Commentary in Post says declining revenues will harm Colorado
Emailed to supporters July 20, 2009
Commentary in Post
says declining revenues
will harm Colorado
On Sunday, The Denver Post published a commentary by Wade Buchanan, Chris Watney of the Colorado Children's Campaign and Carol Hedges of the Colorado Fiscal Policy Institute. We wanted to share it, in case you missed it.
Colorado's budget: Untie state's hands
By Wade Buchanan, Chris Watney and Carol Hedges
This year, Colorado's General Fund revenues will hit their lowest point in recent history, and the implications are dire for the state and its residents.
Revenues will fall to 3.2 percent of the overall state economy. That's 24 percent below the average for the last 28 years, and 11 percent below the lowest point reached in the recession of 2001-03.
Unprecedented decreases in revenue is one finding in our new report, Looking Forward: Colorado's Fiscal Prospects Amid a Financial Crisis. The report looks at recent trends and calculates the costs of maintaining current state services through fiscal year 2012-13. It also projects the amount of revenues necessary to pay for them.
These revenues are the primary resources supporting public systems that underpin our economy and quality of life: schools, colleges and universities; courts and public safety; health care for low-income children; and assistance to families facing hard times.
As revenues erode, so does our ability to maintain these critical public structures. That means we will not be able to keep pace with the needs of a growing state.
The fiscal crisis facing our state is not just due to a recession. There is a long-term structural mismatch between the cost of services and revenues that are projected to grow much more slowly. With each economic downturn, revenues have hit new lows relative to the economy (4.1 percent in 1992, 3.6 percent in 2002, 3.2 percent in 2009), and each recovery has been less robust.
Nor is the crisis due to excessive growth in government. Public systems and services have grown roughly at the pace of the overall economy.
The problem is erosion over time. Total general fund revenues are not expected to return to 2007's pre-recession levels until 2011-12. When adjusted for inflation however, revenues do not return to pre-recession levels through our study period, ending in 2012-13.
But it is worse than that. We adjusted 2007 appropriations for increased numbers of students, prisoners and inflation to see what level of future spending would be necessary to maintain 2007 levels of service. The result? Colorado is falling behind. The state will come up $1.3 billion short this year and next before rising economic growth cuts our shortfall to $668 million in 2013.
In the past, the tangled web of statutory and constitutional provisions such as TABOR, the Arveschoug-Bird appropriations formula, the Gallagher Amendment and Amendment 23 have undermined our fiscal strength and prevented investments in our future. TABOR and other provisions remain problematic to long-term stability, but for the foreseeable future the crisis is centered squarely on our revenue system.
Surviving the current fiscal crisis will require tough decisions, but we can't just cut our way out of this. That would require permanently eliminating the equivalent of an entire state department, i.e., all of higher education, all of human services or all of corrections. Cuts like that would make it all but impossible to meet the needs of a growing state. We need to work on both sides of the equation, on state revenues as well as state spending.
Colorado is headed down a path likely to take us backwards, harming our state and our economy. Is that where Coloradans want to go?
Wade Buchanan is president of the Bell Policy Center; Chris Watney is interim president of the Colorado Children's Campaign; and Carol Hedges is an analyst with the Colorado Fiscal Policy Institute.
(Editor's note: This guest commentary is part of a point-counterpoint about Colorado's budget crisis.)