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July 1, 2022 HB 22-1010
Legislative Council Staff
Nonpartisan Services for Colorado’s Legislature
Final Fiscal Note
Drafting Number:
Prime Sponsors:
LLS 22-0202
Rep. Sirota; Van Beber
Sen. Buckner; Kirkmeyer
Date:
Bill Status:
Fiscal Analysts:
July 1, 2022
Signed into Law
Aaron Carpenter | 303-866-4918
Aaron.Carpenter@state.co.us
Jeff Stupak | 303-866-5834
Jeff.Stupak@state.co.us
Bill Topic: EARLY CHILDHOOD EDUCATOR INCOME TAX CREDIT
Summary of
Fiscal Impact:
☒ State Revenue
☒ State Expenditure
☐ State Transfer
☒ TABOR Refund
☐ Local Government
☐ Statutory Public Entity
The bill creates a refundable income tax credit for eligible early childhood educators.
The bill will decrease state revenue beginning in FY 2021-22, and increase state
expenditures beginning in FY 2022-23.
Appropriation
Summary:
For FY 2022-23, the bill requires and includes an appropriation of $156,743 to the
Department of Revenue.
Fiscal Note
Status:
The fiscal note reflects the enacted bill. The bill was recommended by the Early
Childhood and School Readiness Legislative Commission.
Table 1
State Fiscal Impacts Under HB 22-1010
Current Year
FY 2021-22
Budget Year
FY 2022-23
Out Year
FY 2023-24
Revenue General Fund ($6.2 million) ($12.9 million) ($13.7 million)
Total ($6.2 million) ($12.9 million) ($13.7 million)
Expenditures General Fund - $156,743 $86,926
Centrally Appropriated - $28,931 $23,274
Total - $185,674 $110,200
Total FTE - 2.0 FTE 1.6 FTE
Transfers - - -
Other Budget
Impacts
TABOR Refund ($6.2 million) ($12.9 million) ($13.7 million)
General Fund Reserve - $23,511 $13,039
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July 1, 2022 HB 22-1010
Summary of Legislation
The bill creates a refundable income tax credit for early childhood educators who have an adjusted
gross income of less than or equal to $75,000 for a single return or $150,000 for a joint return, has held
an early childhood professional credential for at least part of the income tax year, and is the licensee
of an eligible early childcare program or employed by an eligible program for at least six months. The
credit can be claimed from January 1, 2022, through January 1, 2026. Credit amounts include:
$750 for an Early Childcare Professional I;
$1,000 for an Early Childcare Professional II; and
$1,500 for an Early Childcare Professional III, IV, V, and VI.
After January 1, 2023, the Department of Revenue (DOR) must adjust the amount of the credit by
inflation. The Department of Human Services must provide DOR with an electronic report of each
individual who held an early childhood professional credential each year.
Assumptions
As of January 13, 2022, the Department of Human Services reports that there are:
6,019 early childhood professionals who currently satisfy the eligibility criteria for the tax credit;
4,207 credentialed early childhood professionals who do not satisfy the eligibility criteria; and
8,559 early childhood professionals whose eligibility status is unknown.
For 2022, the eligible population is assumed to include all currently eligible early childhood
professionals, half of the early childhood professionals with unknown status, and five percent of
ineligible early childhood professionals, including the currently ineligible and half of those with
unknown eligibility. An additional 5.0 percent of the ineligible population is assumed to become
eligible each year for which the tax credit remains in effect, based on caseload growth and the
assumption that the presence of the tax credit will incentivize professionals to work in this field.
The credit amounts are grown by inflation expectations using the Denver-Aurora-Lakewood
consumer price index inflation projections published in the December 2021 Legislative Council Staff
forecast. For years beyond 2023, the annual rate of inflation is assumed to be 2.2 percent. The fiscal
note does not assume any change in the distribution of educators across credential tiers.
State Revenue
The bill will decrease General Fund revenue by $6.2 million in the current FY 2021-22, $12.9 million in
FY 2022-23, and $13.7 million in FY 2023-24. The estimate for FY 2021-22 represents a half year impact
for tax year 2022. Full-year revenue impacts will continue through FY 2024-25, with a half-year impact
in FY 2025-26 as the credit is repealed. The bill decreases income tax revenue, which is subject to
TABOR. Taxpayer and revenue estimates are presented on a tax year basis in Table 2 and on a fiscal
year basis in Table 3.
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July 1, 2022 HB 22-1010
Table 2
Estimated Taxpayer and Revenue Impacts Under HB 22-1010
Tax Year 2022 2023 2024 2025
Eligible Population
ECP I 2,202 2,303 2,399 2,490
ECP II 3,960 4,110 4,254 4,390
ECP III 2,733 2,827 2,917 3,003
ECP IV 1,025 1,059 1,091 1,121
ECP V 462 476 490 502
ECP IV 341 350 359 367
Total Eligible 10,723 11,126 11,509 11,873
Credit Amount
ECP I $750 $776 $790 $807
ECP II $1,000 $1,034 $1,053 $1,076
ECP III $1,500 $1,551 $1,579 $1,614
ECP IV $1,500 $1,551 $1,579 $1,614
ECP V $1,500 $1,551 $1,579 $1,614
ECP IV $1,500 $1,551 $1,579 $1,614
Total Tax Credits Claimed
ECP I $1,651,369 $1,786,999 $1,895,046 $2,009,392
ECP II $3,959,650 $4,250,120 $4,478,987 $4,723,179
ECP III $4,098,975 $4,385,169 $4,606,340 $4,846,340
ECP IV $1,537,463 $1,642,007 $1,722,203 $1,809,468
ECP V $693,413 $738,759 $773,151 $810,734
ECP IV $512,175 $543,513 $566,792 $592,432
Total Revenue Impact $12,453,044 $13,346,567 $14,042,519 $14,791,545
ECP = early childhood professional. Tax year impacts are accrued across the two fiscal years that each comprise half
of the tax year.
