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Recession bites state budget

Economists say up to $600 million must be trimmed

By Ed Sealover, Rocky Mountain News

Published December 19, 2008 at 12:48 p.m.
Updated December 19, 2008 at 11:55 p.m.

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The national recession has finally hit Colorado's state budget - and it's going to leave bruises.

Everything from social services to a soon-to-be-opened maximum-security prison are on the cutting block after state economists reported Friday that Colorado must trim more than $600 million by June to balance its budget.

The exact amount of cutbacks remains fluid, as a competing state economist set the budget gap at just $77 million. And the Joint Budget Committee chairwoman said legislators will look at ways that the state can put off major reductions until next year - including spending its entire reserve fund.

But after Colorado watched other states suffer multibillion-dollar budget gaps while its economy stayed on course as recently as six months ago, officials acknowledge there are significant challenges - if not pain - ahead. Gov. Bill Ritter's office and most legislative leaders declined to identify specific areas that are ripe for cuts but all acknowledged big changes are coming.

"In some perverse way, we're still better than the rest of the nation," Todd Herreid, economist for the Legislative Council, told a committee of legislative leaders Friday. "But now it's a situation, at least in our minds, where we're both in the hospital but our roommate is in worse shape."

The nonpartisan Legislative Council estimated revenues will fall $604.2 million short of expenditures for the fiscal year ending June 30. The governor's Office of State Planning and Budgeting had a far more optimistic projection - a $77 million shortfall.

Economists from the two divisions will work together for the next two weeks to determine why they are so far apart and to see if a hard number for cuts might be somewhere in the middle. But Rep. Mark Ferrandino, a Denver Democrat and JBC member, said legislators have to proceed with the more conservative number and prepare for big cuts.

Everything will be on the table, though Ritter will ensure that public health, safety and welfare are not compromised, said Evan Dreyer, spokesman for the governor.

Ritter received proposed 2.5 percent cuts from all department heads Monday, Dreyer said. But the high-end deficit estimate represents roughly 8 percent of the $7.8 billion general-fund budget for this year, so even full implementation of Ritter's suggested cuts could fall well short of what is necessary.

Republican leaders on Friday criticized the governor and Democrats, noting their rejection of repeated GOP attempts to create another savings fund during this year's budget process.

Rep. Cory Gardner, R-Yuma, challenged Ritter to consider cutting some of the new energy or health-care programs he has started and some of the roughly 3,000 workers he has brought onto the state payroll in the past two years.

What is vulnerable

TRANSPORTATION

Gov. Bill Ritter had announced that state road-funding was set to be cut by $428 million next year even before Friday's report. It could be a rough period for transportation.

HIGHER EDUCATION

Of the four biggest areas of funding in the budget, this one, at $2.5 billion, has the least protection. Gov. Bill Ritter has put $120 million more into colleges during the last two years and would hate to make cuts, but he admitted this week that even higher education is vulnerable now.

STATE EMPLOYEES

A hiring freeze and a ban on pay-for-performance bonuses already are in place. Republicans will push to eliminate some of the roughly 3,000 new workers that have been added to state payrolls in the past two years.

CAPITAL PROJECTS

The $55 million of construction projects that are frozen will remain so. Even some that are being completed now, such as a new 960-bed prison in Fremont County, may sit empty because the state doesn't have the money to staff them.

What is virtually untouchable

K-12 EDUCATION

A 2000 constitutional amendment requires the budget for schools to grow even when the rest of the state budget is being cut.

CORRECTIONS

Although the state can hold off on opening expensive new detention facilities, it cannot make major budget cuts without setting prisoners free - the equivalent of political suicide.

MEDICAID

As the economy goes south, more people will lose their jobs and seek government-assisted health insurance for their children. The government could reduce eligibility levels and cut people off, but some experts say that would redirect health-care costs to hospitals that treat those patients, and those hospitals will increase costs to everyone.

A downward spiral

In less than six months, the state's economic forecast - as presented by the governor's Office of Planning and Budgeting and the nonpartisan Legislative Council - have gone from optimistic to dim. Here's a look at the budget figures and increasing pessimism as the year has gone on.

* June: Projected budget gap for fiscal year 2008-09: $0

"Ritter's office said a rush of people filing their income taxes on time, most likely so they could receive their federal economic stimulus checks from the government, will boost revenue in the state's general fund this fiscal year by nearly $26 million over what the office had forecast in March."

Associated Press

* September: Projected budget gap for fiscal year 2008-09: $99.4 million

"We need to be thoughtful and methodical about how we go forward, and we don't need to overreact. Forecasting is always difficult. It's even more difficult when we are in challenging times like we are in now."

