Guv slashes 2011-12 budget, Dems outraged

The Colorado Statesman

Gov. John Hickenlooper Tuesday presented his plan to get the state into the black for 2011-12, but it has members of his own party seeing red.

Hickenlooper’s budget proposal would cut $375 million from K-12 education, and local school districts would take an additional $117 million hit in lost property tax revenues the state won’t backfill.

The budget proposal rolled out on Tuesday won favor from House Republicans, who hold a slim one-vote majority in that chamber. Senate Democrats, on the other hand, will need to be won over on the plan. They called the proposal “disappointing” and said they would not “rubber-stamp” the governor’s request because it flies in the face of their highest priorities for the 2011 session.

Traditional Democratic allies, such as education and public policy groups, also chimed in with their disapproval this week, as did state employees, who will be required to kick in another 2 percent of the state’s contribution for PERA, on top of the 2.5 percent they’re already covering. And Hickenlooper’s proposal would cut more than 250 positions in state government, although the governor’s budget director said Tuesday the positions eliminated would come through vacancies rather than layoffs.

Gov. John Hickenlooper is joined by his team during Tuesday’s presentation to the Joint Budget Committee. From left, Lt. Gov. Joe Garcia, Office of State Planning and Budgeting Director Henry Sobanet, Hickenlooper, special budget advisor Todd Saliman and Christine Scanlan, the governor’s chief lobbyist.
Photo by Marianne Goodland/The Colorado Statesman

The governor’s budget proposal modifies the one submitted by Gov. Bill Ritter on Nov. 1. It contains $570 million in cost reductions; in addition to the $375 million cut in K-12, the proposal includes the “repurposing” or closure of four state parks: Harvey Gap, near Rifle; Sweitzer Lake, near Delta; Bonny Lake, near Burlington; and Paonia State Park, in Gunnison County. A state prison, Ft. Lyons, 90 miles east of Pueblo, also will be closed and will result in the transfer of 485 inmates to lower-cost facilities, and the eventual elimination of 104 full-time equivalent positions in the Department of Corrections.

Medicaid and human services are not spared under 2011-12 budget, with the closure of a drug treatment program and a residential health care program at Fort Logan, and a reduction in provider rates for private health care providers. Higher education will see a $36 million additional General Fund cut. Hickenlooper also intends to restore the General Fund reserve to its full 4 percent level.

“Ninety percent of this plan is permanent cuts,” said Henry Sobanet, director of the Office of State Planning and Budgeting. Sobanet told reporters Tuesday that the governor’s proposal is based on a two-year plan to close a $1.3 billion structural budget gap, and the revised budget proposal should cover a little less than half of the gap.

Sobanet explained the gap has been financed with one-time money and cash transfers. “We’ve used our savings account to pay for ongoing expenses, and now it’s gone,” he said.

The structural gap is equivalent to the growth in K-12 and Medicaid over the past decade, he noted, while General Fund revenues in the same period have grown by just 0.64 percent, or about $481 million.

As to why the state is not pursuing large-scale layoffs, Sobanet explained that 63 percent of the state’s General Fund budget, which goes to education and Medicaid, is administered by fewer than 900 employees (out of a total workforce of more than 31,000, not including higher education). Most of that money goes to local school districts and private health care providers, and he said most state employees are elsewhere, in “24/7 or safety net” operations, and that “mass layoffs are not practical.”

Sobanet also explained that the budget proposal assumes no changes to existing tax exemptions, but no repeals of the 2010 tax exemption legislation, either. That may not be good news for a number of Republicans in the House and Senate, who are trying to pass bills that would repeal those 2010 measures and had hoped for the governor’s support for repealing the Amazon tax and the agricultural tax.

Despite the cuts, the state’s overall budget for 2011-12 is larger than the 2010-11 budget, according to OSPB documents and the governor’s budget letter to the Joint Budget Committee. Expenditures in 2010-11 are estimated at $6.9 billion; the General Fund expenditure request for 2011-12 is $7.245 billion, with another $283 million left over for the General Fund reserve.

