Joint Budget Committee tackles budget

By Marianne Goodland

The Joint Budget Committee, with four new members, has begun the process of working on the 2011-12 budget with briefings from its staff on 11 state agencies and a meeting with Gov. Bill Ritter on his proposal for the next fiscal year.

Ritter led off the JBC’s fall session with a presentation on the 2011-12 budget and a plea for lawmakers to have an “open mind” with regard to the budget-balancing process.

Rep. Cheri Gerou, R-Evergreen, questions whether funding for Native American students at Fort Lewis College was an incentive to keep those students in college longer, since the state covers tuition for those students.

“There was a lot of rhetoric during the recent campaigns, but when it comes to budgeting, everything must be on the table and the posturing must come to an end,” Ritter told the JBC Nov. 10. “This is about finding common ground, forging bipartisan solutions and doing what’s best for Colorado. If ever there was a place where the saying ‘campaigning in poetry and governing in prose’ was true, it is here, with you, with this budget.”

Ritter ended his remarks by asking legislators to develop a budget with a “civil, thoughtful and rigorous debate. A debate that is respectful of different positions… that sets politics and partisanship aside.”

The Ritter 2011-12 proposal calls for a $19.1 billion budget, made up of $7.6 billion in general fund dollars, $6.3 billion in cash funds and $5.1 billion in federal funds. The 2011-12 budget increases general fund spending by 8 percent or $563.6 million, most of which Ritter proposes would go to cover the discontinuance of federal funds from the American Recovery and Reinvestment Act of 2009 (ARRA).

K-12 education would get a $51.3 million increase in its general fund support, although falling about $92 million short of fully funding inflation and enrollment increases under Amendment 23. The Ritter budget proposal maintains the statutory reserve at 2 percent, or $151.6 million.

The proposal also eliminates all general fund support for Colorado’s state parks. Todd Saliman, director of the Office of State Planning and Budgeting, pointed out that when he was a legislator, the state funded 30 percent of the state parks’ budget, and that ends with this request, he said.

This week, the JBC received staff briefings on two of the state’s five largest divisions: higher education and human services.

Ritter’s request for higher ed mirrors the request submitted by the Colorado Commission on Higher Education earlier this fall. The department’s total request is $660.6 million, an increase of $15.7 million over 2010-11. Of that, $106 million is requested for financial aid, the same amount as was appropriated for 2010-11. Another $268.9 million is requested for the College Opportunity Fund vouchers, which go from the state to the resident undergraduate student to the public institutions and two private colleges as a pass-through; this also is the same amount budgeted for 2010-11 and puts the voucher value at $1,860 per student or $62 per credit hour. That’s down from the high in 2008-09, which was $2,040 per student, but more than its lowest level, at $1,320 per student in 2009-10. Finally, $254 million is requested for fee-for-service funding, which covers non-undergraduate costs such as graduate and remedial education.

JBC analyst Eric Kurtz told the committee that higher ed now gets 9.6 percent of the state’s general fund appropriations, down from 20 percent about 20 years ago. The department and the state’s colleges and universities are the fourth largest in terms of general fund support, he said, but the largest in the number of full-time equivalent employees “by a wide margin.”

For 2011-12, the state’s public institutions will lose $89.4 million in federal dollars with the end of ARRA money, and that means a reduction of between 9.5 percent and 17.6 percent in total funding for the institutions. The 2010-11 general fund plus ARRA appropriation was $644.5 million; for 2011-12 it is proposed at $555 million.

Kurtz pointed out during his presentation to the JBC that one of the philosophical policy decisions the legislature must make is who pays for higher ed: whether costs should be borne by students and their families or whether costs are a public responsibility.

“This is the question,” Kurtz said; “what is the balance?” Kurtz explained that the state does have an interest in having an educated population but “most of the benefit goes to the student,” he said. And that answer also changes depending on the category of student — those who want a first-class education and all the “bells and whistles” that goes along with it — and those who can afford only to go to the state’s “basic skills institutions” (i.e., community colleges).

Kurtz also addressed the “Armageddon” scenario painted by institutions should they lose 50 percent of their general fund support, which Kurtz called “hyperbole.” This scenario was contained in Senate Bill 10-003; institutions were asked to submit plans on how they would keep their doors open with a 50 percent reduction in general fund support, or about $310 million. Kurtz surmised that the reasons for asking for such a plan likely ranged from legislators who believed that such a cut was possible; others who might want ammunition to fight the cut, and still others who might want information that could be taken to voters.

Kurtz said the institutions would have options for reducing expenditures and increasing revenues to handle the cut, so the scenario painted in SB 003 was “not far-fetched.” Even with such a reduction, Kurtz’ analysis showed, the dollars per student would be higher than they were in 2001-02 through 2004-05. However, he said, such a reduction also might mean layoffs or salary cuts for higher ed employees, since two-thirds of the dollars spent by the institutions goes to salary and benefits. Most of that general fund money pays for instructional faculty, Kurtz said, and this would cause institutions to either reduce the number of faculty, cut pay or benefits, or change the mix of tenured faculty to adjunct, part-time professors. And he indicated such a cut also might result in large tuition increases, since a one percent increase in resident and nonresident tuition rates generates $14.4 million statewide. Of that, $8.8 million comes from residents, $5.6 million comes from nonresident students, but Kurtz also raised the political heat that might come from a 20 percent tuition increase to mitigate the reductions.