Table 3
Revenue Impacts by Fiscal Year Under HB 22-1010
FY 2021-22* FY 2022-23 FY2023-24 FY 2024-25 FY 2025-26*
Revenue ($6,226,522) ($12,899,805) ($13,694,543) ($14,417,032) ($7,395,772))
* Fiscal year impacts comprise half-year impacts for each of the two component tax years.
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July 1, 2022 HB 22-1010
State Expenditures
The bill increases state General Fund expenditures in the DOR by $185,674 in FY 2022-23 and $110,200
in FY 2023-24, with ongoing impacts through FY 2026-27. Expenditures are shown in Table 4 and
detailed below. In addition, expenditures in the DHS may increase as explained below.
Table 4
Expenditures Under HB 22-1010
FY 2022-23 FY 2023-24
Department of Revenue
Personal Services $99,282 $80,866
Operating Expenses $2,970 $2,160
Capital Outlay Costs $18,600 -
Computer Programming $34,859 $3,200
Document Changes $1,032 $700
Centrally Appropriated Costs
1
$28,931 $23,274
Total Cost $185,674 $110,200
Total FTE 2.0 FTE 1.6 FTE
1
Centrally appropriated costs are not included in the bill's appropriation.
Department of Revenue. General Fund expenditures in the DOR will increase to hire additional staff
and to make changes to its GenTax software. The DOR requires 2.0 FTE in FY 2022-23 and 1.6 FTE
beginning in FY 2023-24 to process returns, conduct initial review, and to resolve any return issues.
Staffing costs are shown in Table 4 and are prorated for the General Fund paydate shift.
Computer programing. This bill requires expenditures of $34,859 to program, test, and update database
fields in the DOR's GenTax software system. Programming costs are estimated at $4,950, representing
22 hours of contract programming at a rate of $225 per hour. Costs for testing at the department are
estimated at $26,709, representing 586 hours for the systems Support Office at $35 per hour and
246 hours of user acceptance testing at a rate of $25.50 per hour. Expenditures in the Office of Research
and Analysis are required for changes in the related GenTax reports so that the department can access
and document tax statistics related to the new tax policy. These costs are estimated at $3,200,
representing 100 hours for data management and reporting at $32 per hour.
Finally, the DOR will need to make changes to its tax forms. The changes are expected to cost $1,032
in FY 2022-23 and $700 in FY 2023-24. These costs are reappropriated to the Department of Personnel
and Administration.
Department of Human Services. Expenditures within the DHS will increase to the extent they receive
additional applicants for credentialing. These costs include additional help desk staff and purchasing
additional licenses in three computer systems: the Colorado Shines Professional Development
Information System for educators to receive and maintain their credentials, the Colorado Shines
Technology System for early childhood education programs to receive a quality rating, and the Page 5
July 1, 2022 HB 22-1010
Attendance Tracking System for programs that have a fiscal agreement with CCCAP. User licenses
for these systems are purchased in blocks, meaning that the cost increases once a certain threshold of
new users is reached. To the extent that the income tax credit incentivizes new educators or childcare
facilities, the department may be required to purchase additional user licenses in future years. In
addition, if additional persons apply for credentials, additional help staff desk may be needed. Any
future increase in appropriations will be requested through the annual budget process.
Centrally appropriated costs. Pursuant to a Joint Budget Committee policy, certain costs associated
with this bill are addressed through the annual budget process and centrally appropriated in the Long
Bill or supplemental appropriations bills, rather than in this bill. These costs, which include employee
insurance and supplemental employee retirement payments, are shown in Table 4.
Other Budget Impacts
TABOR refunds. The bill is expected to decrease the amount of state revenue required to be refunded
to taxpayers by the amounts shown in the State Revenue section above. Because TABOR refunds are
paid from the General Fund, decreased General Fund revenue will lower the TABOR refund
obligation, but result in no net change to the amount of General Fund otherwise available to spend or
save.
General Fund reserve. Under current law, an amount equal to 15 percent of General Fund
appropriations must be set aside in the General Fund statutory reserve beginning in FY 2022-23. Based
on this fiscal note, the bill is expected to increase the amount of General Fund held in reserve by
$23,511 in FY 2022-23 in $13,039 FY 2023-24, which will decrease the amount of General Fund available
for other purposes.
Effective Date
The bill was signed into law by the Governor on June 3, 2022, and takes effect on August 9, 2022,
assuming no referendum petition is filed.
State Appropriations
In FY 2022-23, the bill requires and includes a General Fund appropriation of $156,743 and 2.0 FTE to
the Department of Revenue. Of this amount, $1,032 is reappropriated to the Department of Personnel
and Administration.
State and Local Government Contacts
Human Services Information Technology
Personnel Revenue
The revenue and expenditure impacts in this fiscal note represent changes from current law under the bill for each
fiscal year. For additional information about fiscal notes, please visit: leg.colorado.gov/fiscalnotes.