Face The State Staff Report
Colorado lawmakers are preparing to make painful budget cuts in light of the latest revenue forecast, which as of Friday indicates a staggering $604 million budget shortfall in the state's General Fund.
The non-partisan legislative council released its fourth quarter projections Friday morning. Chief economist Todd Herreid informed lawmakers that Colorado’s economy is no longer insulated the nation's recession. “It’s like we’re both in the hospital, but our roommate is just in worse shape,” he said.
Previously, Colorado had largely been spared from the nation's economic woes due to its relative housing stability and job growth courtesy of the energy sector.
In the last quarter, legislative council pegged the shortfall at $100 million. Since then, however, Colorado has seen its economy worsen with unemployment rising to 5.8 percent. The state has experienced three straight months of job losses, with 10,600 jobs lost in October alone. Legislative council staffers indicated unemployment will continue to rise into 2009, potentially reaching 6.3 percent next year. Meanwhile, Gov. Bill Ritter’s Office of Budgeting and Planning is far more optimistic about the economy, predicting only a $77 million budget shortfall for the current fiscal year. Despite the shortfalls, Ritter's budget for the 2009-2010 fiscal year charts nearly 5 percent in new spending. Republicans criticized him for being overly optimistic and unnecessarily growing the budget during tough economic times.
Joint Budget Committee member Rep. Don Marostica, R-Loveland, said he wasn't surprised by the conflicting revenue forecasts, but the JBC typically bases decisions on reports from legislative council. Marostica anticipates lawmakers will spend the greater part of next session filling the $604 million hole in the state's $7.6 billion General Fund.
As a cost saving measure, House Minority Leader Mike May, R-Parker, suggested lawmakers limit their session to 90 days and focus exclusively on fixing the budget. The legislative session is usually 120 days but May said shorting it would allow lawmakers to do "their part" to save the state money.
Legislative Council staffers outlined three ways legislators can address the shortfall: cut programs, raise taxes, or put “one time money into the budget.” That one time money would come from the state’s mandatory 4 percent statutory reserve, which currently maintains a balance of $325.4 million.
Joint Budget Committee Chairwoman Sen. Moe Keller, D-Wheat Ridge, previously expressed concern to Face The State over tapping into the statutory reserve. If statutory funds are used, a provision in the state's Taxpayers Bill of Rights requires replenishing funds to be the top priority of the next fiscal cycle. Marostica, however, said the statutory reserve funds were not off the table.
Legislative council staffer Natalie Mullis also warned lawmakers that even if every dollar in the statutory reserve were to be tapped, the move would only fund about half of the state’s revenue deficit. Lawmakers will inevitably have to make cuts somewhere, but they are hesitant to say where. Transportation and higher education are two of the more flexible areas in the General Fund, and many political observers are predicting those programs will experience the first round of cuts. Some areas of the budget are insulated from a recession, including K-12 education, which is protected from cuts under Amendment 23.