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May 2, 2022 HB 22-1414
Legislative Council Staff
Nonpartisan Services for Colorado’s Legislature
Fiscal Note
Drafting Number:
Prime Sponsors:
LLS 22-1058
Rep. Gonzales-Gutierrez;
Michaelson Jenet
Sen. Pettersen; Fields
Date:
Bill Status:
Fiscal Analyst:
May 2, 2022
House HHS
Anna Gerstle | 303-866-4375
Anna.Gerstle@state.co.us
Bill Topic: HEALTHY MEALS FOR ALL PUBLIC SCHOOL STUDENTS
Summary of
Fiscal Impact:
☒ State Revenue
☒ State Expenditure
☒ State Transfer
☐ TABOR Refund
☐ Local Government
☒ School Districts
Conditional upon approval at the November 2022 election, the bill creates the Healthy
School Meals for All program to provide reimbursement for free meals to all students,
offer local food purchasing grants and increase employee wages. It also requires that
the state apply to participate in a federal direct certification demonstration project. The
bill increases state revenue, expenditures, and transfers, and school district revenue
on an ongoing basis.
Appropriation
Summary:
For FY 2022-23, the bill requires an appropriation of $193,354 to the Colorado
Department of Education.
Fiscal Note
Status:
The fiscal note reflects the introduced bill.
Table 1
State Fiscal Impacts Under HB 22-1414
Budget Year
FY 2022-23
Out Year
FY 2023-24
Out Year
FY 2024-25
Revenue General Fund $50.4 million $101.9 million $104.2 million
Total Revenue $50.4 million $101.9 million $104.2 million
Expenditures General Fund $193,354 up to $115.5 million $71.4 - $101.5 million
Centrally Appropriated $18,935 $84,998 $91,824
Total Expenditures $212,289 up to $115.5 million $71.5 - $101.5 million
Total FTE 1.2 FTE 5.4 FTE 5.6 FTE
Transfers General Fund ($3.7 million) ($7.5 million) ($7.6 million)
State Education Fund $3.7 million $7.5 million $7.6 million
Net Transfer $0 $0 $0
Other Budget Impacts GF Reserve $29,033 up to $16.6 million $10.7 - $15.2 million Page 2
May 2, 2022 HB 22-1414
Summary of Legislation
Conditional upon voter approval at the November 2022 election, the bill creates the Healthy School
Meals for All Program, establishes a funding mechanism for the program, and requires the state to
participate in the federal demonstration program for Medicaid direct certification.
Federal Medicaid direct certification demonstration program. The bill requires that the Colorado
Department of Education (CDE) apply to participate in the federal demonstration project for direct
certification for children receiving Medicaid benefits. If selected, CDE must enter into an agreement
with the Colorado Department of Health Care and Financing (HCPF) to directly certify students
enrolled in Medicaid as eligible for free and reduced price meals without further application.
Healthy School Meals for All Program. The bill creates the Healthy School Meals for All Program in
CDE to provide reimbursement to participating school food authorities (SFAs) for offering meals
without charge to all students, beginning in FY 2023-24. The reimbursement amount is based on the
federal free meal reimbursement rate for each meal served, minus the amount an SFA receives from
the federal school breakfast and lunch programs, and current state reimbursement programs.
Conditional upon the state’s participation in the federal demonstration project, the program also
includes three other components for participating SFAs.
Local food purchasing grant program. Participating SFAs that establish a parent and student school
food advisory committee may receive a grant to purchase Colorado grown, raised, or processed
products. CDE must distribute to each participating SFAs a grant of $5,000, or $0.25 for each lunch
provided in the prior school year, whichever is greater. No more than 25 percent of the grant may
be used to purchase value-added processed products, up to 10 percent may be used to cover costs,
and up to 12 percent may be used to support the school advisory committee.
Employee wages or stipends. Participating SFAs may receive the greater of $3,000 or $0.12 per school
lunch, to be used to increase wages or provide stipends for employees who prepare and serve
school meals.