Evan Dreyer, spokesman for Gov. Bill Ritter

* December: Projected budget gap for fiscal year 2008-09: $604.2 million

"The dark clouds of recession have been looming for many months. The legislature should steel itself for very difficult budget times and ignore naive forecasts of sunny days and blue skies."

Senate Minority Leader Josh Penry, R-Grand Junction

A hunk of cash

According to Friday's forecast by the Legislative Council, the General Assembly will need to cut $604.2 million of spending over the next six months to balance the budget. Although none of these options has been mentioned for consideration, here is a look at just what $600 million pays for in state government today:

* That is roughly the cost for the Department of Revenue, which oversees a host of responsibilities, including tax collections, the Motor Vehicle Division offices, the Colorado Lottery and tobacco enforcement.

* It is the combined yearly budgets of the offices of Colorado's four statewide elected state officials: governor, treasurer, attorney general and secretary of state.

* It would cover the costs of the General Assembly - for 226 years.

* It is roughly 13/4 times the amount of money the state is expecting to receive from the federal government this year for transportation funding.

* It is roughly the cost of the College Opportunity Fund, the stipend payments for students attending higher education institutions in this state.

IN HIS OWN WORDS: HENRY SOBANET

Henry Sobanet was deputy state budget director in the early part of this decade when spending was slashed by $1 billion over two years. He was state budget director from from October 2004 to January 2007. He spoke with Rocky Mountain News reporter Berny Morson. Sobanet was asked about the difficulty of making major budget cuts. The transcript was edited.

"As you can imagine, it's the most difficult thing you can do, because the way our budget is, 40 cents on the dollar in the general fund goes to K-12 education, and another 20 cents to Medicaid, and for a variety of reasons those are largely off-limits (to cuts), so you end up having disproportionate cuts in other areas of the budget.

"You end up making some very difficult decisions.

"It affects morale for everyone involved. You feel for the services that have to be reduced, and you try to do it in a way that hurts the least amount.

"We did make some pretty tough cuts in mental health and health care. We eliminated the property tax deduction for seniors. I'm sure that affected some people.

"You always take the opportunity to find efficiencies. You've got only four or five or six months left of the fiscal year to do it in, so the impact is really magnified, because half the year is over.

"We depleted our reserves. We did several accounting-type changes. We cut programs.

"We did all sorts of things to kind of cobble it together as we dropped by a billion dollars.

"We had a little more flexibility back then because we borrowed and took from other funds that had kind of built up balances over the years.

"Most of those are depleted now. So some of those one-time options from the last downturn are not available. That could make some of this challenge a little harder.

"I have sympathy for everyone down there. It's no picnic."

Comments

  • December 19, 2008

    12:58 p.m.

    Suggest removal

    AngryDragon writes:

    Wouldn't it be nice if "cuts" would be made but we all know of course this will just lead to another tax increase request.

    Here's an idea Ritter: STOP SPENDING SO MUCH OF OUR MONEY!!!!!!!! This isn't a bar where you are buying drinks for all the other government drunks. You are dealing with OUR money.

  • December 19, 2008

    1:09 p.m.

    Suggest removal

    farsidefan writes:

    These kind of budget projections and budget cutting drama happen every year. Everyone wants to cut the state budget. Give out your ideas with specifics not "Cut out welfare programs. " Be specific. Lets test your knowledge of the state budget.

  • December 19, 2008

    1:20 p.m.

    Suggest removal

    cdmdenver writes:

    Build More Prisons, Colorado spends too much
    on building the "Prison Business" that yields NOTHING
    in return. We need prisons and to hold offenders accountable.

    WE DO NOT NEED A PRISON BUSINESS IN COLORADO.
    Billions of dollars down the drain, and growing!!

  • December 19, 2008

    1:26 p.m.

    Suggest removal

    JeffcoGOP writes:

    Well said, farsidefan. People who scream for more cuts should be specific or shut up.

  • December 19, 2008

    1:30 p.m.

    Suggest removal

    SlouchingTowardBoulder writes:

    The JBC can start with greatly curtailing discretionary travel, especially out-of-state travel, for state employees to attend conferences, annual conventions, etc. The amount and cost of this is staggering and it is one of the first things that other states look at when cutting.

  • December 19, 2008

    1:32 p.m.

    Suggest removal

    Buckwheat writes:

    I guess this means no state tax refunds again this year... Oh,Darn.

  • December 19, 2008

    1:56 p.m.

    Suggest removal

    AngryDragon writes:

    Farsidefan, JeffcoGOP, you guys are right. Just because I don't have intimate knowledge of the state budget I have no right to ask government to stop spending so much money.

    But then again, that is why I elect representatives to handle this stuff for me. Unfortunately, said representatives do not always get voted into office or perform as expected.

