CWCB Construction Fund and Severance Tax Trust Fund Annual Report 1998

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3.0 Severance Tax Trust Fund The Severance Tax Trust Fund was created in 1978 "...to be perpetual and held in trust as a replacement for depleted natural resources and for the development and conservation of the state's ' water resources pursuant to sections 37-60-106 (1) 0) and (1) (1), 37-60-119, and 37-60-122, C.R.S...." The citations refer to the Colorado Water Conservation Board's Water Project Construction Loan Program supported by the CWCB Construction Fund. ' Prior to 1994, all the money transferred to the Severance Tax Trust Fund was appropriated by the General Assembly for other purposes such as capital construction, the federal Uranium Mill Tailings Remedial Action Project (UMTRAP), and to offset General Fund budget shortfalls. Furthermore,the previous law required all interest from investments to revert to the General Fund. Consequently, no water projects were ever financed through the Severance Tax Trust Fund. ' In 1996, Senate Bill 96-170 concerning the Severance Tax Trust Fund was signed into law by ' Governor Romer. SB 96-170 reaffirmed the fund's original purpose and expanded the use of the fund for "...funding programs that promote and encourage sound natural resource planning, management, and development related to minerals, energy, geology, and water." The bill also ' created two new accounts within the fund and made an appropriation for FY 97. The two new accounts are: ' • the Operational Account (OPA) • the Perpetual Base Account (PBA) The passage of SB 96-170 was due in large part to the efforts of the state Minerals, Energy and Geology Policy Advisory Board which was established in 1995 pursuant to Section 34-20-104, C.R.S. At their July 10, 1996 meeting, the MEGA Board recommended that use of the Severance Tax Trust Fund for water project construction and water planning "give preference to energy impacted areas." ' 3.1 Cash Sources Beginning in 1978,the State of Colorado has collected millions of dollars annually in severance ' taxes from the production of oil and gas, coal, and minerals (molybdenum, gold, and silver). The oil and gas severance tax rate is based on value of production. The coal severance tax is based on tonnage. The rate was cut by a third in 1988 and is now frozen by TABOR. Molybdenum severance ' tax is on a cents per ton basis. The rate was cut by 2/3 in 1987. ' Total severance tax revenue to the state has swung widely due to variation in the price and tax rate on oil and gas and large tax refunds. Severance tax revenue during calendar year 1998 is shown below. 1 CWCB FY98 Annual Report,page 17