1979)(applying the two-part Wimberly test in the

context of taxpayer standing)). Because there are both associational and individual plaintiffs

there are two different analyses which must be performed.

Taxpayer standing is relatively broad in Colorado, although not unlimited. Barber, supra,

196 P.3d at 246 (citing Ainscough, supra, 90 P.3d at 856). “Taxpayers have standing to seek to

enjoin an unlawful expenditure of public funds.” Barber, supra, 196 P.3d at 246 (citing Nicholl

v. E-470 Pub. Highway Authority, 896 P. 2d 859, 866 (Colo. 1995)). As the supreme court

concluded in Barber, “Colorado case law requires us to hold that when a plaintiff-taxpayer

alleges that government action violates a specific constitutional provision such as [TABOR],

such an averment satisfies the two-step standing analysis.” 196 P.3d at 247 (citing Dodge v.

Dept. of Soc. Servs., 600 P.2d 70, 72 (Colo. 1979)). TABOR itself, of course, provides that

“[i]ndividual or class-action enforcement suits may be filed,” Colo. Const, art. X, § 20(1), thus

satisfying the legally protected interest requirement of the Wimberly test. Barber, supra, 196

P.3d at 246; Nicholl, supra, 896 P.2d at 866.

More recently, our supreme court seems to have qualified this rule somewhat by holding that

“[t]o satisfy the injury-in-fact requirement, however, the plaintiff must demonstrate a clear nexus

8
between his status as a taxpayer and the challenged government action.” Hickenlooper v.

Freedom from Religion Foundation, Inc., 338 P.3d 1002, 1008 (Colo. 2014) (citing Barber,

supra, 196 P.3d at 246). In Hickenlooper, supra, the court found that incidental overhead costs

such as the paper, computer hard-drive space, postage, and personnel utilized by the Governor’s

office to issue an annual Day of Prayer proclamation “are not sufficiently related to

Respondent’s financial contributions as taxpayers to establish the requisite nexus for standing.”

338 P.3d at 1008. This does not appear to be a qualification with which the court need be

concerned here, however, since the amounts at issue here are many orders of magnitude greater

than the incidental overhead expenses involved in Hickenlooper.

The supreme court has also recently clarified that “an organization has associational

standing when (1) its members would otherwise have standing to sue in their own right; (2) the

interests it seeks to protect are germane to the organization’s purpose; and (3) neither the claim

asserted, nor the relief requested, requires the participation of individual members in the

lawsuit.” Colorado Union of Taxpayers Foundation v. City of Aspen , 418 P.3d 506, 510 (Colo.

2018) (citing Buffalo Park Dev. Co. v. Mountain Mut. Reservoir Co., 195 P.3d 674, 687-88

(Colo. 2008), as modified on denial of reh’g (Nov. 24, 2008)); see also Hunt v. Wash. State

Apple Advert. Comm’n, 432 U.S. 333, 344, 97 S.Ct. 2434, 53 L. Ed.2d 383 (1977).

There is no dispute that the associational plaintiffs, TABOR Foundation and the Colorado

Union of Taxpayers Foundation (“CUT”) satisfy prongs two and three of this test.2 Rather, the

2
Plaintiff TABOR Foundation “is dedicated to protecting and enforcing TABOR on behalf of its members.”
Second Amended and Supplemented Compl., ¶ 4, at 2. CUT was formed to educate the public as to the dangers of
excessive taxation, regulation, and government spending. See City of Aspen, 418 P.3d at 511. The TABOR
Foundation brought this action, and CUT and the individual Defendants joined the litigation upon the filing of the
Second Amended and Supplemented Complaint. In summary, Plaintiffs seek to enjoin Defendants from collecting
the allegedly unconstitutional HPF and the HASF fees, to declare those charges unconstitutional under TABOR, and
to refund to taxpayers four years worth of the revenue collected in excess of TABOR’s limits, plus interest. Thus,
their objectives in bringing this lawsuit are directly related to their organizational purposes. Further, the relief

9
dispute as to associational standing focuses on the first prong, i.e., whether the associational

plaintiffs’ individual members have standing to sue in their own right. The State argues that City

of Aspen precludes associational standing here because the individual Defendants have paid

neither the HPF nor the HASF, unlike the associational plaintiff in City of Aspen, two of whose

members had paid the grocery bag fee there at issue. Defendants counter that two of their

members have, in fact, received medical care at a Colorado hospital during a fiscal year when

that hospital netted less under the HPF Program and the HASF regime than they paid in fees in

the first instance, and that this net negative economic consequence was passed along to them as

patients with health insurance coverage.

The City of Aspen Court did indeed conclude that because two of the associational plaintiff’s

members had paid the bag charge, they therefore had taxpayer standing and could have brought

the lawsuit themselves, thereby allowing their association to satisfy part one of the associational

standing test. 418 P.3d at 511. However, to this court’s reading, there is nothing in the City of

Aspen case which suggests an actual payment of such a fee is the only way of satisfying the

“clear nexus” requirement for individual standing. Put another way, payment of the bag fee by

two of the associational plaintiff’s members was sufficient to satisfy the first prong of the

associational standing test in that case, but is not a necessary factual element to establish

associational standing in every case. This court is satisfied that the individual plaintiffs standing

based upon their challenge to the constitutionality of the subject provisions under TABOR,

pursuant to the test articulated in Barber and Dodge, supra, is also sufficient to satisfy the first

prong of the associational standing test.

sought – injunctive relief and a declaratory judgment - do not require the participation of the organizations’
individual members. See, City of Aspen, 418 P.3d at 511.

10
 Accordingly, the court finds that all Plaintiffs have standing to bring their claims, and

therefore the court has subject matter jurisdiction.

II. BOTH THE HPF AND THE HASF ARE FEES, NOT TAXES, AND
THEREFORE ARE NOT SUBJECT TO TABOR.

The parties substantially agree that this case comes down to a determination as to whether

the HPF and/or the HASF are fees or taxes. TABOR applies only to “any new tax, tax rate

increase, . . . or a tax policy change directly causing a net tax revenue gain.” Colo. Const. art. X,

§ 20(4)(a). In other words, TABOR requires voter approval for taxes, but not for fees. Id.; see

also Barber, 196 P.3d at 248-50 (discussing the distinction between taxes and fees).

Unfortunately, TABOR itself defines neither “tax” nor “fee.” City of Aspen, 418 P.3d 506, 512.

As the courts have defined it, a tax is a charge levied for general government spending, while a

fee is a charge intended to finance a particular government service. Barber, 196 P.3d at 248. To

determine whether a charge is a tax or a fee, “the dispositive criteria is the primary or dominant

purpose of such imposition at the time the enactment calling for its collection is passed.” Id.,

citing Zelinger v. City and County of Denver, 724 P.2d 1356, 1358 (Colo. 1986) and Bloom v.

City of Fort Collins, 784 P.2d 304, 308 (Colo. 1989).

As the court of appeals has distilled the case law on the subject, courts are to look to three

factors in making this determination. TABOR Found. v. Colo. Bridge Enterprise, 353 P.3d 896,

901 (Colo. App. 2014). First, a court examines “the language of the enabling statute.” Id. (citing

Barber, supra, 196 P.3d at 249). If the statutory language indicates that the primary purpose of

the charge is “to raise revenues for general governmental spending,” the charge is likely a tax.

Id. On the other hand, if the language states that the charge’s primary purpose “is to finance a

particular service,” it is likely a fee. Id. Thus, “[t]he fact that the fee incidentally or indirectly

raises revenue does not alter its essential character as a fee, transforming it into a tax.” Id.

11
Second, a court is to “look to the primary or principal purpose for which the money is raised, not

the manner in which it is ultimately spent.” Id. (citing Barber, 196 P.3d at 249). Third, the court

considers whether “the primary purpose of the charge is to finance or defray the cost of services

provided to those who must pay it.” Id. In this respect, “[a]ny fee amount must be reasonably

related to the overall cost of the service; however, mathematical exactitude is not required.” Id.

(citing Bloom, supra, 784 P.2d at 308). These factors are obviously somewhat overlapping, but

the court will consider each separately with respect to both the HPF and the HASF.

A. Language of the Enabling Statute

1. Hospital Provider Fee

The enabling statute for the HPF was HB 09-1293, which was codified at C.R.S. § 25.5-4-

402.3 (2016).3 The legislative declaration stated that the state and health care providers,

including hospitals, “share a common commitment to comprehensive health care reform.”

C.R.S. § 25.5-4-402.3(2)(a). The declaration noted that “Hospital providers within the state

incur significant costs by providing uncompensated emergency department care and other

uncompensated medical services to low-income and uninsured populations.” C.R.S. § 25.5-4-

402.3(2)(b). It also stated that the statute “is enacted as part of a comprehensive health care

reform and is intended to provide [the enumerated] state services and benefits.” C.R.S. § 25.5-

4-402.3(2)(c). Those services and benefits included providing a payer source for some low-

income and uninsured populations, reducing underpayment to hospitals that participate in

“publicly funded health insurance programs,” reducing the number of people without health care

benefits, reducing the need of healthcare providers to shift the cost of uncompensated care to

3
This statute was repealed by the enabling legislation of the HASF, SB 17-267, §16. 2017 Sess. Laws Ch. 267, §
16, at 1448. Accordingly, citations to its codification will be to the 2016 Colorado Revised Statutes, the last
compilation that included C.R.S. § 25.5-4-402.3.

12
other payers, and expanding access to quality health care for low-income and underinsured

populations. C.R.S. § 25.5-4-402.3(2)(c)(I)-(V).