As to the specifics:
• Department of Corrections: $55 million in General Fund reductions, including 43 million in reductions to the education subprogram, $3 million for decommissioning Fort Lyons, $2 million for the “Operations and Therapeutic Communities” and $1.3 million for eliminating the Parole Wrap-Around Program. The closure of Fort Lyons will eventually result in a savings of $6.3 million annually.

• Department of Health Care Policy and Financing: $57.3 million in general fund reductions, including $13.2 million in reductions for medical services premiums.

• Department of Human Services: $17.3 million General Fund decrease, including $11.1 for the Division of Youth Corrections to reflect reduced caseload, $1.5 million for closing the Circle Program at the Pueblo Mental Health Institute and $0.7 million for closing the Therapeutic Residential Child Care Facility at the Fort Logan Mental Health Institute.

Hickenlooper formally presented his budget to the Joint Budget Committee Tuesday afternoon, and the dismay from JBC Democrats and other Democratic legislators over education cuts was palpable. “It is not possible for the state to continue spending money it doesn’t have,” Hickenlooper told the JBC. While there is evidence of a recovering economy, he said, “our revenue prospects are far from certain,” and he defended the plan, saying it continues to protect the most vulnerable, such as programs in child welfare, mental health and Medicaid, and service to those with developmental disabilities.

The cuts to K-12 are “unavoidable,” Hickenlooper said. “When you’re dealing with bitter choices” between education and health care, between water projects and public safety, it makes an almost ‘inhuman demand’ on the state,” he said. “We take little joy in proposing cuts of this level; no one who runs for public office finds any solace” in doing so.

Sen. Pat Steadman, D-Denver, led off the criticism during the Tuesday JBC meeting, calling the choices “difficult. There are things I question whether they are feasible or wise,” citing the additional pay cut to state employees to cover the state’s PERA contribution. Steadman is carrying the bill to extend the 2010-11 contributions, and questioned whether the state “can ask state employees to further their sacrifice so we can have a higher [statutory] reserve.” Hickenlooper later pledged to find pay increases in 2013 for state employees, who haven’t gotten a pay raise in three years and won’t get one in 2012. But he said he also believed state employees would rather take the additional hit and keep their jobs.

The JBC’s senior member, Rep. Mark Ferrandino, D-Denver, said the proposal showed how few options the state has, and that the proposal is the “start” of the conversation on the budget. But he noted the proposal focuses only on cuts and ignores the other side of the equation: revenue. People already are concerned about the cuts to K-12 and what it meant for the state’s future. “This proposal will make those voices louder and stronger,” he said, and the time is coming to ask people if they support the cuts or are willing to find ways to offset them.

Pushback on the K-12 cuts from Democrats came almost immediately. Sen. Rollie Heath, D-Boulder, a member of the Senate Education Committee, said that continuing to cut education would also cut economic development and job growth. “Cutting our way out of this just won’t work,” he said. And House Minority Leader Sal Pace, D-Pueblo, said the state has to provide a certain level of funding to do a decent job in educating kids. “What should we tell constituents, voters, parents about the future of K-12 education? Where are we headed?” Hickenlooper acknowledged his concerns, stating there was no more important investment than to invest in children, and that businesses won’t come to a state that doesn’t invest in its education system. But he also pointed out in the wake of the worst recession since the Great Depression, the state can no longer protect K-12 funding, which takes 41 percent of the state budget.

Republicans like it, Democrats rebel

The JBC’s Republicans applauded the governor’s proposal. “You’ve presented a realistic and honest appraisal of where we are,” said Sen. Kent Lambert, R-Colorado Springs.

Hickenlooper told reporters later that every state is making these kinds of decisions and that he believes most school districts will do their best to keep every dollar in the classroom. But Jane Urschel of the Colorado Association of School Boards, told The Colorado Statesman that 85 percent of the costs in K-12 are for personnel, and agreed with an assessment that the cuts proposed for K-12 could result in the loss of 6,000 to 7,000 teachers.

Sen. Bob Bacon, D-Fort Collins, chair of the Senate Education Committee, called the governor’s proposal “very disappointing. We need to think carefully about how we will get out of this, but cutting education, hoping to grow jobs, may be contradictory. What companies will want to move to Colorado with a declining education system?”

