State to cover yet another shortfall

By Marianne Goodland

September revenue forecasts bring October cuts. It doesn’t quite roll off the tongue like “April showers bring May flowers,” but you get the idea.

A cloudy revenue picture in September meant the state would have to cut another $262 million out of the 2010-11 budget, and on Oct. 22, Gov. Bill Ritter explained just how that would happen.

Gov. Bill Ritter said that during the last two years, the state has had to cover $4.5 billion in shortfalls due to the recession.

The plan to put the 2010-11 state budget back into balance includes a $156.2 million cut to K-12 education, backfilled by the same amount from the federal Education Jobs Act.

Another $55 million will come from the Local Government Severance Tax Fund, and $10 million will be transferred from the perpetual base account of the Severance Tax Trust Fund.

The state also will postpone $15.2 million in payments to Medicaid providers. The one-month postponement will take place at the end of the fiscal year, and duplicates an action taken by the Ritter administration at the end of FY 2009-10.

The balancing plan includes an additional one-week delay in processing fee-for-service payments through the Department of Health Care Policy and Financing’s claims system. The processing system is already on a two-week delay in 2010-11, and another week’s delay will bring in $55.1 million.

Finally, the Colorado Travel and Tourism Promotion Fund will give up $2.5 million to help shore up the budget.

Several other funds will actually see their reductions lessened under the balancing plan. The Higher Education Federal Mineral Lease Maintenance Fund was to be tapped by $9.4 million, according to a budget-balancing plan submitted in August; that is now reduced to $8.4 million. And the Local Government Permanent Fund was to kick in $11.4 million, also in the August budget plan; that has been reduced by $1 million.

“It’s the latest chapter in the ongoing story of this recession and this economic downturn,” Ritter said, adding that during the last two years, the state has had to cover $4.5 billion in shortfalls due to the recession.

September’s shortfall was the result of lower than expected growth in corporate income tax and individual income tax collections, according to economists with Legislative Council.

“We’ve made tough, difficult and unpopular choices to keep our budget balanced,” Ritter told reporters. At the same time, the state has “preserved essential services, protected the safety net and minimized pain.”

Ritter used the Oct. 22 press conference to go after Republicans in the statehouse and on the campaign trail, claiming they have done little more than criticize rather than being part of the solution.

“It is not easy to balance the budget in a tough economy,” Ritter said. “It requires shared sacrifices and shared solutions,” which are made while others “would rather criticize than contribute. It’s easy to spend, but it’s hard to govern responsibly.”

Ritter was referring to criticisms of bills passed during the 2010 session that eliminated certain tax credits and exemptions, and a freeze on the senior homestead exemption. The tax credit bills have been labeled the “dirty dozen” by Republicans, who have said the state could balance the budget without eliminating those tax credits. Ritter blasted back on Friday, stating that without the bills, K-12 and higher education would have had $200 million more in cuts than they had already taken. “Any suggestion otherwise, any claim there is an easy pain-free way, is wrong and completely disingenuous,” Ritter said.

“We’ve done more with less, and made state government more efficient,” Ritter explained, with a “strategic targeted and very fair shared sacrifice, shared solutions approach” that Ritter said is working.

That same philosophy is guiding the formation of the 2011-12 budget that Ritter will send to the Joint Budget Committee on Nov. 1.

Ritter said his successor, and legislators who are elected in November, will have to make unenviable choices in the next year. If legislators want to restore the credits and exemptions next year, Ritter said they will have to find some other place to come up with the revenue, estimated at $123 million. Ritter said the only place they can go is to the five major areas of state government that take 97 percent of the general fund revenue. It’s unlikely that money could come from public safety, human services or Medicaid, Ritter said, leaving only higher ed and K-12 as potential sources. “That’s the reality of governing when general fund revenue is controlled by five areas.”

And to those who criticize his use of one-time dollars, such as the $156.2 million from the federal teacher act and $144 million from federal Medicaid (FMAP) funds. Ritter said without that money, school districts would have had to eliminate 5,000 teacher positions.

Ritter said he believed the 2011-12 budget would be helped by an improving economy. That budget may face a $1 billion shortfall, much of it because one-time money provided by the federal government or through other one-time sources, will be gone.

Assistant Senate Minority Leader Greg Brophy, R-Wray, told The Colorado Statesman that Ritter’s latest effort is “more of the same — a combination of relying on the federal government to bail you out and some accounting gimmicks.” Brophy said he found it humorous that Ritter has tapped into the severance tax money, given that the governor “has taken such a negative tact with regard to the oil and gas industry, but it’s the pot he wants to dip into for the budget.”

Brophy predicted that Republicans would come in with different ideas on how to balance the budget with wins in November.

“Just watch us — we’ll get there,” he said. The Republicans’ commitment is “to live within our means, and that means reducing spending,” Brophy said. “We will have to do things we don’t want to,” which he said could include seeking federal waivers to rollback increases in Medicaid expenditures, or to pass legislation creating a “genuine school choice” program that he said would save money and increase quality.

“Our commitment as Republicans is to live within our means or to increase taxes again,” Brophy said. “The people get to decide.”