The statute then authorizes the Department to charge and collect the HPF “as described in 42

CFR 433.68 (b)… for the purpose of obtaining federal financial participation under the state

medical assistance program,” which is similarly intended to increase medical coverage, funding

and reimbursement to hospitals participating in public health programs, and to pay the

administrative costs incurred by the Department in implementing and administering the HPF

Program. C.R.S § 25.5-4-402.3(3)(a)(I)-(III).4 In addition, the statute provided that “[f]or any

portion of the provider fee that has been collected by the State Department but for which the

State Department has not received federal matching funds, the State Department shall refund

back to the hospital that paid the fee the amount of such portion of the fee…” C.R.S. § 25.5-4-

402.3(3)(e)(II). See also, C.R.S. 25.5-4-402.3(5)(c)(for purposes of appropriations,

“[n]otwithstanding any other provision of this section, if, after receipt of authorization to receive

federal matching funds for monies in the fund, the authorization is withdrawn or changed so that

federal matching funds are no longer available, the State Department shall cease collecting the

provider fee and shall repay to the hospitals any monies received by the fund that are not subject

to federal matching funds.”)

Thus, the majority of the HPF’s enabling statute is focused on the need to reduce the amount

of uncompensated health care provided by hospitals, fund public health assistance programs, and

4
Plaintiffs argue that because the federal regulation to which both the HPF and HASF statutes specifically refer, 42
CFR 433.68(b), describes the state-generated revenue to which the federal government matches funds under the
Medicaid program as “health care-related taxes,” that this is some indication that the HPF and HASF are in fact
taxes, rather than fees. See, e.g., Plaintiffs’ Motion at 2-3, ¶¶ 2-4 and 17, n. 6. However, the federal regulations
themselves provide that "a health care-related tax is a licensing fee, assessment, or other mandatory payment that is
related to- (1) Health care items or services; (2) The provision of, or the authority to provide, the healthcare items or
services; or (3) The payment for the healthcare items or services (emphasis supplied)." 42 CFR 433.55. Indeed, both
the HPF and the HASF statutes refer to the fees they establish as being "described in 42 CFR 433.68(b),” and
uniformly refer to the funds generated by the programs created by those statutes as "fees," as opposed to “taxes.”
Thus, the court does not find the federal regulations generic reference to "taxes" as persuasive, let alone binding.

13
reduce the number of Colorado residents without access to quality health care by collecting the

HPF, obtaining matching federal funds, and redistributing the aggregate to the hospitals. Funds

which are collected under the HPF Program but unmatched by federal dollars, for whatever

reason, are to be returned to the hospitals which paid the fees. The legislation invariably refers to

the amounts collected as “fees,” and never as “taxes.” These provisions all indicate a legislative

intent to finance a particular list of services. As a result, consideration of the first Colorado

Bridge Enterprise factor strongly suggests that the HPF was, in fact, a fee, as opposed to a tax.

2. Healthcare Affordability and Sustainability Fee

The enabling legislation for CHASE and the HASF, SB17-267, simultaneously repealed the

HPF Program (Section 16), and created CHASE to collect and administer the HASF Program

(Section 17). The structure and substance of the statute is largely similar to the repealed HPF

statute, C.R.S. § 25.5-4-402.3 (2016), although with critical differences. Of note, for present

purposes, the statute, in addition to reciting the same legislative purposes as the repealed HPF

statute, recites the business of CHASE as being to “[o]btain[] federal matching money and

return[] both the healthcare affordability and sustainability fee and the federal matching money

to hospitals to increase reimbursement rates to hospitals for providing medical care under the

state medical assistance program and the Colorado indigent care program and to increase the

number of individuals covered by public medical assistance,” as well as other services. C.R.S §

25.5-4-402.4(2)(d)(I) and (II). The statute also states that “[i]t is necessary, appropriate, and in

the best interest of the state to acknowledge that by [doing so] [CHASE] engages in an activity

conducted in the pursuit of a benefit, gain, or livelihood and therefore operates as a business.”

C.R.S. § 25.5-4-402.4(2)(e). Citing the supreme court’s conclusion in Nicholl v. E-470 Public

Highway Authority, 896 P.2d 859 (Colo. 1995) that the power to impose taxes is inconsistent

14
with enterprise status under TABOR, the general assembly stated that “the [HASF] charged and

collected by [CHASE] is a fee, not a tax, because the fee is imposed for the specific purpose of

allowing the enterprise to defray the cost of providing the business services specified in

subsections (2)(d)(I) and (2)(d)(II) to hospitals that pay the fee and is collected at rates that are

reasonably calculated based on the benefits received by those hospitals. ” C.R.S. §25.5-4-

402.4(2)(f). Indeed, as with the HPF statute, the HASF statute uniformly refers to that which

CHASE collects from hospitals as a “fee,” and the word “tax” nowhere appears in the legislation.

Although courts must bear in mind the supreme c will ourt’s recent observation that

“government[s]…attempt to circumvent TABOR’s requirements by pretending that a tax is, in

fact, not a tax, and label[] it accordingly,” City of Aspen, 418 P.3d at 514, this court nevertheless

concludes that consideration of the first Colorado Bridge Enterprise factor strongly suggests that

the HASF is, in fact, also a fee and not a tax.

B. Primary or Principal Purpose

1. Hospital Provider Fee

The second Colorado Bridge Enterprise factor examines “the primary or principal purpose

for which the money is raised, not the manner in which it is ultimately spent.” 353 P.3d at 901.

The purpose of the charge is determined at the time it is enacted, and even a later transfer of the

funds to the general fund will not affect its nature as a fee. Barber, 196 P.3d at 248-250.

Here, the statutory language indicates that the primary or principal purpose of the HPF

Program as enacted in HB 09-1293 was as set forth supra, at 12 - 13. However, on three

occasions, the fees collected under the HPF Program served other purposes with respect to the

Medicaid program. First, in 2010, the HPF statute was amended to take advantage of enhanced

federal matching funds available under the federal American Recovery and Reinvestment Act of

15
2009, Pub. L. 111-5 (“ARRA”) for certain Medicaid expenditures in the form of increases in the

Federal Medical Assistance Percentage (or “FMAP”). Specifically, Senate Bill 10-169 directed

that the first $41,400,000 generated pursuant to ARRA be transferred to the Health Care

Expansion Fund, created pursuant to § 24-22-117(2)(a)(I), C.R.S., and that any ARRA funds

beyond that be appropriated for Medicaid programs to offset the Department’s general fund

appropriations. 2010 Colo. Sess. Laws Ch. 307, p. 1445, § 1; C.R.S. § 25.5-4-402.3(4)(b)(VII)

(2010). According to the Deputy Controller for the Department, there was no change in the

amount of the provider fee spent in support of the program, and the enhanced federal funds were

not used for general governmental spending, but rather limited to the Medicaid program. State’s

Cross-Motion, Ex. C, Aff. of J. Cotosman, ¶¶ 6-8. This evidence is uncontested.

In addition, in 2011, the general assembly amended the statute to transfer $50 million for

fiscal year 2011-12, and $25 million for fiscal year 2012-13 from the Hospital Provider Fee cash

fund to the Department’s general fund to be used to “offset general fund expenditures for the

state Medicaid program for the state fiscal years 2011-12 and 2012-13 only.” 2011 Colo. Sess.

Laws. , Ch. 146, p. 508, 509; C.R.S. §§ 25.5-4-402.3(3)(a)(IV) and -402.4 (4)(b)(IX)(2011).

Again, the Department’s Deputy Controller’s statement that these funds were also spent on

providing medical care to Medicaid patients is uncontested. State’s Cross-Motion, Ex. C at ¶¶ 7-

8.

Thus, in summary, during the eight state fiscal years the HPF Program existed (2009-10

through 2016-17), there were only three transfers out of the HPF cash fund other than payments

to hospitals, one of which consisted entirely of TABOR-exempt federal funds.5 However, none

of these transfers changed the basic character of the fees and converted them to taxes. In Barber

5
Colo. Const., art. X, § 20(2)(e) (“Fiscal year spending means all district expenditures…except…those
from…federal funds…”)

16
v. Ritter, 196 P.3d 238 (Colo. 2008), the supreme court held that the transfer of over $442

million from 31 separate special funds (consisting of fees, surcharges and special assessments

collected to subsidize the cost of governmental services provided to those charged) to the state’s

general fund did not violate TABOR, because “when determining whether a charge is a fee or a

tax, courts must look to the primary or principal purpose for which the money was raised, not the

manner in which it was ultimately spent.” 196 P.3d at 249 (court’s emphasis) (citing cases from

Oregon, Oklahoma and New Hampshire reaching the same conclusion, Id, n.3). Here, as with

the fees involved in Barber, HPF fees were raised for the purposes set forth in the statute,

although in the three instances set forth above, were ultimately spent for purposes of defraying

the cost of the state’s Medicaid program generally. There is no evidence that any portion of

them were paid into the state’s general fund, or utilized for some purpose other than the

Medicaid program, of which the HPF Program was an integral part. Thus, the second Colorado

Bridge Enterprise factor indicates that the HPF was a fee, not a tax.

2. Healthcare Affordability and Sustainability Fee

The HASF Program commenced on July 1, 2017. The statute contains similar restrictions to

those contained in the HPF statute, requiring that the revenue generated from the HASF be

deposited into the restricted enterprise cash fund, and that expenditures from that fund only be

made for benefits and services to be provided to hospitals as outlined in the statute. C.R.S. §25.5-

4-402.4(5)(a). The enumerated uses of the cash fund do not include transfers to any other fund,

and can only be used for the enterprises purposes. There is no evidence that they have been used

for any other purpose. Accordingly, the second element of the Colorado Bridge Enterprise test

weighs in favor of a determination that the HASF is a fee, and not a tax.

