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As lawmakers debated the merits of levying the state sales tax on select software and agricultural products yesterday, Republicans in the Colorado Senate proposed their own budget-balancing plan.

The Republican proposal includes a .25-percent reduction in state payroll spending for the current fiscal year, and a 4.4-percent reduction for next fiscal year. The Republican senators said their budget plan would eliminate the need for a package of proposals that would suspend or eliminate a series of tax credits and exemptions on a variety of Colorado industries, from bull semen to candy and soda.

“This is a chance for the Democrats to recognize the changing mood of America,” said a statement from Senate Minority Leader Josh Penry, R-Grand Junction. “By cutting budgets one quarter of a percent this year and just over 4 percent next year, we can stave off job-killing, recovery-slowing tax increases. This one’s an economic no-brainer.”

Gov. Bill Ritter spokesman Evan Dreyer said the Republican budget balancing plan looks like something the lawmakers put together on the back of a cocktail napkin without much thought. He pointed out that Ritter’s administration is reducing personnel costs by more than $100 million. Additionally, the executive branch workforce has shed 1,000 employees since the economy started to decline in 2008, according to Dreyer.

“The Senate Republicans fail to grasp the magnitude of the $2 billion shortfall we’ve already closed and the $1 billion shortfall we still face,” he said. “We are taking a more balanced, more thoughtful and more strategic approach than their 11th hour proposal.”

The Colorado Senate Republican plan would require Ritter to cut the state’s $3.2 billion state payroll budget by $17.8 million for the current fiscal year. According to a press release, the savings would come through the elimination of “non-essential or unfilled government jobs” and through salary reductions to state employees primarily making more than $100,000 a year.

For next fiscal year, the GOP plan would require an across-the-board spending cut of approximately 4.4 percent. 

But Colorado WINS, the representative group for Colorado state employees, said the state would end up losing if Republicans “balance the state’s budget on the backs of state employees.” 

“State employees have not received raises in two years, been forced to take unpaid furlough days, face significant increases in health care costs and also introduced today is a 2.5-percent reduction in their take-home pay to offset the state’s share of their PERA payment,” said a statement from Colorado WINS Executive Director Robert Gibson. “Enough is enough.”

Software tax

The Republican plan comes as a series of Democrat-backed bills aimed at eliminating more than 11 tax exemptions makes their way though the Legislature. 

The Senate Finance Committee passed a bill yesterday on a 4-3 party line vote that would save the state an estimated $3 million this fiscal year Ń and $20 million next fiscal year Ń by taxing a subset of software.

House Bill 1192 would change the so-called loophole created by the 2006 Department of Revenue rule that exempted Internet downloads or load-and-leave software form the state sales tax.

Republicans and representatives from a group of software companies blasted the bill yesterday during its Senate Finance Committee hearing. They argued that the tax on the “off the shelf” part of “modified off the shelf software” would send high paying jobs out of state. 

Su Hawk of the Colorado Software and Internal Association, the lobbying group for more than 700 Colorado technology companies, said she personally knows of high-paying jobs and businesses that would move out of the state if the bill passes. She said the measure would result in a net loss, not multi-million dollars in savings, for the state.

But Sen. Rollie Heath, D-Boulder, said that the bill is taking care of a 2006 tax exemption that was implemented without consulting lawmakers. Phillip Horwitz of the Colorado Department of Revenue added that the state tax would merely mirror the tax that most other states implement on such software. The bill now heads to the full Senate.

Ritter’s $50 million budget rebalancing plan announced last week would speed up the implementation of the state tax on software, as well as seven other untaxed industries, from July 1, 2010 to March 1, 2010. The date change is expected to save the state $18.8 million in its 2009-10 budget. Both the House and Senate must approve the measures.

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