- Under current law, the governor or executive branch officials can unilaterally allocate certain funds which originate from outside of the state—known as custodial funds—often with little or no oversight.
- Amendment 78 would democratize the process of allocating custodial funds by requiring the general assembly to appropriate such funds after a public hearing.
- If adopted by voters, the amendment would constitute an important procedural change, which would fundamentally expand an essential system of checks and balances onto a realm of state operations which is currently lacking them.
- The amendment would also cause interest payments on custodial funds to expand the funds available to the general assembly to pursue public objectives.
- These internal and external constraints would ensure the responsible use of state resources, reducing the potential for abuses by executive officials and unlocking funds for use by the elected representatives of the people.
If adopted by voters in November, Amendment 78 would require all money received by the state, including custodial funds, to be allocated by the general assembly following a public hearing. It also contains a series of other changes for the purpose of implementing this new requirement. As an amendment to the state constitution, passage will require approval by at least 55 percent of voters.
Specifically, Amendment 78 would –
- require all money received by the state, including money granted to the state for a particular purpose, known as custodial funds, to be subject to appropriations by the general assembly;
- require a public hearing prior to such apportionment by the general assembly;
- repeal authority to disperse funds from the state treasury by any other means;
- require all custodial money to be deposited into the newly created Custodial Funds Transparency Fund;
- require interest earnings generated in said fund to be distributed into the general fund; and
- allows the state to retain and spend all custodial money, and earnings and revenue on that custodial money, as a voter approved revenue change.
The Colorado state constitution grants the legislature the authority to direct state spending by appropriating money through the annual budgeting process. This process—which incorporates recommendations from the Joint Budget Committee, public input, and debate amongst legislatures—determines funding for state programs and agencies and authorizes these agencies to spend the funds allocated to them. Some state revenues, however, are not subject to the regular appropriations process.
Under current law, the executive branch is authorized to allocate certain state resources, known as custodial money, unilaterally. This includes revenue in the form of grants, legal settlements, gifts and donations, or all federal funding of state programs, as well as emergency relief funds, such as the $1.6 Billion in Federal ‘CARES Act’ distributed to Colorado for pandemic aid. Such revenues are generally not subject to TABOR. Because these funds are independent of the legislative appropriations process, the governor, attorney general, and unelected administrators can deploy these resources absent public input, or in many cases, accessible public records.
Custodial funds originate outside the state government for an intended purpose and are granted to the state pursuant to specific objectives. After becoming the custodian of these funds, the State of Colorado must ensure they are utilized for their intended purpose. The state cannot deploy a research grant from the federal government to complete an infrastructure project, for example. Despite stipulations tied to these funds, expansive discretion can still exist. Defining the general purpose for these resources does not necessarily determine precisely how they must be utilized in pursuit of the objective, often leaving expansive flexibility in allocation decisions for executive officials. In addition, no constitutional mandate currently governs how interest earnings from custodial funds within the state treasury must be utilized.
The broad discretion of executive officials to dispense with custodial funds—and the absence of meaningful scrutiny or accountability mechanisms over such discretionary action—exposes the current process to abuse. In theory, an unaccountable bureaucrat could justify a very broad range of expenditures as loosely associated with the intended purpose of the funds. Thus, the current process can permit capricious decisions made unilaterally by unelected actors. Recent reports from the Colorado Springs Gazette, for example, allege that the Colorado Secretary of State, Jena Griswold, spent almost half of the CARES Act COVID-19 relief funds allocated to her office ($2.8 Million) on a D.C based public relations and lobbying firm to produce a series of TV ads, in which she starred, to educate voters about 2020 election procedures. While these funds were technically used to alleviate a problem produced by the pandemic—disruptions to election procedures—it is unclear whether this was the optimal use of these resources. When such a decision is made unilaterally, and the actor may have directly benefited, this raises the specter of impropriety. Under current law, whether resources are deployed responsibly may sometimes depend upon the knowledge and good faith of individual decision makers.
Amendment 78 fundamentally alters this dynamic through a series of procedural changes which move allocation decisions to a deliberative and democratic process. The amendment prohibits state agencies, the governor, or other executive officials from spending custodial funds without direct allocation from the legislature, eliminating the potential for unilateral decision making. It requires instead that the state legislature issue appropriations of custodial funds only after a public hearing, thus expanding transparency and accountability. By shifting discretion away from the executive and towards the legislature, these changes ensure that Coloradans have a more direct say—through representatives from 65 districts across the state—in these allocation decisions. Amendment 78 therefore expands the number of interests whose input may come to bear in the decision-making process, thus serving as a bulwark against the abuse of authority or the pursuit of relatively narrow goals at the expense of the general welfare.
The amendment’s requirement that all custodial funds be deposited into the Custodial Fund Transparency Fund further enhances transparency. Currently, various agencies or departments within the executive branch and treasury may disperse custodial funds from separate accounts. Under Amendment 78, all incoming funds and interest earnings generated by those funds enter and exit the same two accounts: the Custodial Fund Transparency Fund and the General Fund, respectively. This provides greater visibility into the inflows and outflows of all custodial monies under the control of the State of Colorado.
When interest generated by custodial funds does not have an explicit mandate about how they must be deployed, the governor, attorney general, or custodian generally decide how to spend these earnings. The earmarked purpose attached to custodial funds currently serves as the primary safeguard against the misuse of funds. For revenue generated through interest payments, this safeguard often does not exist. It has been widely reported that when the former Governor, John Hickenlooper, was under an ethics investigation, the interest generated from the ‘Jobs and Growth Tax Relief Reconciliation Act of 2003,’ was used to pay his attorney fees.
If interest revenue is not earmarked for any stated purpose when awarded to the state, the legislature should have the authority to deploy it for the general welfare of Coloradans. By transferring all interest revenue into the General Fund, Amendment 78 grants absolute discretion to the legislature over use of these additional resources. This further enables elected representatives to pursue the needs of their constituents who in turn hold their representatives accountable at the ballot box.
The language explicitly allows the state “to retain and spend all custodial money and earnings and revenue on that custodial money as a voter‑approved revenue change.” That means Amendment 78, if adopted, would have no impact on revenues subject to TABOR limitations. Thus, it would never force the general assembly to reduce spending for existing programs. In fact, the amendment could only increase the amount of revenue the legislature has at its disposal for General Fund purposes. If custodial funds generate large sums of interest revenue, those sums could seriously bolster state revenues without putting the state any closer to TABOR’s tax refund requirement. It’s essentially free money to the state at the discretion of the general assembly.
Amendment 78 would democratize the process surrounding the allocation of custodial funds. If adopted by voters, it would constitute an important procedural change, which would fundamentally expand an essential system of checks and balances onto a realm of state operations which is currently lacking them. In addition, the amendment would cause interest payments on custodial funds to expand the funds available to the general assembly to pursue important public objectives. These internal and external constraints would ensure the responsible use of state resources, reducing the potential for abuses by executive officials and unlocking funds for use by the elected representatives of the people.
In short, Amendment 78 would increase public transparency and eliminate opportunities for influence peddling by the executive branch by shifting spending authority to the legislature. They would bring to bear an expanded range of interests in how state resources are utilized, democratizing the process. And it would increase the amount of funds the legislature has available in the General Fund.