17
 In this regard, Plaintiffs argue that the general assembly has appropriated money from the

CHASE cash fund to the Department’s general fund, and it is the Department, and not CHASE,

which actually makes supplemental payments to hospitals, and expansion payments. Plaintiffs’

Response, at 20. Plaintiffs argue that CHASE provides even less services to the hospitals than

did the Department under the HPF Program, and that CHASE does not have the “essential

operational independence that a TABOR-exempt enterprise must enjoy.” Id.

The State acknowledges that appropriations are made at the Department level, and argues

that this is the appropriate level for appropriations, because the Department houses CHASE.

More to the point, the issue is not appropriations, but rather actual expenditures. In his affidavit,

the Department’s Deputy Controller states that the revenue deposited into the CHASE Cash

Fund is comprised exclusively of the HASF fees received from hospitals, interest, and federal

matching funds, and that none of it comes from a state or local grant, as defined in C.R.S. § 24-

72-102(7)(a). State’s Cross-Motion, Ex. C, ¶¶ 12-13. He also states that the appropriated funds

are spent on administrative costs associated with providing benefits and services, as well as the

supplemental payments to hospitals and medical payments to the expansive population, and for

no other purposes. Id., ¶¶ 10-11.

Plaintiffs’ argument that a TABOR-exempt enterprise must have “operational

independence” derives from their reading of Colorado Bridge Enterprise, supra, in which the

court observed that although the enterprise there at issue was housed within the Department of

Transportation, “the two have separate financial accounting and reporting systems and maintain

separate financial administration,” that “[t]he General Assembly retained no authority to spend

[enterprise] funds; instead, all [enterprise] revenues are spent under the exclusive authority of the

[enterprise’s board]” and that “the [enterprise] and [department] had separate treasury accounts

18
and that money from the [charge in question] never passed into or through the [department’s]

account or the state’s general fund.” 353 P.3d 896, 899-902. Plaintiffs’ Response, at 20-21.

They claim that, in contrast, “CHASE has reported the Department’s expenses,” that the

legislature “has reclaimed the right to appropriate funds out of the CHASE cash fund and has

done so for both fiscal years CHASE has existed,” and that the CHASE fees “pass[] into and

through the Departments accounts to fund administrative expenses and hospital payments.” Id.,

at 21.

Even assuming that all of these observations were intended to identify aspects of the

CHASE and the HASF Program which do not satisfy the Colorado Bridge Enterprise second

factor, the court nevertheless concludes that the CHASE enterprise does satisfy the second

factor. Appropriations do not equate to actual expenditures. The initial appropriation for

CHASE for state FY 2017 - 2018 came after the annual appropriations bill - the so-called long

bill - had already been signed into law, and therefore the new CHASE enterprise required a

separate appropriation, which the legislature enacted simultaneously with eliminating the

appropriation for the HPF Program. SB 17-267, §32. In any event, an appropriation is simply the

legislature’s authorization to spend money, and does not equate to an actual transfer or

expenditure of funds. Mr. Cotosman’s affidavit regarding (1) the source of CHASE funds -

exclusively fees paid by the hospitals, interest, and federal matching funds; (2) where they are

deposited - exclusively the CHASE Cash Fund; and (3) what they are spent on - exclusively as

the legislature authorized, including the Department’s own administrative costs, supplemental

payments to hospitals, and expansion benefits for Medicaid patients, is uncontested. The fact

that the CHASE enterprise is housed within the Department (as was the Colorado Bridge

Enterprise within the Department of Transportation), and utilizes existing state infrastructure to

19
disperse supplemental payments and benefits on behalf of the expansion population, does not

compel the conclusion that it fails to satisfy the second Colorado Bridge Enterprise factor.

C. Finance or Defray Cost/Reasonable Relationship

1. Hospital Provider Fee

The final Colorado Bridge Enterprise factor is whether the primary purpose of the charge is

to finance or defray the cost of services provided to the fee payer, as distinct from general

governmental expense, and whether the fee is reasonably related to the overall cost of providing

the service.

a. Finance or Defray Cost

As noted, HPF revenues funded a variety of services for hospitals which paid the fee. The

first and most obvious ones were “supplemental payments,” which were comprised of the

amount of the HPF fees collected, combined with matching federal funds, which were paid back

to the hospitals. These supplemental payments were an aggregate of several different species of

payments, including inpatient and outpatient supplemental payments, as well as the

Disproportionate Share Hospital payments , uncompensated care payments, and Hospital Quality

Incentive Payments (HQIP). State’s Cross-Motion, Ex. A, Affidavit of Nancy Dolson, ¶8. A

spreadsheet attached to Ms. Dolson’s affidavit demonstrates that for each of the seven state fiscal

years depicted while the HPF was in effect, 2010-2011 through 2016-2017, amounts available in

the HPF cash fund, including the fee revenue collected, interest, and the previous cash fund

balance, represented between 22.6% (FY 2016-17) and 54.7% (FY 2011-12) of the total funds

expended in supplemental payments, expansion population payments, administration, and the

offsets for ARRA, etc., made that year. State’s Cross-Motion, Ex. A-1. The rest of the funds

came from the federal government, and were only available to the state because the HPF fees

20
were collected and eligible for federal matching. In the seven years depicted, between .37% (FY

2014-15) and 5.37% (FY 2012-13) of the fee revenue collected remained in the cash fund at the

end of the fiscal year, and was available for federal matching and distribution the next fiscal

year. Id. See C.R.S. §25.5-4-402.3(4)(c) (2016). Thus, the amounts paid out to the hospitals in

supplemental payments alone were well in excess of the amounts hospitals themselves had made

in HPF fee payments. The vast majority of hospitals or systems of hospitals netted greater

amounts in supplemental payments than they had paid in the form of the HPF fees. Specifically,

Exhibit A-2 to the State’s Cross-Motion demonstrates that only three out of the forty-nine

hospitals or systems making HPF fee payments in fiscal year 2016-2017 received less in

supplemental payments than they had paid in fees. Previous fiscal years demonstrated similar

results. Id. The payment of the fees by the hospitals and the payment of the supplemental

payments by the Department were virtually simultaneous, typically within the same banking day,

which had the effect of putting the hospitals in an immediate net positive position, and not

having to “carry” the expense of the HPF fee until receipt of the supplemental payments. This

too represented a benefit to the hospitals. State’s Cross-Motion, Ex. D, Affidavit of P Burnett, ¶

4; Ex. J, Affidavit of C. Tholen, ¶ 6.

The record also demonstrates that the HPF fees financed additional services for the hospitals

beyond the supplemental payments. Specifically, with respect to the expansion population, i.e.,

new recipients of Medicaid and CHP+ benefits, HPF revenue provided a new source of public

insurance for hospitals to bill against which had been absent before the HPF Program was

initiated and those individuals were uninsured. Federal law requires that a hospital stabilize and

treat anyone coming to an emergency department, regardless of their insurance status or ability

to pay. 42 U.S.C. § 1395dd; Affidavit of C. Tholen, ¶ 10. In addition, all hospitals have charity

21
care programs in which they provide reduced fee services to individuals without an ability to

pay. Id., ¶7. Consequently, hospitals must write off the costs of those services, and absorb them

into their operations, or shift the cost to other payer sources, a phenomenon referred to as “cost

shift.” The HPF Program was designed to reduce the amount of uncompensated care that

hospitals must absorb through funding expansion populations under Medicaid and CHP+. C.R.S.

§ 25.5-4-402.3(4)(b)(IV). During the state fiscal years that the HPF Program existed, over

476,000 additional individuals received Medicaid Coverage and over 25,000 children and

pregnant women received coverage through CHP+, as a result of the HPF Program. Aff. of N.

Dolson, ¶ 8, second bullet item. In fiscal year 2015-16, a total of $1,886,210,000 was paid for

expansion population claims, i.e., new recipients of Medicaid and CHP+ benefits. Based on the

statistic that approximately 30% of Medicaid claims are paid to hospitals, the state calculates that

therefore approximately $565,863,000 was paid directly to hospitals on behalf of new Medicaid

and CHP+ recipients, whose coverage was made possible by the HPF Program. Aff. of N.

Dolson, ¶ 8; Ex. A-8 at 14. When combined with supplemental payments totaling

$1,120,812,000, and reduced by the aggregate amount of HPF fee paid in the amount of

$669,501,000, this leaves a net benefit to the hospitals in fiscal year 2015-2016 of

$1,017,174,000. Although there is also evidence of more subtle and nuanced benefits arising

from the HPF Program in the record, the foregoing is sufficient to demonstrate that the purpose

and effect of the program was to defray the cost of the services provided to the entities paying

the fees.

Plaintiffs argue that this emphasis on benefits received by the hospitals from the HPF

Program altogether misconstrues this element of the Colorado Bridge Enterprise test, which

should be focused strictly on whether the fee is used to defray the government’s cost of

22
providing the service and is reasonably related to that cost. They argue that, in the seven fiscal

years at issue, the Department incurred $211 million in administrative costs, but collected more

than $4.5 billion in charges, a ratio of more than 21:1. Plaintiffs’ Motion, at 20. They argue that,

with respect to the supplemental hospital payments and expansion population expenditures, the

Department acted merely as a “passthrough or conduit” for the federal matching funds. Id.

