Gov. Ritter's budget plan for '10-11 makes best of 'terrible situation'
Gov. Bill Ritter presented his budget for fiscal year 2010-11 to members of the Joint Budget Committee today.
He is requesting a $7.2 billion General Fund budget for fiscal year 2010-2011, which begins on July 1, 2010. This budget closes a $1 billion shortfall between projected General Fund revenues and expenditures and comes on the heels of a $2 billion shortfall in fiscal year 2009-10.
"Governor Ritter is making the best of a terrible situation," said Wade Buchanan, president of the Bell Policy Center. "He has taken a measured and balanced approach in crafting it. While there are some things in it that we do not like, we understand the need to make hard choices given the difficult economic conditions."
On the plus side, he protected critical programs such as preschool and full-day kindergarten and for the first time proposed reducing, suspending or eliminating tax credits and exemptions. However, some of the proposals may make it tougher for low-income Coloradans to find medical care and to afford college.
Gov. Ritter proposed $708.6 million in net General Fund cuts, $153.6 million in additional revenues and $158.1 million dedicated to reserves. Some details of the budget were released last week, but today's briefing contained more details on his plan to balance the budget, including:
- $260 million reduction in K-12 education, which includes $223 million in General Fund cuts.
- $131.8 million in additional revenues by eliminating or suspending 13 tax credits and exemptions.
- $93.8 million in Medicaid savings by shifting payments in the final four weeks of fiscal year 2010-11 into fiscal year 2011-12. Using this technique means that Medicaid payments to medical providers will be delayed four weeks.
- $27.9 million in Medicaid reductions generated by reducing Medicaid provider rates by 1 percent, extending the freeze on per diem rates for nursing facilities, and reducing rates for Behavioral Health Organizations for Medicaid mental health services by 2 percent.
- $20.1 million reduction in state employee compensation by requiring all state employees participating in PERA to contribute an additional 2.5 percent to their pension plan with a corresponding reduction in the state's contribution.
A total of $296 million in federal stimulus funds (from the American Recovery and Reinvestment Act, or ARRA) will be used to help make up for General Fund cuts. These include $192 million from the enhanced federal match for Medicaid and almost $95 million in education funds to make up for cuts in higher education. Over the past three fiscal years, more than $1.5 billion in ARRA funds have been used to help balance the state's budget.
The governor's budget protects some critical services that we have long argued promote opportunity, such as maintaining slots for full-day kindergarten and Colorado's preschool program, maintaining funding for need-based-aid for college students and protecting the Children's Basic Health Plan from enrollment freezes. Gov. Ritter also maintained funding for anti-recidivism programs, which should help slow the growth in Colorado's prison population.
At the same time, increases in tuition could price some students out of college, and cuts in provider rates could make it difficult for low-income Coloradans to find medical facilities willing to serve them. However, we understand that, given the severe economic downturn, there just aren't enough revenues to meet our needs.
"While state revenues are at an all-time low as a percentage of the state's economy, demand is at an all-time high for everything from health care for the uninsured to community college classes for the unemployed," said Buchanan.
In fact, Medicaid caseloads are projected to increase by 11 percent, growing to 567,483 clients in fiscal year 2010-11. This is a 45 percent increase over the pre-recession levels of fiscal year 2007-08.
Community colleges and four-year colleges and universities are experiencing double-digit increases in enrollments as many people return to school to improve their job skills.
"Colorado's state government has never been asked to do so much with so little," said Buchanan.
We are particularly pleased that the governor is proposing to reduce or eliminate some tax credits and exemptions rather than relying solely on cutting expenditures. These credits and exemptions should be treated in the same way as expenditures. If something is still a high priority and accomplishes its goals, we should keep it. If it is not a priority or doesn't work, we should get rid of it. In this economy everything should be on the table.
The governor proposed to reduce and suspend for three years the Enterprise Zone Tax Credit. The Bell released a study earlier this year that summarized extensive research showing that enterprise zones have been ineffective at encouraging economic development and job growth. This credit might have been a good idea at one time, but it is not working and should be cut.
This is the first time the governor proposed significant cuts in funding public schools. Like so many other cuts proposed over the last several years, this could cause long-term damage. However, it demonstrates the extent of the problem we face.
Long-term we face a serious structural problem. Even when we recover from the recession, state revenues are not projected to get back to pre-recession levels for several years. In fact, they fall below these levels when adjusted for inflation and population. They will not be adequate to support critical public systems such as our schools and community colleges, our roads, bridges and public transit systems and our health care services for low-income Coloradans.
We must ultimately confront this fact and take the action required to meet the needs of a 21st century economy.