Technical assistance and education grant program. CDE must issue a grant to a statewide nonprofit
to assist with the promotion of Colorado products to participating SFAs and to assist them with
preparing meals using basic ingredients with minimal reliance on processed products. Grants
may be used for training, technical assistance, physical infrastructure for SFAs, growers
associations, and other organizations that aggregate products for producers, as well as for
education, outreach, and promotion for schools and growers to engage with school communities.
Community eligibility provision. In order to participate in the program, SFAs must maximize federal
reimbursement by participating in the community eligibility provision (CEP), if eligible. If the
US Department of Agriculture creates the option for the community eligibility provision to be
implemented statewide, CDE must work with SDAs and state and local agencies to participate
Reporting. Beginning December 1, 2024, CDE must submit an annual report on the program to the
General Assembly. CDE must contract with an independent auditor to conduct a biennial financial
and performance audit of the program, and make the audit easily accessible on the website. Page 3
May 2, 2022 HB 22-1414
Funding. Beginning in FY 2023-24, the General Assembly must appropriate the amount necessary for
the program, including at least $5.0 million for the technical assistance grant program. The
appropriation must include an amount of General Fund at least equal to the revenue generated from
the add-back (discussed below), but no more than the amount required to fund the direct and indirect
costs of implementing the program. CDE may not expend more than 1.5 percent of the amount
appropriated for administrative costs.
Add-back to Colorado taxable income. Beginning for tax year 2023, the bill requires taxpayers with
adjusted gross incomes of $300,000 or more to add back a portion of their federal itemized or standard
deductions when calculating their Colorado taxable income. Taxpayers filing singly are required to
add back itemized or standard deductions that exceed $12,000 in total, and taxpayers filing jointly are
required to add back itemized or standard deductions that exceed $16,000 in total.
This provision does not apply in a future year if the Healthy School Meals for All program is repealed.
The bill specifies that this section constitutes a voter-approved revenue change if approved by voters
at the November, 2022 election.
Background
School food authority. SFAs are designated organizations that implement school food programs. An
SFA may be a school district, charter school, or an organization representing a group of charter
schools. There are currently 183 SFAs in Colorado.
Meal reimbursement. For most federal programs, SFAs are reimbursed for each meal they provide.
CDE receives annual funding from the U.S. Department of Agriculture, and reimburses claims made
by SFAs. Reimbursement amounts are based on three income classifications. The free rate is the
highest reimbursement amount, followed by reduced-price, and paid reimbursement rates. The state
also provides reimbursement to SFAs for meals, including covering the difference between reduced-
price and free meals.
Community eligibility provision. CEP is a federal program that provides additional reimbursement
to eligible high poverty schools. To be eligible, an SFA must have an identified student percentage of
40 percent or greater. An identified student percentage includes students directly certified as eligible
for free lunch due to participation in public benefit programs (SNAP, TANF, Food Distribution
Program on Indian Reservation) or categorical eligibility (foster, homeless, migrant, runaway or head
start).
A multiplier is applied to the identified student percentage to calculate federal reimbursements. For
example, an SFA with 62.5 percent identified students will receive reimbursement at the free meal rate
for 100 percent of meals served. For a district with 40 percent identified students, 64 percent of meals
will be reimbursed at the rate for free meals and 36 percent will be reimbursed at the paid meal rate.
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May 2, 2022 HB 22-1414
Assumptions
Timing. This fiscal note assumes that Colorado will be accepted for participation into the federal
demonstration project for direct certification of children receiving Medicaid benefits. The first year in
which Medicaid students would be directly certified for CEP eligibility is FY 2024-25. The fiscal note
assumes that meal reimbursements will begin in FY 2022-23, as specified in the bill, and the local food
purchasing and technical assistance programs, and the employee wage and stipend program will
begin in FY 2024-25.
Federal demonstration project costs. The provision requiring that the state participate in the federal
demonstration project is also included in House Bill 22-1202. That bill has been passed by the General
Assembly and sent to the Governor. The fiscal note assumes that the bill will be signed into law and
the costs of applying for the project are included in that bill, and thus, are not included in this fiscal
note. Should the bill not be signed into law, costs will be higher than estimated.
Statewide CEP. The bill requires that the state participate in a statewide CEP option, if available. This
option is not currently available, and this fiscal note makes all estimates assuming that CEP will not
be available.
