DENVER – The proposed Hospital Provider Fee fix to the state’s TABOR quandary may have been a nonstarter from the get-go, according to a legal memorandum by nonpartisan staff for the Colorado General Assembly.

Senate President Bill Cadman, R-Colorado Springs, released a copy of the opinion Wednesday showing that the Office of Legislative Legal Services advised him that moving the Hospital Provider Fee to an enterprise fund would not fulfill the legal requirements needed to exempt roughly $750 million from the Taxpayer’s Bill of Rights threshold.

Cadman said he requested research be done on the issue Dec. 31.

“I got the opinion back in 40 minutes,” Cadman told reporters in a presession interview Wednesday. “So we can assume that obviously they had this already set up. I don’t know who else has it. I have no way to know who else has it, but I do know this, somebody does, it was never shared with us and I’m pretty sure it was never shared with you.”

A spokesman for Democrats in the House who ran a bill last session on the issue said the memo was created in 2015 and was public.

“Lots of lawyers will have lots of different opinions, but most importantly the legislature is the lawmaking body in this state, so that we can address problems just like these,” Speaker of the House Dickey Lee Hullinghorst, D-Gunbarrel, said in a statement. “We are focused on finding solutions for the people of Colorado, not on finding excuses for why we are failing them.”

The Hospital Provider Fee is levied against stays in the hospital and used to obtain matching funds from the federal government for Medicaid and reimbursed to hospitals and other Medicaid recipients.

At issue are TABOR refunds for the 2016-17 fiscal year. The law requires that the state refund revenue to taxpayers if state spending grows faster than a certain rate. About $212 million is expected to be refunded that fiscal year.

The refunds place a strain on state revenue, Democrats have said, and the governor’s office has proposed removing Hospital Provider Fee revenue from money subject to TABOR. That would eliminate refunds in the foreseeable future and free up millions to pay for needs like transportation infrastructure and higher education.

Republicans opposed the proposal last year, but Democratic leaders have remained optimistic that there could be a compromise. The 2016 session begins Jan. 13.

The legal opinion says essentially that the state agency that receives the Hospital Provider Fee does not meet the legal requirements of an enterprise fund, making it exempt from TABOR limits.

“To exclude HPF revenue from state fiscal year spending and prevent it from being counted against both the TABOR and statutory state fiscal year spending limits without obtaining voter approval for a revenue change, the General Assembly would therefore have to create a new TABOR-exempt enterprise to charge and collect the HPF,” said the memo. “An entity created to charge and collect the HPF would not have the clear relationship between itself as a service provider charging a fee for a service and hospitals as customers paying the fee for that service that a TABOR-exempt enterprise has, and such an entity therefore would not be a government owned business and would not qualify as a TABOR- exempt enterprise.”

Cadman received the memo after he made an inquiry of legislative staff for a potential bill on the issue. He has been working behind the scenes with Democrats on the issue.

Henry Sobanet, budget director for Gov. John Hickenlooper, dismissed the memo as “flawed.”

“We are confident that this is a fatally flawed and incomplete legal analysis,” Sobanet said in a statement. “We worked with the AG office last year, and they confirmed that nothing in TABOR prevents the legislature from following this path. . To say HPF can’t be an enterprise makes no sense. In this case, hospitals themselves have asked us to assess this fee.”

Cadman’s announcement came as pressure mounts on Republicans to not support the Hospital Provider Fee exemption.

Nonprofit advocacy group Americans for Prosperity sent lawmakers an online TABOR Protection Pledge. It asked lawmakers to sign a pledge saying, “As a member of the Colorado legislature, I pledge that I will not vote to undermine the Taxpayer’s Bill of Rights by creating a special exemption for the Hospital Provider Fee.”

“Those pledges are a big part of the Republican party’s effort to maintain discipline and toe the line to the most conservative principles,” Hickenlooper said Wednesday after a meeting with the Colorado Forum in downtown Denver. “We’ll see whether that helps the party long-term.”

Tamra Farah, communications director for AFP Colorado, said AFP is a policy-based nonpartisan organization, not an arm of the Republican Party. She said the group opposes the Hospital Provider Fee proposal because the state should ask voters rather than circumvent TABOR.

“We need to get our fiscal house in order rather than grasping for money from this bed tax,” Farah said. “It’s an end run around TABOR.”

The Hospital Provider Fee is expected to be the single-biggest fight during the upcoming legislative session.

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Contact Megan Schrader: 286-0644

Twitter @CapitolSchrader

Bill Cadman is the current President of the Senate in Colorado, but he is outgoing, because of term limits. The Senate Chambers has been undergoing renovations since their last session. The Senate Chambers have been undergoing renovations. He stands at the top of the scaffolding in an area that was covered up in the 1960’s on Tuesday, November 24, 2015. (Jerilee Bennett/The Gazette)

JERILEE BENNETT, THE GAZETTE

Senate President Bill Cadman, R-Colorado Springs. (The Gazette)