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05/01/12 – Budget Problems Solved? Not Exactly

by Matt Sundeen

Senior Program Officer for Health Policy, The Colorado Trust
Matt Sundeen, Senior Program Officer for Health Policy
There were a lot of smiles, high fives and back slaps at the capitol last week after the Colorado General Assembly, with unprecedented levels of bi-partisanship, approved the state's $19 billion budget for the fiscal year that starts on July 1, 2012. Why was everyone so happy?

Mostly the joy came because after years of low revenues, budget shortfalls and bickering between Republicans and Democrats about where to cut general fund spending, lawmakers finally got a little bit of a respite. In March, the Governor's Office of State Planning and Budgeting (OSPB) released a revenue forecast that estimated the state had more than $520 million more to add to its coffers than expected for FY 2011-12 and FY 2012-13. Instead of the angry rhetoric that characterized budget debates of recent years, lawmakers quickly smoothed out differences, restored the senior property tax exemption that had been eliminated in years past, and merrily sent the long bill on to Governor Hickenlooper for his signature.

Great news! That means the state's budget crisis is over, right? Well, not so fast.

Although the March revenue forecast was welcomed news that defused some immediate budget controversies, it did not make up the entire budget shortfall for FY 2012-2013 and did little to solve Colorado's long-term fiscal problems. When Governor Hickenlooper proposed his budget last fall, it outlined actions to address a more than $679 million shortfall for FY 2012-2013, more than $156 million more than the amount of unexpected revenue added in March. Over the last two years, Colorado lawmakers have been forced to cut more than $900 million from state general fund programs, and according to the Colorado Center on Law and Policy, the state has lost more than $7 billion in cuts to state programs in the last five years.

The bad news is that none of the cuts to Colorado's general fund have put the state on the road to fiscal stability. Instead, revenue reductions combined with restrictive provisions in the state Constitution have concentrated state spending in just a handful of programs. According to the Center for Colorado's Economic Future at the University of Denver, absent any changes, over time Colorado's structural budget problem will worsen. By FY 2024, the state general fund will only be sufficient to cover K-12 education, corrections and Medicaid. By FY 2025, general fund revenues won't even cover those three.

So should we be happy that legislators, working in a split legislature during an election year, managed to agree to a budget bill without the acrimony and fighting of years past? Absolutely. But are Colorado's Budget problems solved? Not exactly.

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