Ritter's budget may need 'real flexibility'

State revenue for basic services could fall short by $101 million

By Ed Sealover, Rocky Mountain News

Published November 13, 2008 at 12:05 a.m.

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Gov. Bill Ritter will replace Mike Coffman, who is leaving to become the 6th Congressional District representative in January.

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Gov. Bill Ritter's lean budget for next year could get thinner by trimming things such as money to stimulate job creation and protect against future downturns.

Today, Ritter will present the legislature's Joint Budget Committee with a proposed spending plan for next fiscal year that projects the state economy will turn around and grow in 2009.

Even a smaller-than-usual increase in revenues would allow the state to avoid layoffs or service cutbacks and could free up money to go toward incentives for job creation and economic development, Ritter has said.

However, Ritter's plans could be sidetracked by the sputtering economy.

State government's revenues to provide basic services could come in $101 million under projections this year, members of the JBC were told Wednesday by staff director John Ziegler.

State law allows the general fund to grow only 6 percent over the past year's expenditures. If the general fund dips by $101 million this year, that would lower the amount the state can spend next year by $53.8 million below what Ritter is proposing, Ziegler said.

If that happens, Ritter would have to give up his plan to put money away for future economic downturns and for repairs to some of the state's worst-maintained bridges, his spokesman Evan Dreyer said.

"We know this is an extremely challenging and volatile economy," Dreyer said. "What all of this underscores is the need for real flexibility."

Ritter proposes to spend $19.2 billion next fiscal year - $7.9 billion of which goes into the general fund that covers most essential services.

But before they can approve next fiscal year's spending, the six legislators on the JBC must first balance the general fund for the budget year that ends June 30. The $101 million shortfall projected by the nonpartisan Legislative Council is blamed on lower- than-expected tax returns.

Ritter has taken steps to deal with that problem by freezing hiring and $85 million worth of construction projects for the rest of this fiscal year.

A key part of Ritter's next year budget proposal is setting aside $77 million in a "rainy day" fund that could be used to maintain essential services if economic forecasts get worse. If the economy improves, he has proposed putting $40 million of that money toward a permanent rainy day fund, $30 million to bridge repair and an additional $7 million to provide incentives for businesses to create jobs.

JBC members Wednesday downplayed the significance of the $54 million reduction in the spending cap the state might have next fiscal year. Rep. Jack Pommer, a Boulder Democrat and committee vice chairman, noted that past revenue forecasts have been off by far more than $54 million.

But Dreyer acknowledged that if the shortfall scenario plays out, Ritter would have to let go of his rainy day fund and put that money toward maintaining state services and current jobs.

"The number one priority is to maintain the integrity of the overall budget," Dreyer said after being told of the JBC discussion.

Several committee members said the prediction points out the need to be cautious on creating programs or expanding state hiring.

"Every successful business, you've got to either increase your revenues or decrease your expenses when the books don't balance," said Rep. Don Marostica, R-Loveland, noting that the state can do little to raise revenues. "And $54 million is a lot of money."

Nothing must be done immediately to close the gap. The JBC will get economic forecasts in mid-December and again in mid-March that it will use to set the budget. The legislature is expected to vote on the budget in late March or early April.

But the JBC, which over the past two years has been able to ride a positive economy to create programs is now uncertain about just what is available to the state.

"We're looking at something now that's ill-defined and fuzzy. All we know is that all the numbers that are out there are undoubtedly wrong," Sen.-elect Al White, R-Hayden, said. "You just keep it in the back of your mind until we get another revenue projection in December."

sealovere@RockyMountainNews.com or 303-954-5438

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