Senate President Brandon Shaffer, D-Longmont, told The Statesman that Hickenlooper’s proposal, especially its K-12 cut, won’t be “rubber-stamped” by the General Assembly, and pointed out that Senate Democrats’ top priority this session, as reflected by SB 1, is backfilling cuts to K-12,” not making bigger cuts. Shaffer said he knew there would be significant cuts to K-12 and higher ed in the proposal, but pledged there would be changes to Hickenlooper’s proposal.

Education and public policy groups lined up to voice their dismay over the K-12 cuts. Most said the time had come for a conversation on increasing revenues, which Hickenlooper flatly rejected during the Tuesday press conference. Colorado Education Association President Beverly Ingle said the cuts would be “painful and unpopular” and will result in $497 less in per-pupil funding, which she called “plain wrong.” She said she understood that Hickenlooper is in an “impossible situation,” but that in a bad economy, the best way to recover is to invest in education, not cut it. “The quality of education will largely drive the quality of the Colorado economy and the size of our tax base” she said. “We must start a serious dialogue now around how to raise revenue to restore funding to our schools.”

Wade Buchanan, president of the Bell Policy Center, said the cuts “truly threaten bedrock investments in our future, particularly the cuts in K-12 and higher education.” He noted that the governor and Legislatures could only balance the budget through spending cuts, but that voters can make the choice to increase revenues that will be invested in children’s education.

Colorado Children’s Campaign President Chris Watney said the cuts “will fall disproportionately on the backs of Colorado’s children and will have long-lasting, negative implications for Colorado’s future workforce and economic prosperity,” and that the state has run out of responsible choices. “New revenue” must now become part of the conversation, Watney said.

According to a statement from the Colorado Fiscal Policy Institute, the budget reflects “grim reality,” and while the proposal is “not a viable path to a prosperous future,” the Institute said the state is “out of acceptable options for dealing with the persistent budget challenges.

“Now is the time for voters to stand up for their kids and their communities,” the statement said. “It’s hard to imagine how our state will recover if we don't invest in an educating our future workforce. Our state government simply needs more revenue to do the things Coloradans expect, and voters have the power to change our future.”

But Hickenlooper did find allies for his proposal, and from unlikely sources — Republicans at the state House, who also lined up, but to applaud the proposal, and several cited parts of Hickenlooper’s remarks during their own comments of support.

House Speaker Frank McNulty, R-Highlands Ranch, said he appreciated “the Governor’s willingness to tackle the state budget in a way that begins to address the long-term structural issues and we look forward to working with him on specifics.”

Gerou called the proposal the first step “in moving us toward a more responsible budget that will bring Colorado’s state government in-line with our current economic conditions,” Gerou said. “Creating a budget that is responsible and respectful of taxpayer dollars will play a critical role in Colorado’s economic recovery.” She also told The Statesman that Republicans, who she said have been excluded from the conversations in the past, are “really pleased to be part of the conversation and help the state and people to be a more fiscally responsible state. I think the governor said it — we have to be honest about where we are.”

Rep. Brian DelGrosso, R-Loveland, said he applauded Hickenlooper’s recognition that the reliance on one-time federal funds “and other clever budgeting maneuvers has left the state budget in a desperate situation. We also congratulate the Governor for acknowledging that economic growth through job creation is the only cure for our budget woes, not tax increases.” And Senate Minority Leader Mike Kopp, R-Littleton said Senate Republicans welcomed the governor’s participation in an effort to turn the economy around.

Rep. Randy Baumgardner, R-Hot Sulphur Springs, told The Statesman that the governor is looking at the budget “realistically” and that he agreed with much of what Hickenlooper said. “We will have to make those tough decisions to balance the budget, and the money just isn’t there,” he said Tuesday. “I believe he’s a person we’ll be able to work with” because he understands business, Baumgardner added.

Rep. Mark Waller, R-Colorado Springs, warned that he believes some people will use the budget cuts as a tool for raising taxes. He said he didn’t like making drastic cuts to K-12 or higher education, but the state can no longer come up with the “creative financing mechanisms. We have to make these cuts. I don’t think anyone wants to cut it to the bone the way it will happen, but it needs to happen. We do need to make government a little leaner and this is an opportunity to do that.”

Marianne@coloradostatesman.com