    What an unreasonable request on my part to ask the government to show fiscal responsibility. I'm such a moron.

  • December 19, 2008

    2:06 p.m.

    Suggest removal

    mokey writes:

    "Buckwheat writes:

    I guess this means no state tax refunds again this year... Oh,Darn."

    The citizens of Colorado, albeit by a slim majority, approved Referendum C which eliminated TABOR refunds. They appear to be returning by FY 2010-11, when Referendum C's "TABOR time-out" expires.

    However, I think people believe that the TABOR refund is some sort of entitlement. But in a way the refund has always been like your tax refunds, where the amount you paid to the IRS exceeded your obligations after adjustments. In essence the IRS held onto your money interest-free until your refund is issued. A TABOR refund kicks in when actual state revenues received exceed TABOR limits.

    Gov. Owens in his first terms in office cut taxes TWICE which eliminated the need for the refunds because under TABOR rules the government was taking in too much $$ each year and just had to refund it back to citizens interest-free.

    So the TABOR refund is not some entitlement program (everyone gets $250 dollars guaranteed) that the government took away from you to spend on another government program. It just means taxes probably should have been reduced in that year to balance revenues with TABOR revenue limitations.

    I am sure my explanation is clear as mud, but I tried.

  • December 19, 2008

    2:09 p.m.

    Suggest removal

    OldSailor writes:

    Cuts need to be made in various places...one that comes to mind is the cost of what illegal aliens cost the taxpayers. And for you who call me a racist, remember....illegal aliens come in ALL races.

  • December 19, 2008

    2:14 p.m.

    Suggest removal

    chickenlittle1234 writes:

    AngryDragon - Maybe there may be tax increases, but there will also be massive spending cuts. There will have to be - every tax I can think of (with the possible exception of the income tax, though that's arguable) is based on taxing consumption, and you and I both know that's falling fast. This will be ugly, not only for Colorado, but for nearly every municipality and county in the State, as well as nearly every other state in the union. If you own any muni bonds, sell them quickly, before they get their debt ratings slashed.

  • December 19, 2008

    2:44 p.m.

    Suggest removal

    mokey writes:

    "chickenlittle1234 writes:

    AngryDragon - Maybe there may be tax increases, but there will also be massive spending cuts. There will have to be - every tax I can think of (with the possible exception of the income tax, though that's arguable) is based on taxing consumption, and you and I both know that's falling fast."

    Very salient point! Any tax increases would be hugely outweighed by the lack of spending (tax generation). There's no way Ritter would promote taxes or approve them because beginning next year he'll have to start his re-election campaign. The failure of almost all tax increases to pass in November is a clear statement by the people about their mood for raising taxes in this environment.

  • December 19, 2008

    2:56 p.m.

    Suggest removal

    fishheadsoup writes:

    let's start with corrections. we lock up way to many victemless crime "criminals" on petty drug charges with out of whack mandatory minimums. over 20% of our bloated prison population are minor drug offenses. each inmate costs us about 30 grand to feed, house and guard - maybe a bit more. conservatively, we spend over 500 million a year on non-violent, drug offenders in the corrections system. it's a joke.

    there's a start. don't even need to do surgey on that one.

  • December 19, 2008

    3:02 p.m.

    Suggest removal

    pdt2139 writes:

    What? We have a shortfall. What about the DNC and all the money it brought in?

  • December 19, 2008

    3:55 p.m.

    Suggest removal

    SanctuaryCity writes:

    The illegals took it & ran.

    Maybe the sanctuary state will wake up

  • December 19, 2008

    4:34 p.m.

    Suggest removal

    coarizona writes:

    Go online and read the LAT regarding the California state budget problems. We are in the position to learn and save our own a$$e$. Dump the sanctuary city status also, it just adds to the problem. The last people who should be taking a salary cut is the fire/police department. Time for our government leaders to decrease their salaries. Oh, thats right the senate just got a pay increase today. Makes me ill.

  • December 20, 2008

    8:16 a.m.

    Suggest removal

    socrates writes:

    Slouching towards Boulder, Tiero, etc... - there is no significant savings in any of your proposals. You want to cut spending - ok.

    Here's how you do it: Cut medicaid. Cut services for disabled people. Cut services for the elderly. Cut higher education spending and cut K-12 (except you can't since that's in the constitution, so take that off the list). That's where the money is. So, since you're such a genius - you pick it. Who do YOU want to throw under the bus?

    I would suggest anyone who wants to rant about government spending - pick the people you will sacrifice from the list above.

    None of this stuff is secret. You can go to www.leg.state.co.us - go to the link for the joint budget committee and look at the budget. Pick your victims.

