When the Colorado economy is rolling along as it has been for a couple of years — 4.7 percent growth in 2014 alone — who can believe that a budget crackup is headed its way?
Believe it.
For reasons explained here last week, the state could easily hit a wall in the next fiscal year — even with a healthy economy.
To better understand why, let’s take a deeper dive into the numbers. But first a recap: Just to keep pace with the constitutional mandate for growth in education funding — the enrollment-plus-inflation formula in Amendment 23 — the state will need an additional $337 million in fiscal 2016-17, according to state projections. And that alone could exceed the entire general fund growth.
That’s the budgetary rock. The hard place is the fact that the state can’t grow out of this squeeze. If revenue comes in higher, it will trigger mandatory refunds under the Taxpayer’s Bill of Rights — meaning cuts in programs like higher education and transportation anyway.
I suggested two ballot measures as a balanced approach to averting the crackup (meaning both conservatives and liberals will like only one of them). The first fix is fairly obvious: We need a Son of Referendum C — the 2005 ballot measure that allowed the state, for five years, to keep the revenue it collects over and above the limits imposed by TABOR rather than refund the money.
That’s the ballot measure that will excite liberals and irritate conservatives.
The second measure will flip allegiances but is no less important: We need relief from Amendment 23’s education funding formula during economic downturns.
To understand the importance of the second measure, take a look at what occurred in the Great Recession. State tax collections tanked for two years, shrinking by nearly $1.3 billion. Most programs had to be trimmed, or slashed.
But Amendment 23 doesn’t care about the economy. Its formula marches on no matter what.
Could there be anything more reckless than putting 40 percent of the budget on automatic pilot when the state is barred from running deficits?
Education activists might argue the solution is higher taxes. But the legislature can’t just raise taxes in Colorado. That requires a vote of the people — the core part of TABOR that is not going to be repealed. And even if it were repealed, would raising taxes by more than $1 billion at the height of a brutal recession really be smart?
During the crisis, Democratic Gov. Bill Ritter and a Democratic legislature decided they had no choice but to cut education funding despite what Amendment 23 says. It literally wasn’t possible to add money to K-12 funding without gutting other parts of government. So they changed how the formula was calculated and created what has been known since as the “negative factor,” which is the gap between what the old formula would have given education and what schools receive instead.
That gap was about $1 billion in fiscal 2012-13 and has been paid down to $855 million today. But that’s still a huge hole. Meanwhile, a group of school districts and parents have asked the state Supreme Court to declare the whole scheme a violation of the state constitution.
What if the court rules in their favor and another recession hits? The governor and lawmakers might as well turn off the lights and go home.
That’s why 2016 is such a critical year to ask voters to approve measures to give lawmakers more flexibility in good times and bad. Because bad times are never too far down the road.
E-mail Vincent Carroll at vcarroll@denverpost.com.
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