Gov spares rod on school cuts, other reductions needed

State budget going to pot

By Marianne Goodland
THE COLORADO STATESMAN

For a former district attorney, the idea of using money to balance the state budget gained from an enterprise that he once considered illegal kind of sticks in the craw.

That former DA, now Gov. Bill Ritter, on Monday announced that he would have to cut another $60 million from the state’s 2010-11 budget in order for it to be balanced as required by the state constitution. And he ordered revenues gained from medical marijuana licenses be used to help in that effort.

However, the news could have been much worse — state revenues have come in slightly higher than expected, and Congress rode to the rescue of the states with money hoped for from an extension of the enhanced Federal Medical Assistance Percentages (FMAP) program.

In announcing the cuts Monday, Ritter pointed out what did not have to be cut — K-12 education, which has already seen $260 million in cuts; higher education, and no more furloughs, at least for now, of state employees.

The shortfall was announced back in June, after revenues in the June forecast were estimated to come in slightly lower than anticipated, primarily due to lower-than-expected individual income tax payments. While the budget itself was still balanced, the state’s general fund reserve was projected to drop below the 2 percent statutorily-required level, and in June it was short about $75 million, according to forecasts from the Office of State Planning and Budgeting. Legislative Council forecasts estimated that shortfall at $37 million. Those figures have since been revised, with a shortfall of $59.1 million, based on OSPB figures, and Ritter chose to use the more conservative OSPB number.

The June forecast also pointed out that the 2009-10 budget was still not balanced, and Ritter at that time ordered a $38 million delay in Medicaid payments to prevent a general fund deficit. The state began the 2010-11 year with just $59.9 million in the statutory general fund reserve, which increased to $80.5 million with the beginning of the 2010-11 budget year. But that still left the reserve at just 1.15 percent, and another $70 million was needed to bring it back up to the 2 percent required level.

Between June’s forecast and Monday, the state actually received higher-than-estimated individual and corporate tax revenue, to the tune of about $76.8 million. And while the FMAP funding wound up being less than what was hoped for, it still brought in $144 million. OSPB Director Todd Saliman said the state had hoped for $211 million, and got about 70 percent of that.

Ritter’s plan to balance the budget will:

• Cut $1.3 million from the Department of Corrections, which includes a $350,000 cut in utilities costs; $250,000 cut to the “Dress Out Program”; $250,000 cut in parole contract services; $250,000 cut from the Community Intensive Supervision Program contract services; and $89,100 net general fund reduction, to be associated with a reduction of 20 private prison beds and a commensurate increase in lower-cost state beds at the Trinidad Correctional Facility.

• A $4.9 million across-the-board reduction in personnel costs statewide by keeping positions vacant, and hiring delays;

• Transfers $53 million from other accounts in the state’s general fund to cover operating expenses. That includes $9 million from the Medical Marijuana Program Fund, $15 million from the Department of Local Affairs local government mineral impact fund; $5 million from the DOLA local government severance tax fund, $11.4 million from the DOLA local government permanent fund, $9.4 million from the higher education federal mineral lease maintenance and reserve fund, and $3.5 million from the secretary of state cash fund.

The balancing plan will allow the state to keep $149.6 million in the statutory reserve, about 2.1 percent.

Ritter also is planning for the September forecast, by putting on hold another $40 million in local grants that are also funded by severance taxes and FML revenue.

In response to reporter questions Monday, Ritter said he did not like balancing the budget with the medical marijuana fund, saying he was not in favor of medical marijuana “but it is the law of the state,” and it is regulated in a “sensible way.”

As to taking out so much in local community grants, Ritter said “there are opportunity costs to everything,” and that it allowed him to reconcile the budget without making further cuts to K-12 or higher education. “We find ourselves in difficult circumstances,” Ritter said.

Looking toward the end of his term, Ritter was asked if he intended to prepare two budgets for 2011-12, to show voters how the state budget would look if three ballot measures passed in November. The three ballot measures (60, 61 and 101) would cut property taxes, limit state and local government borrowing, reduce vehicle taxes, lower the state’s income tax rate and reduce taxes on telecommunications.

Ritter said he did not intend to prepare a second budget; instead, he would be part of the coalition that opposes the three ballot measures.

Republican opposition to Ritter’s budget-balancing plan came from Senate Republicans later in the day. Senate Minority Leader Mike Kopp, R-Littleton, blasted the plan’s reliance on FMAP dollars, stating the “Democrats’ partnership with Washington is not working for Colorado taxpayers” and that Ritter and Democrats in the General Assembly had “speculated on federal funding guessed wrong.”

The Republican statement also took aim at the state’s expanded Medicaid eligibility, which they said added hundreds of thousands to the state’s Medicaid rolls, and which they said the state could not afford. “The promise of increased federal Medicaid funding was one of the arguments used to sell Obamacare,” Kopp said. “Under the expanded eligibility rules in Obamacare, Colorado taxpayers will be forced to bear the financial burden of the Democrats’ out of control entitlement spending.”

Kopp told The Colorado Statesman that a bill he ran in the spring, and one he will offer again next year, would allow the Legislature to identify core functions of state government. Then, everything in the budget would be compared against those core functions. It would provide a more proactive approach to budgeting rather than the “frenetic, reactive” approach that takes place now, Kopp said. Democrats would have a seat at the table in this process, because the change is “so significant that it will take members from both sides to implement and maintain it.”

With regard to Medicaid, Kopp said the Legislature has “tinkered” with eligibility rules in the past several years, and that has led to a substantial expansion in the Medicaid rolls. “We need to have a very thorough review of how we will be able to afford this obligation, so that we don’t get into a situation where we’re robbing from other critical needs in the state,” Kopp said. “It’s not a runaway train — the Legislature does have a lot to say in setting the eligibility criteria.”

State Rep. Mark Ferrandino, D-Denver, said that expansion of the Medicaid rolls would have happened anyway because of the federal health reform act, but that most of the increases have been due to more people becoming unemployed and becoming eligible for Medicaid coverage, which they cannot be denied under federal rules.

Marianne@colordostatesman.com