The cuts also would likely be politically difficult to achieve, Kurtz explained, given the varying ability of institutions to raise tuition, which would then lead to a need to shift general fund dollars from one institution to another to create an equitable reduction in total funding. Institutions who lost more than their share would complain, he said.

If the state were to close institutions in order to save money, the savings would be relatively small unless the state chose to close a lot of small ones or a very large one, like CSU Fort Collins or CU-Boulder, which has never been on the table, Kurtz explained. And closing an institution might not achieve the desired savings: it just might mean that those students would migrate to another state institution, the institutions would have significant upfront costs related to payout of leave and retiring debt; and the closure would likely drive higher unemployment and Medicaid claims due to job losses, reduced income tax revenues and negative impacts on the institution’s local economy.

“You might not like the consequences,” Kurtz said, “but it wouldn’t be Armageddon” nor far-fetched “to imagine a world where you reduce funding to higher ed institutions and they change their operations to accommodate that kind of reduction.”

Kurtz also took issue with the report recently released by Ritter’s higher education strategic planning committee. He noted one chart in that report that shows Colorado ranked 49th out of 50 states on average state and tuition funding per student, which Kurtz interpreted as a measure of Colorado’s competitiveness with other states in attracting faculty; offering high-cost, low-enrollment degrees; and offering support services that help students graduate and find jobs. Kurtz said the report ignored Colorado’s average net tuition, which places it 30th out of 50 states, and said that if Colorado increased its tuition the state’s ranking could improve. But it also goes to the question of whether the Colorado wants to be competitive “at the expense of students or at the expense of the state,” his analysis said. On average, resident students pay about 35.5 percent of the cost of their education while the state contributes 28.4 percent. “Is it important to you that CU be the best in the country?” which would require more general fund, Kurtz said, or, conversely, if “you don’t have the general fund to pump in, CU won’t be as competitive,” he said.

The analysis listed the options developed by the strategic planning committee to provide more stable funding for higher ed. All of those options involve raising taxes, such as restoring the income and sales tax rates to 5 percent and 3 percent respectively, which would generate $445 million per year; or expanding sales taxes to specific services, which would bring in $550 million annually.

Among the questions raised by committee members Wednesday: how Colorado institutions compare to other states in the number of hours spent by faculty in the classroom. That question, which has been raised by Republicans many times over the past decade, was revived by Rep. Cheri Gerou, R-Evergreen, during Wednesday’s hearing. Legislators in past session have equated the number of hours spent by faculty in the classroom to the number of hours faculty actually work. However, a 1994 report authored by Stephen Jordan, now president of Metropolitan State College of Denver, said that a faculty member who spends 10 hours per week in the classroom works 52 to 57 hours per week. About half of that is spent on instructional-related activities; the rest is spent on research and college or university service. Jordan was executive director of the Kansas Board of Regents at the time of the report.

Gerou also questioned whether funding for Native American students at Fort Lewis College was an incentive to keep those students in college longer, since the state covers tuition for those students. Other members asked how access would change if the state shifts more of the cost to the student, and also asked about efficiency as it relates to the institutions’ graduation rates. JBC members also raised the issue of consequences for Mesa State College, which increased its tuition rates for incoming freshmen above the rate increase approved by a footnote in the 2010 Long Appropriations Bill. Those issues and questions will be addressed when college and university officials meet with the JBC next Tuesday.

On Thursday, Dec. 2, the JBC will meet with officials from the Department of Human Services to review questions and issues raised by JBC members and their staff following a briefing on the department held on Tuesday. It is the first of eight briefings and follow-up hearings on the department, which is fifth among state agencies in the amount of its annual general fund appropriations.

The Department of Human Services budget for 2011-12 seeks a total of $2.5 million in new general fund dollars, primarily to fund increased caseload for food stamps and food assistance and disability services. The hearing on Tuesday reviewed the department’s executive director’s office, operations, county administration, self-sufficiency and adult assistance divisions.

Ritter’s 2011-12 budget request seeks $701.5 million for the department (excluding disability services), a 1.1 percent request over the 2010-11 appropriation. The 2011-12 budget request is “relatively flat from a total funds perspective,” according to JBC analyst Amanda Bickel, but does reflect a $60 million increase in general funds, due to the expiration of ARRA funds and an increase for placements for people with developmental disabilities. Bickel said that increased caseload is due to the aging developmental disabilities population; she said that they are living longer and that the state must provide services when aging parents can no longer care for them.

Over the past decade, the largest amount of funding growth in the department has been for covering services for the developmentally disabled, Bickel pointed out; the department has also seen increased costs for child welfare but a drop in costs for child care and self-sufficiency programs. Most of the growth in funding for the developmentally disabled goes for community-based, Medicaid-funded services.

The 2011-12 budget request also seeks a $4.7 million increase in total funds, including $2.4 million in general funds, for county food stamp administration, where caseload has increased 70 percent in the last 30 months. In making the request, the department noted the state has fallen short of federally required timelines in processing food stamp applications, and faces withholding of federal funding if those timelines are not met (the federal government pays for the actual food assistance program; Colorado covers just the administrative costs.) In addition, the department’s request noted, the state is dealing with a court settlement related to timeliness problems with the Colorado Benefits Management System. While timeliness has improved, the state’s application turnaround is still below federal guidelines.

The JBC will receive a staff briefing on the department’s youth corrections, child welfare and child care division and the disability services division on Tuesday, Dec. 7. A briefing for the mental health division is scheduled for Friday, Dec. 10. Follow-up hearings are scheduled for Thursday, Dec. 16.