This argument misconstrues the nature and purpose of the HPF Program. Plaintiffs

acknowledge, and the HPF Program’s enabling legislation demonstrates, that it was created

essentially exclusively to obtain matching federal funds. C.R.S. § 25.5-4-402.3 (3). Indeed, the

statute provides that if, for whatever reason, federal matching funds are not available, the

Department will cease collecting the fee altogether, and refund any fees collected back to the

hospitals that paid them. C.R.S. § 25.5-4-402.3 (5)(c). See also C.R.S. § 25.5-4-402.3 (3)(e)(II)

(Department authorized to return to hospitals any portion of the hospital provider fees on which

it has not received federal matching funds within five business days after fees collected). Thus,

the federal matching funds were quite literally the HPF Program’s reason for being. After all,

there would be little point in collecting fees, then simply redistributing them to the hospitals on

essentially a dollar for dollar basis. Although there were variations over the years, the federal

government appears to have, at a minimum, matched the amount the Department collected in

hospital fees on a dollar for dollar basis, and in some years, matched those amounts on a 2 to 1 or

even 3 to 1 basis. Simply put, then, the purpose of collecting the HPF was to allow the state to

literally double or even triple its money in TABOR-exempt federal matching funds, and then

redistribute the aggregate amount among the hospitals based upon a formula designed to fulfill

the statutory purposes of reducing the burden of uncompensated or under-compensated medical

care, providing a public insurance payer for patients which previously had none, and reduce the

23
number of uninsured Coloradans. The court has not been directed to, nor has it found, any case

involving the fee versus tax issue in which a state governmental entity or department received

matching funds from the federal government which could not have been obtained but for the

state funds being available for the federal government to “match” in the first place. Cf.,

Colorado Bridge Enterprise, 353 P.3d at 899 (enterprise only authorized to receive

“reimbursement” from federal transportation funds allocated to Colorado in fiscal year 2011, for

which the state had to apply to the Federal Highway Administration, which had sole discretion to

approve or deny the reimbursement request). Thus, although perhaps not amounting to “costs” in

a strict accounting sense, the court must take into account the full panoply of the services

rendered to the hospitals in order to assess whether the program was designed to defray its own

cost. The court concludes that it was.

b. Reasonable Relationship

The second issue with respect to the final prong of the Colorado Bridge Enterprise test is

whether the charge is reasonably related to the overall cost of providing the service, and whether

it is imposed on those reasonably likely to benefit from or use the service. As noted, the value

provided to hospitals in terms of supplemental payments, the creation of new Medicaid and

CHP+ recipient patients and public insurance for hospitals to bill against, and other reductions in

uncompensated or under-compensated medical care were well in excess of the amounts

contributed by the hospitals through the payment of the HPF Program fees. Once again, this is

only true because the state funds are matched by federal funds in varying amounts each year, but

almost always at least doubling the amount of the fees collected, and being available to be

distributed to the hospitals as supplemental payments and expansion population payments. As

24
noted on Ex. A-1, the Department’s administration costs are also paid out of the cash fund, but

represent a relatively modest amount.

Plaintiffs contend that the large dollar amounts paid in supplemental payments demonstrate

that there is no reasonable relationship between the fees collected and the services provided.

They argue repeatedly that the case law contemplates a “fee for service” arrangement. Plaintiffs’

Motion, at 14-17. Certainly some of the reported cases, especially those which predate TABOR,

do involve such an arrangement. See, e.g., Bloom v. City of Fort Collins, 784 P.2d 304 (Colo.

1989). However, none of the case law supports the proposition that a fee becomes a tax simply

because it generates revenue and corresponding benefits, most especially TABOR-exempt

revenue and benefits, in amounts which are significantly larger than the fee itself for those who

pay it, rather than simply “breaking even.” As noted previously, in cases not involving federal

matching funds, the Colorado courts have noted that “the fact that a fee incidentally or indirectly

raises revenue does not alter its essential character as a fee, transforming it into a tax.” Barber,

196 P.3d at 249, and “mathematical exactitude is not required.” Colorado Bridge Enterprise,

353 P.2d at 901 (citing Bloom, 784 P.2d at 308). What distinguishes the HPF and HASF fees

from any others the Colorado courts have ever considered, of course, is that they are eligible for

federal matching, which effectively doubles or even triples the amount of money available to be

distributed to the payers of the fees as supplemental payments and other benefits. This court must

take into consideration these unique circumstances, and the availability of federal matching

funds of the magnitude involved in this case certainly must be considered in the calculus of

whether there is a “reasonable relationship” between the fee and its cost. In addition, as large as

the supplemental payments have been relative to the fees collected to date, they have apparently

not completely eliminated nor reimbursed the hospitals for all of the uncompensated care

25
provided by them. State’s Cross-Motion, Ex. A, Affidavit of N. Dolson, and Ex. A-9 at p.A11

(total of bad debt and charity care written off by hospitals decreased from $693,594,036 in

calendar year 2009 to $292,561,992 in calendar 2016, but not eliminated completely); Id., Ex. D,

Affidavit of Peg Burnette, ¶ 8 (CFO of Denver Health and Hospital Authority: “Because

Medicaid pays below cost, the supplemental payments are critical to helping Denver Health at

least break even.”) Thus, the court finds that the third prong of the Colorado Bridge Enterprise

test is satisfied, and the HPF Program is a fee, and not a tax.

2. Healthcare Affordability and Sustainability Fee

The HASF Program, in its relatively short life, has demonstrated similar results as the HPF

Program did before it. It was designed, after all, solely to access the same source of federal

matching funds as the HPF fee program did, and similarly provides that if the federal matching

funds are not available, for whatever reason, CHASE will cease collecting the HASF and return

to the hospitals any unmatched funds. C.R.S. § 25.5-4-402.4 (6)(c) and -402.4 (4)(e)(II). The

HASF Program has produced similar levels of increased reimbursement for uncompensated or

undercompensated care in the form of supplemental payments, as well as expanded Medicaid

and CHP+ populations with public insurance sources to be billed. In December, 2017, CHASE

collected $69.35 million in fees from hospitals, and paid out $105.43 million in supplemental

payments to those hospitals. State’s Cross-Motion, Ex. A, Aff. of N. Dolson, ¶22. Thus, the fee-

paying hospitals continue to receive services and benefits of a value well in excess of the amount

they paid in fees, including new business-consulting and advising services which were not

available under the HPF Program. Accordingly, the court reaches a similar conclusion that the

purpose of the HASF is to finance and defray the cost of services provided to the fee-paying

26
hospitals, and that there is a reasonable relationship between the amount of the fee and the cost

of providing the service.

III. CHASE WAS CREATED AS A TABOR-EXEMPT ENTERPRISE BY

SB 17-267, AND NO DOWNWARD ADJUSTMENT TO THE EXCESS
STATE REVENUES CAP WAS REQUIRED

TABOR defines an enterprise as follows:

(d) “Enterprise” means a government-owned business

authorized to issue its own revenue bonds and receiving under 10%
of annual revenue in grants from Colorado state and local
governments combined.

Colo. Const., art. X, §20(2)(d). Enterprises are exempt from TABOR’s spending and revenue

limits.

Plaintiffs first contend that CHASE is not a TABOR-exempt enterprise, and in fact is an

unlawful enterprise, because it levies a tax, i.e., the HASF, without voter approval.6 However,

this court has already determined that the HASF is a fee and not a tax, and therefore CHASE’s

collection of it does not place it outside the definition of a TABOR-exempt enterprise.

Alternatively, Plaintiffs contend that, through SB 17-267, CHASE became “qualified” as

an enterprise within the meaning of Section 7(d) of TABOR, requiring a downward adjustment

of the excess state revenues cap in the amount of $600.6 million, that being the amount of

projected revenue for the HPF Program, rather than the $200 million the general assembly

specified in the bill. SB 17-267, § 17 at 20; C.R.S. § 25.5-4-402.4(3)(c)(II). Plaintiffs rely upon

several factual grounds for this argument. First, they point out that CHASE’s enabling legislation

was based upon substantially similar legislative findings to those for the HPF Program, and that

CHASE administers essentially the same program, in the same way, with the same initial board

members, and by utilizing the same infrastructure of the Department. Plaintiffs’ Motion, at 34-

6
Plaintiffs concede that CHASE is government-owned. Plaintiffs’ Motion, at 25, n.13. CHASE is authorized to
issue revenue bonds by its enabling legislation, SB 17-267, § 17 at 19; C.R.S. § 25.5-4-402.4 (3)(b).

27
35. They also rely upon the legislation’s reference to a “Type 2” transfer, within the meaning of

the Administrative Organization Act of 1968, C.R.S. § 24-1-105(2), as indicating that the HPF

Program was simply “transferred” to the Department, as opposed to abolished, in which event it

would have been designated a Type III transfer within the meaning of C.R.S. § 24-1-105(3). Id.,

at 36-38.

In response, the State argues that the legislature explicitly and simultaneously terminated

the HPF Program and created the HASF Program and CHASE as an enterprise, rather than the

HPF becoming “qualified” as an enterprise and simply being renamed CHASE. It points out that

the legislative findings in SB 17-267, while duplicating those in the HPF Program’s enabling

legislation, HB 09-1293, also included additional findings, and that the HASF Program

contemplates services in addition to those which were available under the HPF Program to the

hospitals which pay the fee. It also points out that the general assembly carefully provided that

CHASE “shall exercise its powers and perform its duties and functions as if the same were

transferred by a Type 2 transfer… to the [Department]” SB 17-267, § 17 at 21 (italics supplied;

boldface in statute); C.R.S. § 25.5-4-402.4(3)(e); C.R.S. § 24-1-119.5(9), as opposed to “by a

Type 2 transfer,” since a Type II transfer presupposes an existing program, and SB 17-267

created CHASE, rather than transferred a pre-existing agency to the Department.