State Revenue
Conditional upon voter approval, the bill is expected to increase state revenue by $50.4 million in
FY 2022-23 (a half-year impact), $101.9 million in FY 2023-24, $104.2 million in FY 2024-25, and by
increasing amounts in subsequent years.
The bill increases income tax revenue by requiring certain taxpayers to add back a certain amount of
Federal deductions to their Colorado taxable income. In tax year 2023, the bill is expected to increase
Colorado taxable income by approximately $2.2 billion. The Colorado state income tax rate of
4.55 percent is applied to this increase in taxable income to arrive at a total tax increase of
$100.7 million in tax year 2023.
State Transfers
Under current law, one third of one percent of taxable income, as adjusted by state law, is transferred
from the General Fund to the State Education Fund. Because this bill increases taxable income, the
bill also increases transfers from the General Fund to the State Education Fund by an estimated
$3.7 million in FY 2022-23, by $7.5 million in FY 2023-24, by $7.6 million in FY 2024-25 and by
increasing amounts in subsequent years.
State Expenditures
Conditional upon voter approval, the bill increases state expenditures by $212,289 in FY 2022-23,
$115.5 million in FY 2023-24, and between $71.5 million and $101.5 million in FY 2024-25 from the
General Fund. Costs are in CDE and the Department of Revenue. Expenditures are shown in Table 2
and detailed below. Page 5
May 2, 2022 HB 22-1414
Table 2
Expenditures Under HB22-1414
Cost Components FY 2022-23 FY 2023-24 FY 2024-25
Department of Education
Personal Services $88,214 $246,053 $328,525
Operating Expenses $1,755 $4,185 $5,805
Capital Outlay Costs $18,600 - -
Legal Services $14,786 $14,786 -
Information Technology Costs $70,000 - -
Meal Reimbursements - up to $115,000,000 $48.5 - $78.5 million
Local Food Purchasing Grant - - $9,494,109
Local Food Technical Assist. Grant - - $5,000,000
Employee Wage Distributions - - $7,644,126
Program Audit - $17,850 $400,000
Centrally Appropriated Costs
1
$18,935 $53,133 $71,551
FTE – Personal Services 1.1 FTE 3.1 FTE 4.2 FTE
FTE – Legal Services 0.1 FTE 0.1 FTE 0.0 FTE
CDE Subtotal $212,289 up to $115,336,007 $71.4 - $101.4 million
Department of Revenue
Personal Services - $109,673 $69,729
Operating Expenses - $3,240 $1,890
Capital Outlay Costs - $12,400 -
GenTax Costs - $39,213 -
Document Management - $664 -
Research & Analysis - $12,800 $6,400
Centrally Appropriated Costs
1
- $31,865 $20,273
FTE – Personal Services - 2.2 FTE 1.4 FTE
DOR Subtotal $0
$209,855
$98,292
Total $212,289 up to $115,545,862 $71.5 - $101.5 million
Total FTE 1.2 FTE 5.4 FTE 5.6 FTE
1
Centrally appropriated costs are not included in the bill's appropriation.
2
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May 2, 2022 HB 22-1414
Department of Education. CDE will require additional staff in the Office of School Nutrition to
implement the bill. In FY 2022-23, 1.1 FTE are required to begin program development and
implementing changes to existing systems; this staffing amount assumes a January, 2023 start date. In
FY 2023-24, 3.1 FTE are required to develop program rules and processes for the wage and grant
programs, provide outreach and training to SFAs on data collection and submission, and begin
additional reimbursements. Beginning in FY 2024-25, 4.2 FTE will be required to provide evaluation
and monitoring for expanded CEP participation, oversee the grant and wage programs, handle
additional claims and reimbursement, and conduct reporting. Staff are prorated in their first year for
the General Fund paydate shift.
Legal services. In FY 2022-23 and FY 2023-24, CDE will require 150 hours of legal services to
support rulemaking by the State Board of Education. Legal services are provided by the
Department of Law at a standard rate of $98.57.
Information technology. The department’s school nutrition technology system will need to be
modified to allow for new functionality and streamlined district data submission, estimated at
$70,000 based on prior vendor costs. These are one-time costs in FY 2022-23 only.
