DENVER—Colorado schools are set to lose funding this year even though the overall state budget and tax revenue are growing. Other parts of the budget, like prisons and higher education, are getting more tax dollars—forcing cuts elsewhere—as federal stimulus money begins to dry up and the state faces the strings attached to it.
It’s a taste of what could be in store as Colorado begins to recover from the recession and the stimulus dollars that have propped up the budget disappear completely in 2011.
Legislators call the loss of stimulus funds “the budget cliff.” How steep it will be depends on how quickly the economy recovers and what cuts lawmakers can restore.
Last week, legislators passed and sent to Gov. Bill Ritter an $18.2 billion spending plan for the budget year that begins in July. Schools will get $365 million less than they normally would under the law that requires schools funding increases. That’s a 6.5 percent decline, even though tax revenues are finally expected to rise after falling by $1.3 billion over the last two years.
Much of the extra revenue will just make up for stimulus money that’s running out. That will cause the part of the budget paid for with tax dollars to rise by about $300 million—or 5 percent—by the time lawmakers pass all their related budget-balancing bills.
State colleges and universities are set to get $216.4 million more in tax dollars than they did this year because the state must keep funding them at 2005 levels as a condition of taking federal stimulus dollars for education. Their overall budget will increase 12 percent over this year’s.
Prisons are set to get an extra $89 million to make up for lost stimulus dollars, but their overall budget will still decline by 0.9 percent.
When lawmakers return next year, they may need to find up to $938 million to make up for lost stimulus money and one-time budget fixes, according to a preliminary legislative analysis. That doesn’t include restoring the $365 million cut to schools.
The Legislature does have some choices—such as putting $192 million into a reserve fund required by the Taxpayers Bill of Rights. Instead of cash, the state has been putting assets like buildings into that reserve.
Others would be harder to avoid.
The biggest loss of stimulus money will be in Medicaid, the joint federal-state health insurance program for the poor. Washington picked up more of the tab during the recession, but that will end in 2011, when the state will lose $381 million in federal funding.
Colorado’s budget also has been propped up by $40 million from a voter-approved tobacco tax. In normal times that pays for health programs, but lawmakers tapped it the last two years to balance the budget. It’s not clear whether they can do so again by declaring another fiscal emergency in a healthier economy.
They’ve also delayed $25 million in payments to fire and police pensions. In July, state workers will have to start paying their own pension contributions to avoid furloughs. Restoring that 2.5 percent cut in take-home pay next year would cost $20.4 million.
To prepare for the cliff, Republicans wanted to cut more spending from the latest budget. But Senate Democrats rejected a GOP proposal to cut $226 million by requiring all departments to slash spending by 3 percent. Sen. Moe Keller, a member of the Joint Budget Committee and a Wheat Ridge Democrat, said that would inevitably lead to layoffs that could make it impossible for some departments to function.
Sen. Greg Brophy, R-Wray, thinks tax revenues will rise enough to cover part of the cliff, but he said Republicans will vote for more cuts if they win enough seats in this fall’s election. Democrats control both the House and Senate as well as the governor’s office.
Brophy said he would support making it tougher to qualify for Medicaid and requiring Medicaid patients to pay a deductible on the care they receive, something that would require federal approval. He also favors providing tax credits or vouchers for children to attend private schools, which he says can educate students for less.
Budget committee chairman Rep. Jack Pommer, D-Boulder, said he thinks the state will eventually need more tax revenue. That could mean asking the voters for money or eliminating existing business tax breaks, including state enterprise zones.
“We’re just running out of options,” Pommer said. “It’s just hard when the obvious solution if off the table.”