    But avoid the vapid generalities and ideological rants. They're tiresome and idiotic.

  • December 20, 2008

    6 p.m.

    Suggest removal

    SICKANDTIRED74 writes:

    God forbid Colorado would think of releasing any prisoners... we all know the state is making way too much money off the prison business to consider other forms of rehabilitation and correction for non-violent offenders!!

  • December 20, 2008

    6:10 p.m.

    Suggest removal

    pfwag writes:

    The recession is bringing out some serious faults in the budget. While they are moaning about a needing to trim $600M, they are ignoring the elephant in the budget. The Governor and Legislature won't tell you this but illegal immigration in Colorado is costing Colorado taxpayers and wage earners $2-3 BILLION every year.

    What they, and the RMN, did not mention and what neither will tell taxpayers:

    * The education costs for illegal aliens and their children is about $900 million per year.

    * Illegal alien births cost taxpayers $40 million per year.

    * Illegal aliens on Medicaid program cost $65 million per year.

    * Incarcerating illegal immigrants in Colorado costs Colorado taxpayers $62 million per year. (Other estimates put it at $110M/year.)

    And those are just SOME of the direct cost. There are also numerous indirect costs.

    The figures come from a private study, "A Compendium of Illegal Immigration Data" of March 28, 2006 by Donald Rice. The study also estimates an additional economic loss to Colorado workers of nearly $2 BILLION per year. This loss is caused by the downward drag of illegal labor distorting the laws of supply and demand in the job market.

    You can find the cost details posted at http://www.cohd23.com/Immigration.html

    While they are figuring out how to cut the budget and/or raise your taxes, has anybody asked taxpayers how they feel about paying for Colorado's internal foreign aide?

    Socrates, you didn't make a complete list of who we need to throw under the bus. In fact, did you know that we could solve the entire budget deficit by giving each illegal alien in Colorado $2,500 and a one way ticket to their home county? In fact we would even save money and eliminate most of the deficit if we would PAY half of what it is costing us to educate them K-12 here if they would return to their home countries and be educated there.

    And nobody got thrown under the bus.

  • December 20, 2008

    6:23 p.m.

    Suggest removal

    westernlady writes:

    It is illogical and irresponsible to spend any money for services for illegal aliens when services to lawful US citizens are being cut. We spend money on free legal services for criminals while legal aid tells lawful US citizens they're too inundated to assist them.

    Whose state is this?!

  • December 23, 2008

    8:12 a.m.

    Suggest removal

    justiceisblind writes:

    DOC's projected 2009 budget shows 13 million dollars in profit made off of canteen services alone. That is money being made off of the families of offenders. None of that money has gone to ANY rehabilitation programs in prison or assistance for parolees once they are out. My $6,000 spent for 20 months could have paid for my husband to be in community corrections and paid for mental health assistance. Being mentally ill or a drug addict is not a crime, it's an illness. Two-thirds of the people in prison fall under the categories of property crime or drug crimes. Put more money into community corrections and get these people the help they need to become productive TAX PAYING citizens. Community corrections has been proven to be successful in lowering recidivism. Prison is only successful in creating repeat offenders. DOC's own statistics show what a dismal failure parole in Colorado is!

  • December 24, 2008

    3:08 p.m.

    Suggest removal

    tateman writes:

    Amazing how a lawyer has no idea about budgets and yet is always willing to spend our money in rediculous ways. I can not believe he hired 3000 new employees in the government. The many promises he gave to our Latino community have never been seen and I hope my Hispanic friends will vote against any lawyer or democrat in 2010.
    we have been fooled to long and it's time for the truth by a leader and party. They have gotten us all in deep trouble and talk will not get us out.

    I will NOT VOTE For Ritter or an more dmocrats in this state.

  • December 24, 2008

    3:27 p.m.

    Suggest removal

    tateman writes:

    I found an organization that is going stand up against things like taking away our freedom and abuse by the liberal media. I was told they are rebuilding their site since they have had such a large sign up of support. In case anyone is interested it is preservationofliberty.com and I think they might be on a good track. Just wanted to let everyone know. Our Latino group advised me by phone a few minutes ago and we are all getting involved. Ths is a great country if we don't let people ruin it. I came here and now a citizen and worked hard to become a citizen. I don't want to see America not be the world leader and I was misled for a few years that some people wanted to help the minority and now I know different. I believe a conservative system is stronger and not always looking for things to complain about and instead working hard to keep us safe and give our families a good opportunity in America. If we can stop the big spenders in our government we might have a chance. Never will I vote for another lawyer and probably never will I vote for the Liberal party as they just lie to us to get our vote. Happy Holidays and Merry Christmas to all.