It bears repeating that a statute challenged on constitutional grounds enjoys a heavy

presumption of constitutionality which “can be overcome only if it is shown that the enactment is

unconstitutional beyond a reasonable doubt.” Barber, 196 P.2d at 247.7 As the Barber Court also

pointed out, TABOR’s internal rule of construction that courts are to favor a construction that

7
See also City of Aspen, supra, 418 P.3d at 511 (certiorari granted to determine “whether we should modify the
standard of review that a court should apply when deciding if an ordinance is unconstitutional,” but subject
ordinance determined to be constitutional under either the “beyond a reasonable doubt” or the “preponderance the
evidence” standard).

28
would “reasonably restrain most the growth of government,” Colo. Const. art X, §20(1), “applies

only where the text of [TABOR] supports multiple interpretations equally.” Id, 196 P.3d at 247-

248 (citing Havens v. Bd. of Cnty Comm’rs, 924 P.2d 517, 521 (Colo. 1996)); City of Aspen, 418

P.3d at 511-512.

Our supreme court has also repeatedly observed that trial courts “must give significant

deference to legislature’s fiscal and policy judgments,” even with respect to constitutional

questions. Lobato v.Colorado, 218 P.3d 358, 374-375 (Colo. 2009) (“The trial court may

appropriately rely on the legislature’s own pronouncements to develop the meaning of a

‘thorough and uniform’ system of education,” pursuant to Colo. Const. art IX, § 2). 8 The

Barber Court made clear that this rule is of particular significance in the case of challenges to

legislation on the basis of TABOR:

Moreover, we have consistently rejected readings of [TABOR] that

would hinder basic government functions or cripple the
government’s ability to provide services. [Havens v. Bd. of County
Comm’rs, 924 P.2d 517, 521 (Colo. 1996)](declining to adopt a
“rigid interpretation of [TABOR], which would have the effect of
working a reduction in government services”) (quoting Bolt v.
Arapahoe County Sch. Dist. No. Six, 898 P.2d 525, 537 (Colo.
1995)); In re Submission of Interrogatories on House Bill 99-1325,
979 P.2d 549, 557 (Colo. 1999) (rejecting an interpretation of
[TABOR] that would “cripple the everyday workings of
government”). In the context of the case now before us, we are
especially mindful of the cautious line we have drawn to
reasonably interpret [TABOR] and maintain the government’s
ability to function efficiently. Arguably, requiring the state to
return nearly half a billion dollars from the General Fund to the
special cash funds would place a significant financial burden on
the state. Under our rules of construction, we should require such a
result only if the text of [TABOR] leaves us no other choice.

8
See also, Bd. Of Cnty Comm’rs of Pueblo Cnty v. Strait, 85 P. 178, 179-180 (Colo. 1906) (“The greatest deference
is shown by the courts to the interpretation put upon the Constitution by the Legislature, in the enactment of laws,
and other practical application of constitutional provisions to the legislative business, when the interpretation has
had the silent acquiescence of the people, including the legal profession and the judiciary, and especially when
injurious results would follow the disturbing of it,” quoting Endlich on Interpretation of Statutes, §527).

29
196 P.3d at 248; City of Aspen, 418 P.3d at 512. These concerns are only amplified here, where

the long-time Director of the Governor’s Office of State Planning and Budgeting has estimated

that the judgment Plaintiffs seek would amount to approximately $5.38 billion, or over half of

the state’s estimated general fund revenue for fiscal year 2017-18, which would have a

devastating impact on Colorado. State’s Cross-Motion, Ex. B, Aff. of Henry Sobanet, ¶¶ 35-37.

This amount is an order of magnitude greater than even that involved in Barber.

The court begins its analysis of this issue, as it must, with the relevant constitutional and

statutory language. Nicholl, 896 P.2d 859, 867.

TABOR provides that revenue collected in excess of spending limits is to be refunded in

the next fiscal year unless voters approve a revenue change as an offset. Colo. Const., art. 20,

§7(d). It also provides that the “current fiscal year spending” constituted the initial district bases,

and that “[q]ualification or disqualification of an enterprise shall change district bases and future

year limits,” Id., without further defining “qualification” or “disqualification.” In 2005, the

voters approved Referendum C, which provided a five-year “timeout” from the spending limits

of TABOR, from July 1, 2005 through June 30, 2010, and also provided for a new “excess state

revenue cap,” which was defined as follows:

For each fiscal year up to and including the 2016-17 fiscal year, an
amount that is equal to the highest total state revenues for a fiscal
year from the period of the 2005-06 fiscal year through the 2009-
10 fiscal year, adjusted each subsequent fiscal year for inflation,
the percentage change in state population, the qualification or
disqualification of enterprises, and debt service changes;

C.R.S. § 24-77-103.6(6)(b)(I)(B).9 After Referendum C was adopted, it is only when revenues

exceed the excess state revenues cap, rather than the spending limits, that refunds are issued.

9
It is undisputed that fiscal year 2007-2008 ended up being the year during which the “highest total state revenues
for a fiscal year” was collected, and therefore became the initial “Ref C cap.”

30
C.R.S. § 24-77-103.6 (1)(b).

The court has not been directed to any case law, nor has it found any, which sets forth

any standards against which a particular governmental action is to be judged for purposes of

determining whether it amounts to the “qualification” or “disqualification” of an enterprise.10

TABOR’s language itself does not compel the conclusion that the subject entity had to pre-exist

either becoming “qualified” or “disqualified” as an enterprise.

For its part, the general assembly was crystal clear in SB 17-267 that it intended to

terminate and defund the HPF Program simultaneously with creating CHASE and providing the

HASF as its funding source. It provided that the HPF Program was “repealed” and the HASF

was “created,” SB 17-267, § 16 and 17, at 19; C.R.S. § 25.5-4-402.4 (3)(a), and that CHASE was

to constitute an “enterprise for purposes of [TABOR] so long as it retains the authority to issue

revenue bonds and receives less than 10% of its total revenues in grants from all Colorado state

and local governments combined.” SB 17-267, §17, at 19-20; C.R.S. § 25.5-4-402.4(3)(b).

With respect to the effect which the creation of CHASE was to have upon the excess state

revenues cap, the general assembly also addressed that issue directly:

The repeal of the [HPF Program] and the creation of [CHASE] as a

new enterprise to charge and collect a new [HASF] … and provide
[HASF]-funded business services to hospitals that replace and
supplement services previously funded by [HPF] is the creation of
a new government-owned business that provides business services
to hospitals as a new enterprise for purposes of [TABOR], does not
constitute the qualification of an existing government-owned

10
The only reported cases which even discuss the matter simply focus on whether the subject entity fits TABOR’s
definition of “enterprise,” rather than how it came to do so. See, Nicholl v. E- 470 Public Highway Authority, 896 P.
2d 859, 869 (Colo. 1995) (Highway authority with power to levy several species of taxes held to be a district, not an
enterprise: “[T]he power to unilaterally impose taxes, with no direct relation to services provided, is inconsistent
with the characteristics of a business as the term is commonly used. Nor is it consistent with the definition of
‘enterprise’ read as a whole.”); Board of Cnty Comm’rs, Cnty of Eagle, State of Colorado v. Fixed Base Operators,
Inc., 939 P.2d 464, 468 (Colo. App. 1997) (nonprofit corporation, owned and controlled by county, expressly
authorized to issue bonds, met TABOR definition of “enterprise” despite collecting federally-authorized passenger
facility charges).

31
 business as an enterprise for purposes of [TABOR] or section 24-
77-103.6(6)(b)(II), and, therefore does not require or authorize
adjustment of the state fiscal year spending limit calculated
pursuant to [TABOR]or the excess state revenues cap, as defined
in section 24-77-103.6 (6)(b)(I).

SB 17-267, § 17 at 20; C.R.S. § 25.5-4-402.4 (3)(c)(I)(emphasis supplied). At the same time, the

legislature noted that

Notwithstanding section (3)(c)(I) of this section, because the repeal

of the [HPF] program… will allow the state to spend more general
fund money for general governmental purposes than it would
otherwise be able to spend below the excess state revenues cap, ….
it is appropriate to restrain the growth of government by lowering
the base amount used to calculate the excess state revenues cap for
the 2017-18 state fiscal year by two hundred million dollars.

SB 17-267, § 17 at 20; C.R.S. § 25.5-4-402.4 (3)(c)(II). Thus, the enabling legislation for CHASE

and HASF itself provided that, in the general assembly’s judgment, an adjustment to the excess

state revenues cap was not required under TABOR, but nonetheless a partial one was appropriate

as a policy matter given that the simultaneous repeal of the HPF Program did have the effect of

allowing the state to spend more general fund money for general governmental purposes than it

would otherwise have been able to spend below the excess state revenues cap. It is this legislative

finding which the court must bear in mind in cautiously drawing the line to “reasonably interpret

[TABOR] and maintain the government’s ability to function efficiently.” Barber, 196 P.3d at 248;

City of Aspen, 418 P.3d at 512.

Ultimately, the purpose of TABOR’s requirement that “future year limits” be “change[d]”

in response to “[q]ualification or disqualification” of an enterprise, is to avoid the use of the

enterprise mechanism to artificially inflate the TABOR limits by segregating a function formerly

performed by a governmental entity into an enterprise without a corresponding reduction in those

limits. State’s Cross-Motion, Ex. B. Aff. of Henry Sobanet, ¶ 12. Based on the record before the

32
court, the excess state revenues cap has historically been adjusted at the administrative level, and

only when a pre-existing entity has become “qualified” or “disqualified” as an enterprise.

