Decline In Severance Taxes Affects Funding For State Water Projects

May 20, 2016

The economic downturn in the fossil fuel industry is not only affecting profits and jobs; it’s also impacting funding for state projects.

In Colorado, if a company takes something out of the ground, whether it’s coal or oil or even granite, the government gets a cut. It’s called severance tax, and it funds community and natural resource projects. Unfortunately, that means long-term efforts can be subject to a boom-and-bust industry. 

Recently, Governor John Hickenlooper inked an annual bill that allocates money for water conservation. Funding for the projects comes from severance taxes. 

Data from the Colorado Water Conservation Board.
Credit Jake Ryan/KVNF

Republican Representative Don Coram of Montrose co-sponsored the measure. He said forecasted revenue from the tax is down 75 percent compared to last year.

"So now I’m going to lay out the gantlet to the Governor here in front of you all," Coram said at the bill's signing ceremony. "I am going to be bringing efforts [forward] this summer to the Water Resource Review Committee to actually provide stable funding for these projects. We can’t depend on severance tax if we’re going to provide the water we need by 2050."

Unless things change by the year 2050, experts predict the state could have a major water supply shortfall.

Coram said a fee charged to domestic water users could generate the needed revenue for conservation projects. He said that at this point no idea is off the table.