Meal reimbursements. Beginning in FY 2023-24, the department will reimburse districts for meals
based on the federal free reimbursement rate for each meal served, minus the amount an SFA
receives from the federal and state meal reimbursement programs. In FY 2023-24, meal
reimbursements are estimated at up to $115.0 million, depending on actual federal reimbursement
rates.
Meal reimbursements are estimated at between $48.5 million and $78.5 million in FY 2024-25,
based on projected meal counts and possible program participation rates. This cost is less than
estimated for FY 2023-24 because the direct certification of children in Medicaid will begin in
FY 2024-25, increasing federal reimbursement and reducing the state share of providing school
meals.
Because direct certification won’t begin until FY 2024-25 and the most recent data available
predates the COVID-19 pandemic, there is elevated uncertainty about the actual costs for meal
reimbursements. The high end of the range, $78.5 million, represents a conservative estimate for
participation in CEP based on participation rates of other state that have participated in the federal
demonstration project. Additional participation will increase federal reimbursement and lower
the state’s cost. As such, the low end of the range, $48.5 million, represents an increase in
identified student percentage based on pre-pandemic Medicaid data.
Should participation be lower than expected, costs could be as high as $92.0 million in FY 2024-25.
Should participation be higher than expected, costs could be as low as $35.4 million.
Local food purchasing grant. Beginning in FY 2024-25, the department will award grants to
participating SFAs of $5,000, or $0.25 for each lunch provided in the prior school year, whichever
is greater. The estimated cost is up to $9.5 million, based on projected lunch counts and an
assumed 60 percent program participation rate. To the extent fewer districts elect to receive a
grant for this purpose, costs will be lower than anticipated.
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May 2, 2022 HB 22-1414
Local food technical assistance grant. The bill specifies that $5.0 million must be appropriated
for this program.
Employee wage distributions. All participating SFAs may receive the greater of $3,000, or
$0.12 per school lunch for school meal employee wages. This estimated cost is up to $7.6 million
in FY 2024-25.
Program audit. The bill requires that CDE complete a performance and financial audit of the
program. An RFP will be issued in FY 2023-24 at a standard cost of $17,850, and the contracted
audit is estimated to cost $400,000 in FY 2024-25.
Department of Revenue. To implement the tax changes in the bill, the Department of Revenue
requires 2.2 FTE in FY 2023-24 and 1.4 FTE in FY 2024-25. Costs also include GenTax changes,
document management, and data reporting costs.
Election expenditure impact — existing appropriations. This bill includes a referred measure that
will appear before voters at the November 2022 general election. While no additional appropriation
is required, certain election costs are incurred by the state when ballot measures are referred. These
include reimbursing counties for certain election costs; publishing the text and title of the measure in
newspapers across the state; and preparing and mailing the ballot information booklet.
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 2.
Other Budget Impacts
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 the
amounts in Table 1, which will decrease the amount of General Fund available for other purposes.
School District
Revenue. Participating districts will receive the federal free meals reimbursement rate for all meals
served, funding for employee wages, and local food purchasing grants, as discussed in the State
Expenditures Section. The amount each district receives will depend on the number of meals served,
and whether the funding is state or federal reimbursement will depend on the district’s identified
student percentage, and whether the district is eligible to participate in the CEP once the state
participates in the federal Medicaid direct certification demonstration project.
Workload. Districts that participate in CEP once the state participates in the federal Medicaid direct
certification demonstration project will have their workload modified to submit the required data to
CDE, while no longer collecting free and reduced price forms for all students. Districts will also see
workload associated with grant programs and data submission related to the employee wage
program. Workload changes will vary by school district. Page 8
May 2, 2022 HB 22-1414
Effective Date
If approved by voters at the November 2022 election, the bill takes effect upon proclamation of the
Governor, no more than 30 days following the official canvas of votes.
State Appropriations
Conditional upon voter approval, the bill requires a General Fund appropriation of $193,354 to the
Colorado Department of Education, and 1.1 FTE. Of this amount, $14,786 is reappropriated to the
Department of Law, with 0.1 FTE.
State and Local Government Contacts
Education Health Care Policy and Financing Human Services
Law Revenue School Districts
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.