DENVER • A proposal to raid a semiprivate state worker’s compensation insurance fund – a golden egg that would ease much of the pain of $700 million in state budget cuts proposed for the 2009-10 fiscal year – survived its first legislative test Tuesday despite bitter Republican attacks.

A bill to withdraw $500 million from the assets of the insurance fund, called Pinnacol Assurance, was approved by the Senate Appropriations Committee on a 7-3 vote.

The panel’s six Democrats were joined by Sen. Al White, R-Hayden, also a member of the Joint Budget Committee, which incorporated the golden-egg plan into the budget package it rolled out on Monday.

Without tapping Pinnacol’s surplus, the proposed state budget would slash funding for higher education by more than half, a move that educators said would wreck Colorado’s public colleges and universities.

In the grip of a global recession that has cut deeply into tax revenues, budget-balancing has come to the fore as the central debate of the 2009 General Assembly.

Bill Mansheim, chief financial officer of Adams State College in Alamosa, said that unless money comes in from Pinnacol or another source, the school would have to raise tuition by 135 percent. “We cannot do that,” he warned. “You’re looking at closing down Adams State College.”

Sen. Bob Bacon, D-Fort Collins, said that after years of TABOR restrictions, now compounded by the recession, the time had finally come when cutting off state funding to Colorado’s public colleges and universities was on the table. “We have reached the cliff,” he said.

Steve Durham, testifying for the Denver Metro Chamber of Commerce and the Colorado Association of Home Builders, picked up Bacon’s metaphor in arguing that raiding Pinnacol was merely postponing the day of reckoning for public higher education.

“By not looking at permanent cuts in other areas, you simply move the cliff 50 feet farther away,” he said. “Unless you solve the systemic problem, sooner or later you still go over that cliff.”

“The most disturbing part of this whole process is this is a one-time fix,” said Sen. Keith King, R-Colorado Springs. “This problem comes right back to us next year if we do this.”

No one disagreed.

But the debate on Tuesday was whether it was appropriate or even legal to tap Pinnacol, a hybrid public-private entity established in 2002 to replace the state agency that provided worker’s compensation insurance in Colorado.

“We are a political subdivision of the state of Colorado,” Dan O’Neil, Pinnacol’s chief counsel, told the committee. “But we’re supposed to operate as a mutual insurance company.” He argued that, therefore, its assets belong to its policyholders and could not be transferred to the state.

Sen. Brandon Shaffer, D-Longmont, said that Pinnacol was holding $587 million in surplus assets, and that the state had every right to the money.

“That surplus is our surplus. Those dividends are our dividends,” he said. “This is a great big stone that has been left unturned, until now.”

Pinnacol’s president, Ken Ross, countered that the surplus was smaller and that in any case the money belonged to the 58,000 Colorado businesses that pay into the fund.

Ross promised a court fight if the state moves to tap Pinnacol’s assets, but said he was negotiating with members of the legislative Joint Budget Committee and Gov. Bill Ritter’s office and hoped to work out some arrangement that would give the state access to Pinnacol’s surplus while honoring its responsibilities to its policyholders.

Sen. Moe Keller, D-Wheat Ridge and chairwoman of the Joint Budget Committee, said the broader question had to be put to the general public: “What are you willing to pay for? Because we don’t have the revenues in order to maintain public services.”

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Contact the writer at 476-1654. Gazette writer John Schroyer contributed to this report.

The era of one-price-fits-all-songs on iTunes came to an end Tuesday, April 7, 2009 as Apple Inc., the Internet’s dominant digital music store, ended its practice of selling all songs for 99 cents each. Photo by (AP Photo/Paul Sakuma, file)

Paul Sakuma