Budget news brighter, but long-term challenges persist

The Colorado General Assembly will take up the state's budget this week. The so-called Long Bill (HB 1335) started in the House on Monday and is expected to move to the Senate by the end of the week.

As a result of stronger economic growth, the state expects to receive $265 million more in General Fund revenue in fiscal year 2012-13 than was projected last fall when Gov. John Hickenlooper submitted his original budget request. As a result, the legislature's Joint Budget Committee restored many of the cuts the governor proposed in November.

While our short-term budget picture is brighter, long-term we continue to face significant challenges.

This increased revenue allowed the JBC to recommend fully funding the Senior and Disabled Veterans Property Tax Rebate ($98.5 million), maintain average per-pupil funding in K-12 education at $6,474, restore $30 million in proposed cuts to need-based financial aid for higher education and restore all but $5.8 million of a proposed $29 million cut to higher education operating budgets.

While this is good news and the budget for next fiscal year looks much better than it did when the process began, we should not be lulled into thinking that all is well. It is not. We still face a structural budget gap that is projected to continue to grow over time.

When adjusted for inflation and population growth, funding levels for fiscal year 2012-13 are substantially below fiscal year 2007-08, the last time General Fund revenues reached $7.7 billion and the high-water mark before the Great Recession hit Colorado.

General Fund revenues in FY 2012-13 will buy 18 percent less per person than they did in FY 2007-08. This means that in terms of purchasing power, the state has $311 less in General Funds per person to spend in FY 2012-13 than it did in FY2007-08.

We can see how this affects the ability of low- and middle-income families to pay for the costs of college. The amount of need-based financial aid has dropped from $107 million to $104 million between FY2008-09 and FY2012-13, even though there are now 39,000 more college students, an 18 percent increase over FY2008-09. In addition, tuition at most public colleges and universities has grown by about 9 percent per year over this period. Clearly, the amount of aid available per student is not keeping pace with the growth in the number of students or with increases in tuition. Again, level funding is better than the proposed cut. But by standing still, we continue to fall behind.

The budget maintains the College Opportunity Fund stipends at $1,860 for 30 credit hours at state schools but cuts operating funds to these same colleges and universities by $5.8 million. Again, better than the $29 million cut originally proposed – but still a cut.

Increasingly we are relying on tuition to fund higher education in Colorado, with families paying more and the state paying less. Over the last decade, students and their families have gone from paying 32 percent of all higher education costs through tuition to paying 66 percent today.

Although the average per pupil funding amount in K-12 education has not been cut from FY2011-12, we are still $1 billion, or 16 percent, below where we should be if the school finance formula had been funded as originally intended. Over the past three years the legislature has applied a "negative factor" to cut state aid to schools as a way to balance the budget. Although the legislature is not proposing to cut aid to schools this year, it cannot restore the cuts made over the past three years, either.

Members of the General Assembly and Gov. Hickenlooper have done a good job making tough decisions and allocating state revenues among many competing demands. While we do not agree with everything they did, we thank them for putting money back into need-based financial aid, restoring most of the proposed cuts to higher education, maintaining the average per-pupil spending in K-12 education and keeping funding for the counselor corps program in high schools at last year's levels.

However, until we come together as a state and address the structural budget gap, either through raising additional revenues, eliminating a significant number of state programs or some combination of the two, we will face many of these same choices again next year and the year after. In years when we have strong economic growth, it will be somewhat easier. But even in good times, we will be unable to fully fund the commitments we have made.

For more background information on long-term budget trends and what you can do, check out our Plain Talk video and companion materials. To learn more about the structural budget gap facing Colorado see this report by the Economic Futures group at Denver University and these background materials from the Colorado Nonprofit Association.

Finally, Gov. Hickenlooper's TBD process is just getting under way and there are a number of documents and videos that describe the current conditions in several policy areas and projections for the near future.