15 February 2011

Hick's Budget

Governor Hickenlooper has released his first state budget proposal. Some notable points:

* "Sixty-three percent of this budget is handled by less than 900 [state] employees." (For example K-12 and Medicaid.)

* K-12 is cut $375 million through $257 million in reduced general fund support and a decision not to backfill $117 million of local funding declines due to falling property values. The impact is $497 per student. It isn't clear what loophole in school finance laws in Colorado, which generally mandate no K-12 categorial spending cuts, is involved to authorize this step. It may be that there is a negative inflation adjustment and that some K-12 education funding is not "categorial."

* State funding of higher ed is reduced by $36 million from $555 million to $519 million. Higher education is also losing $89 million of federal stimulus funds for a total cut of $125 million, which is $877 per college student.

* Closing Fort Lyon Correctional Facility with 485 elderly prisoners who will be relocated that cuts 149 jobs and $3 million a year.

* Closing Closing Bonny Lake State Park near Burlington, Sweitzer Lake State Park near Delta, Harvey Gap State Park near Rifle and Paonia State Park near Paonia.

* The budget increases payroll deductions for PERA (public employees retirement) by 2.5 percentage points of take home pay saving $15.7 million on top of prior COLA-less years with prior increases in PERA contributions. Furloughs, which saved little general fund money, will not be repeated this year.

* Other general fund cuts of $376 million and 114 jobs are made.

* $42.3 million in revenues and cash fund transfers are used.

Colorado is in a very hard spot, with a $1 billion shortfall in a $7 billion general fund budget. It isn't even obvious that this round of cuts is big enough to balance the budget and this is on top of multiple rounds of past deep budget cuts in the Great Recession.

TABOR limits the availablity of tax increases to make up the shortfall without a vote of the people which is always too late for the current year's budget.

Much of state government is financed with users fees or other dedictated funds so cuts to those programs don't solve the state's general fund deficit.

Prison sentences already imposed make it hard to cut the corrections budget in the short term.

Medicaid already pays providers considerably less than market rates or the cost of the services provided and Medicaid beneficiaries have great difficulty finding providers willing to take new patients.

Colorado's funding for both K-12 and higher education is very near the bottom nationally. The state constitution puts limits on K-12 education cuts.

Medicaid, higher education, K-12 education and the corrections budget are the dominant components of the state general fund budget.

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