During fiscal year 2015-2016, for example, Fort Lewis College received more than 10% of

its revenue from state grants. Thus, it no longer met the TABOR definition of an enterprise, and

was disqualified. State’s Cross-Motion, Ex. B, Aff. of Henry Sobanet, ¶ 13. Accordingly, the State

Controller lowered the limitation on state fiscal year spending and the excess state revenues cap,

apparently without any legislative direction to do so. Id., Exhibit F, Office of the State Controller,

2016 Colorado Comprehensive Financial Report, at 31-32.11 A year later, in fiscal year 2016-

2017, Fort Lewis again met the requirements of a TABOR enterprise, and the Controller adjusted

the limits upward, again without explicit legislative direction. Id., Exhibit G, Office of the State

Controller, 2017 Colorado Comprehensive Financial Report, at 36.

As another example, when the general assembly authorized the State’s Unemployment

Insurance Division to become an enterprise, the enabling legislation itself contained no adjustment

to the excess state revenues cap, 2009 Session Laws Ch. 363, but one was made at the

administrative level. Id., Exhibit H, Office of the State Controller, Colorado 2010 Comprehensive

Annual Fiscal Report, at 27-28 (“During Fiscal Year 2009-10,…the Unemployment Insurance

Program became a TABOR enterprise as authorized by statute. As required by TABOR, the State

Controller makes the qualification or requalification of enterprises neutral in the excess revenue

calculation by removing the newly qualified or requalified enterprises nonexempt revenues from

the TABOR base before adjusting for allowable growth [emphasis supplied]”).

In each of these examples, the entity which qualified or requalified as an enterprise had

existed before State Fiscal Year 2007-2008, and therefore its revenue was included in calculating

the initial excess state revenues cap. See, C.R.S. § 23-52-101 (1) (Fort Lewis College established);
11
A similar adjustment was made in the case of Western State Colorado University. Id.

33
C.R.S. § 23-56-101 (Western State Colorado University established); C.R.S. § 8-71-103 (Division

of Unemployment Insurance created).12 However, in the case of a newly-created enterprise, the

Controller cannot “remove” nonexempt revenues from the TABOR base by way of neutralizing

the effect of the new enterprise, because such revenues were never a part of that base to begin

with. Rather than a pre-existing governmental entity coming to fulfill the constitutional

requirements of a TABOR-exempt enterprise over time, the general assembly crafted SB 17-267

to create CHASE to meet the constitutional criteria of such an enterprise in the first instance.

Plaintiffs do not contend that the general assembly lacks the plenary power to do so - in fact, they

acknowledge that it does have such power. Plaintiffs’ Response, at 28-29. For its part, the

legislature apparently recognized the historical uniqueness of the situation - a newly-created

enterprise which would have substantially similar powers and duties as a relatively short-lived,

repealed government program which did not exist at the time the excess state revenues cap was

initially calculated - and therefore provided that the state excess revenues cap should be adjusted

downward by $200 million, rather than the $600.6 million which the repealed HPF Program was

anticipated to receive in fiscal year 2017-2018. The legislature’s explanation that this was because

the repeal of the HPF Program “will allow the state to spend more general fund money for general

governmental purposes than it would otherwise be able to spend below the excess state revenues

cap,” corresponds with the suggestion made by counsel for the State during oral argument that it

amounted to a “political compromise.”13

12
The court regards each of these examples as evidence of the interpretation of TABOR by an administrative agency
charged with its enforcement in the first instance, to which the court must give appropriate deference. See, e.g.,
Ingram v.Cooper, 698 P.2d 1314, 1316 (Colo. 1985) (contemporaneous construction of legislation by agency
charged with its enforcement, though not controlling, is to be given deference by the courts).
13
As introduced on March 27, 2017, SB 17-267 provided for a downward adjustment of the state excess revenues
cap greater than that suggested by Plaintiffs, in the amount of $670,300,000. See, Legislative History Supplement to
Cross-Motions for Summary Judgment, filed September 11, 2018, Exhibit 1, §§ 4 and 6. That amount was changed
to $200,000.000, apparently in a Senate Finance Committee hearing, and the Engrossed bill as amended on second

34
 It is undisputed that the HPF Program was enacted in 2009, during the 2009-2010 fiscal

year, and therefore its revenues were not utilized in calculating the initial state excess revenues

cap. That cap’s initial amount was based on the “highest total state revenues” collected during the

Referendum C timeout, which had been collected the previous year, in fiscal year 2007-2008. That

being the case, although the HPF Program’s revenue counted against the TABOR spending limit,

it had never been included in the calculation of the state excess revenue cap. Thus, if this court

were to find that the HPF Program had simply become “qualified” as the CHASE enterprise, a

corresponding reduction in the state excess revenues cap would have the effect of reducing the cap

by an amount which had not been included in its initial calculation, and therefore also had not

been subject to the interim increases based upon inflation and population growth. To do so would

run counter to TABOR’s somewhat imprecise requirement that “qualification… as an enterprise

shall change district bases and future year limits [emphasis supplied].” If the HPF Program’s

revenue was not included in the original calculation of the excess state revenues cap, its

subsequent subtraction therefrom would not “change” the cap from a pre-existing status, but rather

artificially lower it. It would also violate the State Controller’s historical practice of ensuring that

the qualification of an enterprise be neutral in terms of its effect on the excess revenue calculation.

Under the unique circumstances of this case, the court finds that this would impermissibly “hinder

basic government functions or cripple the government’s ability to provide services.” Director

Sobanet’s statement that such a conclusion would require a TABOR refund in the amount of

approximately 50% of the state’s anticipated general fund revenues for fiscal year 2017-2018 is

uncontested, and demonstrates the deleterious effect which such an interpretation would have.

reading in the Senate so reflects. Id., Exhibit 2, at §§11 and 17. The court also notes that SB 17-267 repealed SB
17-256, which had decreased the appropriation from the HPF cash fund to HCPF by $264,100,000, apparently to
avoid creating the necessity of a TABOR refund.

35
 Finally, the Plaintiffs’ reliance upon SB 17-267’s provision that CHASE “shall exercise its

powers and perform its duties as if the same were transferred to the state department by a type 2

transfer as defined in section 24-1-105” is misplaced. That statute’s definition of type 2 transfer

refers to “transferring of all or part of an existing department…” C.R.S. § 24-1-105 (2). The

legislature, in keeping with its intention to simultaneously “repeal” the HPF Program and “create”

CHASE and the HASF Program, rather than transfer anything, needed to qualify its reference to a

type 2 transfer accordingly. In doing so, it chose the exact phraseology which it has utilized

dozens of times in situations where it is creating a new entity, rather than transferring an existing

one. See, e.g., C.R.S. §24-31-302 (2) (creation of the peace officers standards and training board

within the Department of Law); C.R.S. §24-32-802 (creation of the office of rural development

within the Department of Local Affairs); C.R.S. § 24-32-2004 (2) (creation of the Colorado youth

services corps within the Department of Local Affairs); C.R.S. §30-10-601.6 (2) (creation of the

Colorado corner’s standards and training board within the Department of Public Health and

Environment). Accordingly, the court assigns no analytical significance to SB 17-267’s reference

to a type 2 transfer.

On the basis of all of the foregoing, the court finds that the Plaintiffs have failed to sustain

their burden of demonstrating the unconstitutionality of SB 17-267’s adjustment of the state

excess revenues cap by $200 million rather than $600.6 million beyond a reasonable doubt.

TABOR does not require such an adjustment, although the general assembly retained and

exercised the legislative authority to make one in a lesser amount.

36
 IV. SB 17-267 DOES NOT VIOLATE THE CONSTITUTION’S SINGLE
SUBJECT REQUIREMENT

Senate Bill 17-267 bore the title “Concerning the Sustainability of Rural Colorado.”

Plaintiff contends that the bill violates the “single subject” provision of the Colorado Constitution,

which provides as follows:

No bill, except general appropriation bills, shall be passed

containing more than one subject, which shall be clearly expressed
in its title; but if any subject shall be embraced in any act which
shall not be expressed in the title, such act shall be void only as to
so much thereof as shall not be so expressed.

Colo. Const. art. V, §21 (“Section 21”). From early on, our supreme court has recognized the

purpose of this provision:

In considering this constitutional provision, it is important to bear

in mind the evils sought to be corrected thereby. The practice of
putting together in one bill subjects having no necessary or proper
connection, for the purpose of enlisting in support of such bill the
advocates of each measure, and thus securing the enactment of
measures that could not be carried upon their merits, was
undoubtedly one of the evils sought to be eradicated.[14 ]Another
object is to prevent surprise and fraud from being practiced upon
legislators, and to apprise the people of the subjects of legislation
by the titles of the bills, so that they might have an opportunity to
be heard by petition or otherwise.

Catron v. Board of Comm’rs of Archuleta County, 33 P. 513, 514 (Colo. 1893). As the supreme

court has more recently observed, “[t]he purposes of section 21 are: (1) to notify the public and

legislators of pending bills so that all may participate in the legislative process; (2) to guarantee

that each legislative proposal passes on its own merit; and (3) to enable the governor to consider

14
The Catron Court, 33 P. at 514, was decidedly pessimistic that this legislative practice of "log rolling" could
actually be outlawed by the single subject provision:

So far as the first of the above evils is concerned, unfortunately, neither this nor any other provision yet
devised upon the subject has produced the desired result. Even a casual investigation into the methods a
[sic] adopted by modern legislators will show that the passage of any bill upon its intrinsic merits is a rare
occurrence, logrolling being as successfully carried on to secure the passage of a number of bills upon
different subjects as if the same legislation could as formerly be included in a single bill.

37
each piece of legislation separately in determining whether to exercise veto power.” Parrish v.

Lamm, 758 P.2d 1356, 1362 (Colo. 1988) (citing In re House Bill No. 1353, 704 P.2d 371, 372

(Colo. 1987); Colorado Gen. Assembly v. Lamm, 704 P.2d 1371, 1383 (Colo. 1985); Catron v.

