As lawmakers work late into the night debating whether to raise taxes on bull semen, software sales and soda pop, wouldn’t it be nice if they could simply transfer a few hundred million from the state’s savings account to help cover some of the shortfall?
Ah, if only.
Unfortunately, there is no meaningful rainy-day fund in Colorado, and Gov. Bill Ritter and lawmakers already have approved cash transfers from what little cash they had on hand.
So we welcome House Bill 1177 by Rep. Steve King, R-Grand Junction, which would establish the Colorado Economic Stability Fund. In good years, lawmakers would be required to set aside 10 percent of any increase in general fund revenues over the previous year. The money would accumulate until it reached 15 percent of the state’s general fund.
If there was a downturn in the economy, and two-thirds of the legislature and the governor agreed, the state could tap up to half of that money to keep existing programs afloat.
We have for years advocated the creation of a meaningful rainy-day fund. But over the years, lawmakers from both parties have spent nearly every dollar available to them — in good times and bad, no matter which party controlled state government — and they saved very little for that proverbial rainy day.
In recent years, lawmakers have proposed various versions of what we would consider to be meaningful rainy-day funds, but they’ve all been shot down for various reasons.
The optimal time to do it was just after voters approved Referendum C, which allowed the state to keep more of the tax money it already was collecting. After the budget cuts of the 2001-03 recession, which now seem like the state’s halcyon days in comparison to today’s cuts, lawmakers should have committed to the fiscal restraint necessary to build a cushion against recession. But for reasons of politics and policy, the much-discussed idea of putting aside something on the order of 8 percent of the state budget never came to pass.
State law requires the state to have some reserves, but it’s never enough to truly cushion the blow from a recession.
We think King’s proposal should serve as a good jumping-off point to discuss how the state can best set up such a fund. It’s necessary to do it now, in a down time, because it will limit political fights over how to spend some of the new money.
However, lawmakers should amend the bill to allow state revenues to recover before siphoning it off for the fund. We say that only because the cuts have been so severe this time around.
If the state allowed for perhaps two years of positive revenue growth before kicking money into the rainy-day fund, it could restore some of the deep cuts to K-12, higher education and mental health services, to name just a few.
It’s best to prepare now, in the depths of this recession, for the next bad time.
