The state of Colorado will barely scrape by with a balanced budget when the current fiscal year ends in June, and it will start the next budget year in July with up to a $72 million shortfall, prompting more cuts.
That was the outlook today as economists for the legislature and governor presented budget forecasts to lawmakers. While the prognosis for the budget is that it is somewhat stable in the immediate short term, all eyes looked worriedly to fiscal year 2011-12, which begins in July 2011.
That year, economists said, is when the state could be facing up to a $1 billion shortfall as federal stimulus money and a multitude of one-time revenue sources the state has used to weather the recession are no longer available.
Lawmakers already closed a $1.3 billion deficit in writing the 2010-11 budget, and bridged a $2.2 billion gap for the previous year.
Revenue remains sluggish even as Medicaid caseloads and enrollment in schools and colleges increases.
“This recovery will continue to be tenuous and timid,” said Natalie Mullis, the legislature’s chief economist.
Colorado has a lower rate of unemployment than the nation as a whole, but personal income tax collections still fell below previous predictions for the current fiscal year, Mullis said.
The state in July will start fiscal year 2010-11 with up to a $72 million shortfall, prompting Gov. Bill Ritter, a Democrat, to trim spending. That plan, likely to be implemented in August, could include furlough days for state employees and additional cuts to health care and public schools.
The state will end the current year this month by dipping into its reserve fund. That fund, which is intended to stay at 2 percent of general fund appropriations, will only be at 1.2 percent – or $80.9 million – when the year closes. Had the state not delayed $38 million dollars in Medicaid payments and taken $29.8 million from a scholarship fund, there would only by about $13 million left in the reserve, Mullis said.
But the state’s real problems come down the road. Colorado, like at least 30 other states, wrote its 2010-11 budget on the assumption that Congress would approve an extension of an enhanced federal match for Medicaid.
But recently, the prospects of that extension appear to be shakier, as a number of congressional Democrats have gotten cold feet about approving additional deficit spending items. For Colorado, not getting the extension money would result in having to cut nearly $212 million from the 2010-11 general fund budget of $6.9 billion.
That could mean further deep cuts to public schools, which already are facing a 6 percent cut in the current year, and it could hit higher education and discretionary health care programs.
But lawmakers today were most keenly focused on “the cliff” – the coming budget gap for the 2011-12 year. Economists said $617 million, most of which is federal recovery money, will no longer be available to spend in that year. Add to that the typical yearly increased costs of growth in spending for Medicaid, public schools and colleges of about $300 million, and the shortfall that year could approach $1 billion.
The news was sobering to lawmakers on the six-member Joint Budget Committee, which just seated three new members who will have to help guide the state through the worst budget crisis it has seen since the Great Depression.
“You look at (cutting) education and you look at health care,” said Rep. Mark Ferrandino, D-Denver, the chairman of the committee. “When you look at a half billion-dollar to a billion-dollar shortfall, these are the areas we have to go to.”