Board of County Comm’rs, 18 Colo. 553, 557, 33 P. 513, 514 (1893); 1A N. Singer, Sutherland

Statutory Construction §17.01, at 2-3 (4th ed. 1985)). See also, Colorado Criminal Justice

Reform Coalition v. Ortiz, 121 P.3d 288, 291 (Colo. 2005). As the Parrish Court noted, “[s]o

long as the matters encompassed in the bill are necessarily or properly connected to each other

rather than disconnected or incongruous, the single subject requirement of section 21 is not

violated.” Parrish, supra, 758 P.2d at 1362 (citing In re House Bill No. 1353, 758 P.2d at 374).

See, In re Breene, 14 Colo. 401, 404, 24 P. 3 (1890).15

The Colorado courts have repeatedly noted that a general title, such as the one involved

in this case, far from being violative of Section 21, is often beneficial:

The general assembly may, within reason, make the title of a bill as
comprehensive as it chooses, and thus cover legislation, relating to
many minor but associated matters. For example, an act entitled
‘An act in relation to municipal corporations’ may provide for the
erganization [sic], government, powers, duties, offices, and
revenues of such corporations, as well as for all other matters
pertaining thereto. ‘The generality of a title,’ says Judge COOLEY,
‘is no objection to it so long as it is not made a cover to legislation
incongruous in itself, and which by no fair intendment can be
considered as having a necessary or proper connection.’ Const.
Lim. (5th Ed.) 174, 180. It is not essential that the title shall specify
particularly each and every subdivision of the general subject.
Such a requirement would lead to surprising and disastrous results.
Many titles would not only be absurdly prolix, but the laws
themselves would be endangered by virtue of the inhibition against

15
The Breene Court also adopted the following classic explanation of the purpose of Section 21’s clear expression
clause:
Another purpose was to give information to the members, or others interested, by the title of the
bill, of the contemplated legislation; and thereby to prevent the passage of unknown and alien
subjects, which might be coiled up in the folds of the bill.

24 P. at 3-4, quoting Dorsey’s Appeal, 72 Pa. St. 192. See also, Catron, supra, 33 P. at 514.

38
 duplicity of subjects. [citations omitted] Efforts to cover
specifically in the title all subordinate matters treated of in the act
have already jeopardized legislation in this state, and only be [sic]
the most liberal interpretation has the court been able to save the
statutes. [citations omitted]. But the legislature may, on the other
hand, undoubtedly contract the scope of a title to the narrowest
limits. When, however, in the exercise of this discretion, it sees fit
to thus restrict the title, care must be taken not to transcend, in the
body of the bill, the limit thus voluntarily fixed.

Breene. supra, 24 P. at 4; Brown v. Elder, 77 P. 853, 857 (Colo. 1904) (Comprehensive revenue

measure entitled “An act in relation to public revenue” did not violate Section 21: “The…

objection… that the title of the act is too general is not usually a tenable one. Indeed, this court,

in passing upon the titles of acts, has advised the General Assembly against the attempt to make

them too specific.”); Titus v. Titus, 41 P.2d 244, 246 (Colo. 1935) (bill entitled “An Act Relating

to Marriage and Divorce,” not violative of Section 21: “‘Particularity is not essential and

generality is commendable, ’” citing Roark v. People, 79 Colo. 181 [185], 244 P. 909 [,910

(1926)]); Gordon v. Wheatridge Water Dist., 109 P. 2d 899, 901 (Colo. 1941) (same, citing

Roark, supra); California Company v. Colorado, 348 P.2d 382, 389 (Colo. 1959) (same, citing

Gordon and Roark). Compare, Arapahoe Cnty School Dist. No. 1 v. Colorado, Civil Action No.

2018 CV 32901, Omnibus Order (Denver Dist. Ct., 12/14/18) (section from Senate bill entitled

“Concerning Improving School Choice Traditional Schools in a School District” and concerning

the transportation of any student across school district boundaries which was appended to a

House bill entitled “Concerning Ensuring Educational Stability for Students in Out-of-Home

Placements” and concerning school stability and transportation of foster and homeless children

held to be in violatuion of Section 21’s single subject provision).

The Colorado courts have also often relied upon the Sutherland treatise on statutory

interpretation, which provides the following distillation of the law from many of our sister states

39
with comparable constitutional provisions: “[w]here there is any reasonable basis for grouping

various matter of the same nature together in one act, and the public cannot be deceived

reasonably, the act does not violate the single subject requirement.” 1A Sutherland Statutory

Construction § 17:2 (7th ed. 2018).

Plaintiffs urge the court to apply a uniquely-worded three-prong test with respect to the

single subject issue, which they argue is derived from a supreme court test of dubious

applicability to this case. Plaintiffs argue that to satisfy the single subject requirements of

Section 21, “a bill must have one unifying subject and a purposive element or modification of

that subject. In addition, all substantive provisions in the bill must be dependent on and

connected to that purpose or modification.” Plaintiffs’ Motion, at 27. Plaintiffs cite no Colorado

case adopting such a test, but argue that it derives from the supreme court’s “negative

construction” of the same concept recited in the following two-pronged test:

In order to constitute more than one subject under our case law
pertaining to bills, the text of the measure must relate to more than
one subject and it must have at least two distinct and separate
purposes which are not dependent upon or connected with each
other.

In the Matter of the Title, Ballot Title, Submission Clause, and Summary Adopted April 5, 1995

by the Title Board Pertaining to a Proposed Initiative “Public Rights in Waters II.”, 898 P.2d

1076, 1078-1079 (Colo. 1995) (citing People ex. rel. Elder v. Sours, 31 Colo. 369, 403, 74

P.167, 177 (1903). Plaintiffs’ Motion, at 27-28.

However, the Sours case, upon which the Public Rights in Waters II Court relied,

involved a referred constitutional amendment which had been adopted by the voters and

concerned the creation of the City and County of Denver by means of the consolidation of the

pre-existing City of Denver and those portions of Arapahoe County which existed within the

40
municipal limits of that city. 74 P. 167. The respondent contended that the amendment violated

Art. XIX, § 2 of the Constitution, which prohibited the legislature from submitting amendments

to more than six articles of the Constitution at any one session, arguing that the numerous

sections of the amendment amounted to, and therefore should have been submitted as, separate

amendments, exceeding six in number. As the Sours court noted, Section 21, which pertains to

legislative bills, “is not applicable to a constitutional amendment.” 74 P. at 177, citing Nesbit v.

People, 19 Colo. 441, 36 P. 221. Thus, the case was not decided under Section 21. Moreover, a

close variation of the phraseology of the test recited above actually comes from a Wisconsin

case, Hudd v. Timme, 54 Wisc. 318, 11 N.W. 785, 791 (Wisc., 1882), in which the Wisconsin

Supreme Court was interpreting a provision in its constitution comparable to Art. XIX, § 2, not

Section 21. Although the Sours Court quotes Hudd at length and with apparent approval, it

nowhere specifically adopts the phraseology set forth above as an actual test, let alone one that

applies to Section 21. Although this test has been cited with frequency in cases involving

initiatives, and the constitutional single subject requirement pertaining to them which the voters

adopted ninety-one years following Sours in 1994, Colo. Const, art. V, § 1 (5.5), this court has

found no case in which the Sours test has actually been applied to a legislative bill, as distinct

from an initiative,16 or legislatively-referred measure such as that at issue in Sours itself. Indeed,

the supreme court has relatively consistently acknowledged a separation between the two

different lines of authority, perhaps best illustrated by Justice Rice’s scholarly opinion for the

court in In the Matter of the Title, Ballot Title and Submission Clause, and Summary for 1999-

2000 # 25, 974 P.2d 458, 460-464 (Colo.1999). But see Id., 974 P.2d at 461 (“[W]e held in

[Sours] that in order for the text of a bill to constitute more than one subject, it ‘must have at

16
Although the passage quoted above from Public Rights in Waters II refers to "our caselaw pertaining to bills
[emphasis supplied]," 898 P.2d at 1078, the court there principally relied upon Sours, which, as noted, did not
involve a legislative bill.

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least two distinct and separate purposes which are not dependent upon or connected with each

other [emphasis supplied]’”).

Thus, the court understands that the proper test is that recited in Parrish that so long as

the matters encompassed in the bill are necessarily or properly connected with each other rather

than disconnected or incongruous, the single subject requirement of Section 21 is not violated.

However, even assuming the Sours test applies, the court reaches the same result.

SB 17-267 is fifty-nine pages long and has thirty-five sections, thirty-two of which

contain substantive provisions.17 Plaintiffs’ Motion, Exhibit 1. As noted, its title is “Concerning

the Sustainability of Rural Colorado.” Id. Unless Plaintiffs can demonstrate, beyond a

reasonable doubt, that the matters encompassed in those thirty-five sections are neither

necessarily nor properly connected with each other, but rather are disconnected or incongruous,

SB 17-267 will withstand their challenge pursuant to Section 21.

The court finds that SB 17-267 does withstand that challenge. As noted, the title of the

bill is rather general and broad - the sustainability of rural Colorado - but this alone is not

indicative of a failure to meet the single subject requirement. In fact, as noted above, it is the

preferred practice. In any event, after careful review of its thirty-five sections, the court is

satisfied that all of them relate to the subject of the sustainability of rural Colorado, are

necessarily or properly connected with each other, and none are disconnected or incongruous.

The court also finds, under the Sours test, that the text of SB 17-267 relates to the single subject

of the sustainability of rural Colorado, and that its provisions do not have two or more distinct

and separate purposes which are not dependent upon or connected with each other.

