Colorado counties file lawsuit against Gov. Jared Polis, state treasurer over transfer of tax money

DENVER — Seven Colorado counties filed a lawsuit Thursday accusing the state of illegally taking tax money generated from oil and gas extraction and set aside for local governments.

The suit, which names Gov. Jared Polis and state Treasurer Dave Young, was filed in Denver District Court by several mostly rural counties on the Western Slope, plus metro Denver’s Douglas County. They allege that a bill passed by the legislature earlier this year would “substantially deplete” — if not zero out — a portion of severance tax revenue that’s intended “to offset the impact” of oil and gas extraction.

That bill, the bipartisan House Bill 1413, took $25 million in severance tax funds and directed them to the general fund, which is the state’s primary spending account. It was one of a handful of transfers that aided in balancing the budget.

The counties — Mesa, Douglas, Garfield, Moffat, Montezuma, Montrose and Rio Blanco — are asking a Denver judge to rule that the transfer was illegal and to prohibit transfers in the future that would “deplete” the fund.

At a county commission meeting at the end of August, Mesa commissioners accused the legislature of taking the money to balance the state budget, and Commissioner Janet Rowland said it was an “insult to injury.”

The counties said in their suit that they have used the money for transportation, public health, and senior and animal welfare services. The distributions made up between 0.6% (in Montrose County’s case) and 3.65% (for Montezuma County) of the their 2023 expenditures.

“As a result of depletion of the (fund), the (counties) and their communities will be deprived of critical funds on which they have come to heavily rely, and on which they intended to rely moving forward for established and new service programs alike,” the counties’ lawyers wrote in the suit.

According to the Colorado Department of Local Affairs website, $25 million is available for local governments in the Energy/Mineral Impact Assistance Fund Grant program; that’s the account from which legislative staff recommended lawmakers transfer the money. Applications for those grants opened July 1.

A spokeswoman for the department was unable to provide immediate comment Thursday.

The legislature has moved severance tax dollars into its general fund before, as Republican lawmakers who opposed the transfer noted during floor debates in the spring. Staff for the Joint Budget Committee, a group of six lawmakers tasked with creating the state’s budget and guiding fiscal policy, recommended the $25 million transfer in March.

Spokespeople for Polis and Young were not immediately able to comment. Messages left for Reps. Shannon Bird and Rick Taggart, who sit on the powerful Joint Budget Committee and co-sponsored the bill, were not immediately returned Thursday.

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