Wednesday, April 2, 2008

Bipartisan Effort to Create Rainy Day Fund Breaks Down After Ritter Says "No"

A bipartisan effort to create and fund a larger financial reserve for the state, conducted against the backdrop of the Senate's debate over the budget, ran into a big roadblock Wednesday after Gov. Bill Ritter's office said he opposed the compromise proposal.

Republican senators, including Greg Brophy of Wray and Josh Penry of Fruita, approached Senate Democrats about shifting about $30 million into a fund to cope with the possible effects of economic recession.

According to a Rocky Mountain News report, talks between the two parties hit a snag after Ritter's spokesman said the governor did not favor the particular cuts suggested as a way to get the $30 million.

"The budget amendments proposed by Republican senators to create a rainy day fund would have cut into public safety, prisons, criminal justice, health care, education and clean energy," Ritter spokesman Evan Dreyer said in a statement sent to Colorado Capitol Journal and other media entities. "Gov. Ritter is committed to saving taxpayer dollars and running state government as cost-effectively as possible - especially when the economy is in a precarious condition. But those were bad ideas."

The Senate later passed HB 1375, the so-called "long bill," on second reading after fending off a number of Republican amendments.

The Rocky article quotes Penry as saying discussions about how to fund a "rainy day" reserve will continue through third reading debate tomorrow.

In fact, according to another Rocky article posted this evening, Ritter will announce Thursday, along with a group of bipartisan legislators, a bill that taps into the state's share of federal mineral leasing revenue to create a rainy-day fund.

According to the article, the state's share of those revenues - about $671 million over the next ten years - will be used to increase higher education capital funding, build or improve roads, and create the new reserve.

Colorado does currently save some money. By law, the state must balance its budget each year and also has two reserve funds already in place.

The Taxpayers Bill of Rights requires the legislature to set aside three percent of revenues each year for "declared emergencies." However, TABOR specifies that economic conditions and revenue shortfalls do not qualify as "declared emergencies" justifying use of the funds in the reserve it created.

The other set-aside is the so-called "statutory reserve," which obligates the General Assembly to save four percent of annual appropriations. This fund is replenished each year because, practically speaking, it operates as a short-term cash kitty.

In addition to the two reserves already in place, the so-called Arveschoug-Bird law limits growth in general fund spending to a maximum of six percent per year.

According to a 2002 report by the Center on Budget and Policy Priorities, Colorado is one of nine states that lack a reserve specifically created to help the state weather economic recession and associated revenue declines.

More recent data gathered by the same organization indicates that Colorado, Kansas, Arkansas and Montana are the only four states that have no money set aside in a "rainy day" fund.