State budget squeeze tough on lawmakers

0 Comments | Gazette, The (Colorado Springs), Feb 29, 2004 | by KYLE HENLEY THE GAZETTE

DENVER - Sharpen your No. 2 pencil and put your thinking cap on.

Now, decide which of these scenarios makes the most sense:

Option A: All state sales tax refunds disappear -- forever.

Option B: Guaranteed funding increases for public schools dry up - - forever.

Option C: A combination of both options.

None of the above: which means the government will stop funding higher education, health care, social programs, prisons and a bevy of other popular and necessary programs.

No, it's not a hideous SAT question.

It sums up the Gordian knot voters will be asked to unravel in November as the state and various think tanks grapple with how to deal with Colorado's budget mess.

Gov. Bill Owens asked a handful of legislative leaders this week to begin working on the conundrum, which is the legislative equivalent of putting humans on Mars.

Several think tanks -- from left to right -- are moving ahead with ballot initiatives that deal with the problem from their points of view.

The ways things are shaping up, the mix of initiatives and referendums on the ballots could make for one of the most confusing and complex election seasons.

The financial foundation of state government is at stake and with it the future of key government programs.

Colorado boomed during the 1990s.

The economy often was compared with the engine of a race car. Jobs were plentiful and generally paid well. State coffers brimmed with tax revenue.

Times were so good the state cut taxes by almost $1 billion during the late 1990s and still recorded $1 billion in surpluses each year.

The Taxpayer's Bill of Rights, a constitutional amendment approved in 1992, capped government spending and required the state to return surplus tax money to Coloradans, so getting a sizable check from the state became the norm for most taxpayers.

Each year, government agencies received ample yet conservative funding increases thanks to TABOR's spending caps, which are based on a formula that factors in inflation and population growth.

In 2000, voters approved Amendment 23, a constitutional amendment that ate up portions of the surplus by requiring the state to increase education spending each year by inflation plus 1 percent.

Even with Amendment 23, government surpluses grew, and it appeared Colorado would cruise through the new millennium with a top-notch education system, miles of new highways, efficient government agencies and money in the bank.

"We just thought the money would never go away," said Brad Young, R-Lamar, co-chairman of the Joint Budget Committee. "Well, it went away."

A mild recession was magnified by the Sept. 11 attacks. A difficult situation went even farther south when drought and wildfires kicked the legs out of Colorado's $7 billion-ayear tourism industry.

More than 90,000 Coloradans lost their jobs. Revenues dried up, and Colorado faced shortfalls of about $1 billion three years in a row.

Colorado weathered the storm initially by tapping huge savings accounts set aside for building maintenance and workers compensation claims. Lawmakers also used some accounting changes -- such as shifting the payday of state employees -- for other savings.

In the end, the state only cut about $200 million during the three years, but the downturn took its toll.

"We are broke, we are more than broke," said Rep. Tom Plant, D- Nederland, also a JBC member. "According to the constitution... we got no money. We won't have money next year. We won't have money the year after that."

TABOR and Amendment 23, which seemed to coexist a few years ago, are like a bad chemical reaction for the state budget.

The recession and subsequent budget shortfalls exposed a problem that probably wouldn't have become obvious for decades.

TABOR shrinks the size of government relative to the economy. Amendment 23 requires state spending to increase regardless of what happens to the rest of government spending.

"There is a hole in the bottom of the boat -- that is the TABOR spending limit," Young said. "We are shrinking relative to the economy. It works for a little while, but you go out into the future and you sink the boat. In two years we will have refunds and a shortfall at the same time."

Because of the TABOR caps, state government is projected to have a $31 million TABOR surplus during 2004-05. At the same time, the state is looking at cuts of $124 million.

Projections show the state would have to cut $214 million in 2005- 06 and $92 million in 2006-07 even as the TABOR refund grows to more than $441 million.

Amendment 23 says education spending still must grow, at the expense of other government programs. It means that while education money increases and voters receive rebate checks, other programs might have to be cut.

The problem is worse when Medicaid is considered. Medicaid is an entitlement program, the cost of which is dictated by the number of people who are eligible and apply for government health care assistance.

To meet the requirements of Amendment 23 and Medicaid, the state needs $236 million more. Next year, the state is slated to receive only $155 million in new dollars.