17
Excluding §§ 1, 34 and 35, which contain the legislative declaration, effective date, and safety clause,
respectively.

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 First, the court notes that it was certainly the general assembly’s express intention that the

bill address a number of issues affecting rural Colorado, some of which undeniably also affected

other parts of the state. In the legislative declaration, it recited that

in comparison to the urban and suburban areas of the state, rural Colorado, on
average and with some exceptions, faces complex demographic, economic, and
geographical challenges including: (I) An older population that requires more
medical care; (II) less robust and diverse economic activity and associated lower
average wages and household incomes; and (III) greater challenges, due to
distance and less adequate transportation infrastructure, in accessing critical
services such as healthcare.

SB 17-267, § 1(1)(a)(I) – (III). It also recited that “the purpose of this legislation is to ensure and

perpetuate the sustainability of rural Colorado by addressing some of these demographic,

economic, and geographical challenges…” and explicitly manifested its intention to comply with

Section 21:

(2) the general assembly further finds and declares that the
sustainability of rural Colorado is directly connected to the
economic vitality of the state as a whole, and that all of the
provisions of this act, including provisions that on their
face apply to and affect all areas of the state but that
especially benefit rural Colorado, relate to and serve and
are necessarily and properly connected to the general
assembly’s purpose of ensuring and perpetuating the
sustainability of rural Colorado.

Id, § 1 (2) (emphasis supplied, echoing the test of Parrish and In re House Bill No. 1353, supra.)

See also, Colorado Criminal Justice Reform Coalition v. Ortiz, 121 P.3d 288, 293 (Colo. App.

2005)(court relied, in part, on legislation’s explicit statement that it did not violate TABOR to

conclude that it did not).

Fourteen of the sections of the bill concern, to one degree or another, the issue which is

the primary focus of this case, that is the repeal of the HPF Program and its administration

through the Department, and the simultaneous creation of CHASE and the HASF. Section 17,

43
which accounts for the bulk of the bill, is the Colorado Healthcare Affordability and

Sustainability Enterprise Act of 2017, and creates CHASE, and provides for the details of its

funding and administration. In section 16, the legislature repeals the HPF Program then codified

at C.R.S. § 25.5-4-402.3, as amended by SB 17-256, which the legislature had passed earlier in

the 2017 session, cutting HPF Program appropriations by $264,100,000. Many other provisions

of the bill pertain directly to the creation of CHASE and the repeal of the HPF Program. For

instance, Section 6 added new subsection (9) to C.R.S. § 24-1-119.5, clarifying that CHASE was

to exercise its power and perform its duties and functions “as if the same were transferred by a

Type 2 transfer;” Section 11 made the adjustment to the excess state revenues cap in the amount

of $200 million, codified at C.R.S. §24-77-103.6; Section 14 increased co-pays for pharmacy and

hospital outpatient services for Medicaid patients under C.R.S. §25.5-4-209; Section 15 provided

for the payment of performance-based additional amounts to hospitals, and made conforming

amendments; Section 18 created the Unexpended HPF cash fund, to facilitate payment of claims

under the repealed HPF Program until October 30, 2018. Other minor conforming amendments,

most of which simply substitute reference to CHASE and/or HASF for references to the

Department or HPF, appear in Sections 2, 3, 7, 13, 19, 20, and 22 of the bill. Section 21 of the

bill directs the Department to seek additional federal matching funds which the legislature

believed would become available under the federal Advanced Care for Exceptional Kids Act,

and establish an enhanced pediatric health home for children with complex medical conditions.

Based on the record, the court concludes that all of these provisions are related to the

sustainability of rural Colorado, and are necessarily or appropriately connected with one another,

and none are disconnected and incongruous, nor do they have distinct and separate purposes. The

proposed cuts to the HPF Program would have disproportionately impacted rural Colorado and

44
rural hospitals in particular. See, Legislative History Supplement to Cross-Motions for Summary

Judgment, filed September 11, 2018, Ex. 26 (chart demonstrating impact of planned cuts to

Hospital Provider Fee in FY 2017-18, listing approximately 34 identifiably-rural hospitals which

would be negatively affected). At the hearing before the Senate Finance Committee on April 11,

2017, representatives of hospitals in Grand Junction, the San Luis Valley, and Hugo all testified

to the devastating effect which the cuts in the amount of approximately $264 million to the HPF

Program enacted in SB 17-256 would have on their communities. These included decreases in

the quantity and quality of available healthcare, which would disproportionately affect the high

percentage of Medicaid patients in rural Colorado, and cause great difficulty for patients and

providers alike in reaching distant trauma centers and medical specialists. The witnesses also

testified regarding the loss of jobs and resulting economic impacts on their communities should

rural hospitals be forced to close for lack of funding. One of the hospital witnesses referred to her

rural hospital’s heavy reliance upon the Children’s Hospital in Denver for highly specialized

care, of the type provided for in the Advanced Care for Exceptional Kids Act addressed in

Section 21 of the bill. Hearing on SB 17-267, Senate Finance Committee, 72nd Gen. Assembly,

First Reg. Sess., April 11, 2017, https://leg.colorado.gov/committee/granicus/1474831/2017

Senate Finance Archived Audio/April 11, 2017 (“SB 17-267 Sen. Fin. Hr’g”).

Other provisions of SB 17-267 addressed other issues impacting rural Colorado.

Specifically, Sections 4, 23, 28, 29 and 30 concerned retail marijuana taxes, and a special, one-

time allocation of $30 million to statutorily-defined large and small rural school districts.

Sections 5, 8, 10, 12, and 31 concerned highway funding, including the redirection of

maintenance funds to rural highways. The members of the Senate Finance Committee were

provided with a handout at the hearing on April 11, 2017 stating that “[a]lthough there are more

45
lane-miles in rural areas of the state, the vast majority of the transportation dollars are spent in

populated areas of the state allowing the infrastructure in rural parts of the state to continue to

decline.” State’s Cross Motion, Exhibit E. In addition to the representatives of rural hospitals,

representatives of the business community and school districts in Elizabeth, Merino, Hanover,

and Canyon City all testified to the Senate Finance Committee that revenues committed to road

maintenance and rural Colorado, and marijuana retail sales tax revenue dedicated to rural

schools, would allow them to address numerous problems of infrastructure and school budgets in

their rural communities. SB 17-267 Se. Fin Hr’g.

Several provisions of the bill address business and personal property tax credits,

including those pertaining to seniors, and the reimbursement of county treasurers by the state for

the loss of revenue caused thereby, including through the mechanism of TABOR refunds. As the

longtime Director of the Governor’s Office of State Planning and Budgeting, Henry Sobanet,

states in his affidavit, these provisions disproportionately benefit rural Colorado because of its

slower economic recovery following the Great Recession compared to urban areas, and the

provisions “support rural communities with greater aging populations and home values.” State’s

Cross-Motion, Exhibit B, ¶ 32 at 518; see also SB 17-267, § 1(2).

With respect to the single subject issue, it is worth noting that Plaintiffs have provided no

evidence whatsoever indicating that any legislators were actually misled by the title of SB 17-

267. In view of the fact that the statute enjoys a heavy presumption of constitutionality, and it is

Plaintiffs’ burden to demonstrate its unconstitutionality beyond a reasonable doubt, this is a

significant omission. Indeed, a representative of Free Market Healthcare Advocates testified to

the Senate Finance Committee, as the first witness at the hearing on April 11, 2017, that although

18
Plaintiffs refer to the Sobanet affidavit as being "self-serving," but offer virtually no evidence to contradict it.
Given that Plaintiffs bear the burden of proving the unconstitutionality of SB 17-267 beyond a reasonable doubt, the
lack of such evidence is fatal to their contention.

46
the HASF was characterized as a fee within the bill, in his judgment it was really a tax, and the

bill as a whole was an attempted “end run” around TABOR. SB 17-267 Sen. Fin. Hr’g. The

principal Senate sponsor, Sen. Jerry Sonnenberg, thanked the witness for that perspective in his

closing remarks, and indicated his agreement in part. See, Town of Sugar City v. Board of

Comm’rs of Crowley Cnty, 140 P. 809, 815 (Colo. 1914)(“It seems clear, upon a survey of the

whole matter, that no member of the legislature could possibly have been misled or deceived by

the language of this title, nor could any citizen of ordinary prudence be led astray by the fact that

the title was not as definite and certain as exacting and critical counsel now insist that it should

have been, which are among the chief evils intended to be met and overcome by this

constitutional provision.”) Thus, it seems clear that neither the legislators nor citizen witnesses

were misled by the bill, and a range of views expressed, at least before the Senate Finance

Committee.

For all the foregoing reasons, the court finds that SB 17-267 does not violate the single

subject requirement of Section 21.

CONCLUSION

In summary, all Plaintiffs have standing to challenge the constitutionality of both the HPF

Program and CHASE and the HASF Program under TABOR. Both the HPF and the HASF are

fees, and not taxes, and therefore not subject to TABOR. In creating CHASE in the manner it

did, the general assembly was not required to adjust the excess state revenues cap downward,

even though it made the policy judgment to do so. Finally, SB 17-267 does not violate the single

subject requirement of Article V, Section 21 of the Colorado Constitution.

47
 Accordingly, Plaintiffs’ Motion for Summary Judgment is DENIED IN ITS ENTIRETY,

and the State’s Cross-Motion for Summary Judgment and Defendant Intervenor Colorado

Hospital Association’s Motion for Summary Judgment are both GRANTED IN THEIR

ENTIRETY. The case is DISMISSED WITH PREJUDICE.

DATED this 5th day of March, 2019.

BY THE COURT:

______________________________________

Ross B.H. Buchanan

Denver District Court Judge

48