The state budget, dominated by ever-increasing spending on schools, prisons and Medicaid, is near the breaking point, according to a study released Tuesday by the University of Denver.
State lawmakers earlier this year had to fill a $1.4 billion hole in the state’s budget spread over two fiscal years, and they now are starting the current fiscal year with a $384 million deficit.
“The budgetary tsunami that washed over Colorado government last fall and winter was likely just the first wave,” the study said, projecting that spending for schools and Medicaid will grow even larger and threaten funding for higher education and other programs by 2011.
The study found funding for schools, prisons and Medicaid already consumes 76 percent of the state general fund, the $7.5 billion pot that funds most of the state’s operating costs. A decade ago, that percentage was 54 percent.
The percentage will increase to 91 percent in five years if the rate of growth in those programs continues, the report said.
From 1998 to 2008, tax revenues that flow into the general fund increased 1.9 percent on average. Meanwhile, spending for schools, prisons and Medicaid grew by an average of 5.4 percent every year.
The study said there were several reasons for the spending-vs.-revenue imbalance, including Amendment 23, which requires that state spending for public schools increase by at least the rate of inflation each year, and the TABOR amendment, which requires voter approval of tax increases.
TABOR combined with the Gallagher Amendment, which keeps the taxable value of residential property lower than actual market values, means that the state’s share of funding for public schools compared with the share local districts pay has grown from 57 percent a decade ago to 65 percent now, the study said.
Finally, the report said, the state cut taxes in the late 1990s by an amount that would equal $700 million a year now.
The study was released a day before the 16-member Long Term Fiscal Stability Commission was to hold its first meeting to examine the state’s fiscal woes.
The study’s authors were Charles Brown, director of the Center for Colorado’s Economic Future at the University of Denver, and Jeffrey Roberts, a former Denver Post reporter and editor who now does data analysis and policy research.
The pair recommended a comprehensive study of the state’s tax structure and the organization of state government.
Commission chairman Sen. Rollie Heath, D-Boulder, said the study reinforced the commission’s charge. But he said the state does not have time to conduct a study or a constitutional convention that could take years.
House Minority Leader Mike May, R-Parker, also rejected the idea of study, though for different reasons.
“You can’t have mandated expenditures during a time of decreasing revenues. It doesn’t take a study to say that,” he said.
Tim Hoover: 303-954-1626 or thoover@denverpost.com
