State budget feeling the pinch with end of federal dollars

By Marianne Goodland

Gov. Bill Ritter laid out the state’s 2011-12 budget on Election Day Tuesday, saying the $19.1 billion spending plan is “fiscally responsible and moves Colorado forward on the road to recovery.” But the cuts to the 2011-12 budget show that the state is beginning to cut into essential services, the result of both the recession and the end of one-time federal dollars that kept the budget balanced.

Ritter’s budget for ’11-12 includes $7.6 billion in general fund dollars, $6.3 billion in cash funds and another $5.1 billion in federal funds.

The ’11-12 budget reflects an 8 percent increase of $563.5 million in general fund revenue over the 2010-11 budget signed into law in April. But most of that revenue will be used to cover the one-time federal dollars the state relied on in 2010-11 in order to prevent larger cuts.

The general fund increase will cover $422.3 million in one-time federal Medicaid assistance percentages (FMAP) funding to the Department of Health Care Policy and Financing that helped shore up the 2010-11 budget. Todd Saliman, director of the Office of State Planning and Budgeting, said that because the state had to use those revenues to replace the FMAP funding, the state’s general fund spending would increase by 2 percent instead of 8 percent. Another $51.3 million will go to the Department of Education, but still falls $92 million short of fully funding inflation and enrollment increases required under Amendment 23.

Another $15.7 million will go to the Department of Higher Education to replace one-time transfers from the College Invest program. The governing boards will get $555 million in general funds but total funding will be $89 million less than what they got in 2010-11. Those dollars came from the federal government through the American Recovery and Reinvestment Act (ARRA). “We’re doing everything we can to shield higher education from deep and painful cuts,” and the budget proposal does preserve the current general fund support for higher education, Ritter said Tuesday. But the state also must acknowledge that higher ed is losing ARRA funds, he added, “requiring us to continue the conversation about higher ed funding.”

The budget also covers an estimated $1.1 billion general fund shortfall that was predicted for 2011-12. That figure came from economists with the Legislative Council in September. It is comprised of $714.6 million, which includes $422 million in one-time funding from the federal government for Medicaid funding and $98 million from ARRA for K-12 education and government services.

The rest, $379.5 million, comes from expenditures that will not be funded: $14 million for salary increases for state employees, their third year without a raise; and $365 million that should have gone to K-12 education to bring them up to required Amendment 23 funding levels. (That’s in addition to the $92 million that the state could not fund K-12 this year; the $365 million includes a $260 million cut K-12 education took in the 2010-11 budget.)

Ritter said Tuesday the budget would maintain the safety net “as best we can,” but the details show that some of those safety net programs are going to start feeling the pain. The state predicts Medicaid enrollment will increase by 11 percent over 2010-11 projected levels, or by more than 58,000. At the same time however, Medicaid funding will be cut, as will some parts of the Children’s Health Plan (CHP+).

The CHP+ program, a hallmark of Ritter’s time in office, will be cut by $12.2 million. Among the cuts: eliminating pre-enrollment periods. Currently, a child enrolled in CHP+ is presumed covered on the day of application; under the budget plan, the enrollment will begin on the first day of the following month. In addition, the plan calls for eliminating inpatient coverage for presumptive eligibility, which affects pregnant women who apply for CHP+. Currently, they are presumed covered for inpatient care, including delivery, until the application is approved. Under the budget plan, the delivery costs are covered only after it is determined they are eligible; otherwise, they are responsible for the hospital bill.

Another $14.8 million in general funds will be saved by implementing targeted reductions in Medicaid programs; these include reduced payments for inpatient renal dialysis, reduced rates for certain diabetes supplies; and to deny hospital readmissions within 48 hours, which is intended to produce better discharge planning.

These are the first things the state will cut in the safety net, Saliman told reporters Tuesday. They will have the “least dramatic impact for Medicaid” recipients, and show “how difficult it is to achieve savings in this area.”

State employees also will continue to carry some of the state’s budget woes: Ritter has called for a 2 percent across-the-board reduction in general funds for personal services, to be paid for primarily with vacancy savings, eliminating the need for $10 million in general funds. The state will extend for another year a 2.5 percent reduction in employee pay that was passed by the General Assembly for 2010-11 to cover 2.5 percent of the state’s PERA contribution. That will save $19.6 million in general funds. In addition, part-time employees who work less than 20 hours per week will no longer get the full state contribution to their health, life and dental insurance premiums. Instead, it will be pro-rated based on the number of hours worked for those part-time employees. Those who work less than 24 percent time (9.6 hours per week or less) will not receive health, life or dental insurance. That change will save the state $1.4 million in general funds.

And the state is eliminating all general fund support for state parks, saving $2.7 million, and will move the parks to 100 percent fee-based, which means the daily park usage fee will increase by $1.

Ritter said the notable investments the state will make in 2011-12 are to provide new resources for children and adults with developmental disabilities ($6.2 million) and that the state would keep open all of its drivers’ license offices.

“All of that said, the road to recovery will continue to be slow, bumpy and full of detours,” Ritter said. Revenues are up but not enough to keep up with higher mandatory and caseload costs. “This budget continues many of the same tough, unpopular and unenviable decisions we’ve been making for two years.”

Ritter said the state has covered $5.2 billion in shortfalls since 2008, and the 2011-12 budget will continue “to spread the burden, the pain and the solutions.”

Ritter continued to criticize Republicans who have said the state can balance its budget without tax or fee increases. “Anyone who claims to have a pain free way to balance the budget is not only wrong but disingenuous,” he said. “It’s easy to criticize, it’s easy to stand on the sidelines and easy to offer platitudes instead of solutions.”

He praised legislators who have passed his budget-balancing proposals, saying they understand “what it means to lead and make tough choices.…they have my unwavering gratitude for having been with us in balancing budgets over these very difficult prior three fiscal years.”

But Ritter also cautioned legislators who may attempt to repeal the tax exemption time-outs from the previous legislative session. “You will have to find some other place to cut or find some other place to add revenue. There has been a lot of sloganeering during the campaign season, but this has to be a balanced budget.” Ritter said some of those who would be elected Tuesday night have used tax-cutting rhetoric to appeal to the voters, but once they are in leadership positions they will find it isn’t so easy. “A lot of individuals who are new to this building will learn the lesson the hard way,” he said.

Ritter will discuss the 2011-12 budget with the Joint Budget Committee, which has four new members, on Nov. 10.