Ritter Tells Legislators His Ideas For Cuts

Gov. Bill Ritter's budget director told the Joint Budget Committee today that the administration thinks most of the state's expected $600 million budget shortfall this fiscal year can be closed by moving money around.

Todd Saliman said the General Assembly should authorize $289.7 million in diversions and transfers from cash funds to the state's general fund and tap Colorado's emergency reserve for $134.1 million.

Among the cash fund transfers would be $11.9 million in casino revenues.

The remaining $201.1 million needed to close the gap would come from spending cuts.

"The governor's plan is to try to fairly distribute the pain across the entire state government," Saliman said in his comments to the committee, which will recommend measures needed to balance the state's budget to the entire legislature later in the session.

Ritter's office said that most of the spending cuts would come from executive agencies and programs but that more than $34 million should be taken from the state's contribution to the Police and Fire Pension Association of Colorado.

Included among the programs facing spending reductions or elimination is the full-day kindergarten program authorized by the General Assembly last year, which is one of the governor's major educational priorities.

Saliman said that the legislature should eliminate $34.5 million dedicated this year to construction projects relating to full-day kindergarten services.

Other cuts affecting public education would include, if Ritter's suggestions are taken, $4.9 million from charter school construction, $1.8 million from payments to school districts for military dependent enrollment, $1 million from grants that finance alternative teacher compensation plans, and $973,000 from grants to finance summer school programs.

Higher education would take a $30 million hit, which Ritter's office said would nevertheless result in a $90 million increase in spending on colleges and universities since the beginning of FY 2007.

The governor's goal of increasing health insurance coverage to low-income children would suffer a significant setback as well, as Saliman told the committee that Ritter's plan would drop the planned expansion of Children’s Basic Health Plan (CHP) eligibility from 205 percent of the federal poverty level to 225 percent of that benchmark for children and pregnant women. This cut would save $3.1 million this year and $13.6 million next year, according to a press release issued by the governor's office.

The balancing plan also would reduce various health care provider rates, saving $21.7 million.

Ritter will also ask the legislature to cap the amount of sales tax revenues businesses can keep to cover expenses at $5,000. Under current law vendors are allowed to retain 3.5% of sales tax revenues. Saliman said this change would affect 1.9% of the state's businesses and save the general fund $12.8 million.

The governor on Oct. 1 instituted a limited executive branch hiring freeze and suspended ongoing construction projects financed by the general fund. The governor's office says those actions have thus far saved the state $62.5 million.

Saliman said the governor would freeze an additional 64 construction projects, saving an additional $43.4 million.

The budget director also said that Ritter suggests avoidance of reductions in the state's emergency reserve and cancellation of diversions and transfers from cash funds if Congress enacts a federal financial bailout plan for states in the coming months.

Ritter acknowledged today that the choices available to lawmakers are less than ideal.

“My top priorities will be protecting life, safety and public health, ensuring that we are able to meet our safety-net obligations, and that we try to preserve much of the progress we’ve made in areas such as higher education the past two years,” Ritter said. “There will be no more challenging task this legislative session than responsibly, thoughtfully and collectively balancing the budget. Colorado’s budget has always been frugal and tight, and our options are much more limited than during the last recession."

Ritter's recommendations for closing the shortfall expected in FY 2009 are to be presented Jan. 23, according to a press release issued by the governor's office.

Senate GOP Crows Over 3Q Revenue Forecast

Republicans at the statehouse took the opportunity afforded by a somewhat pessimistic third quarter revenue forecast to criticize Democrats' budget policies today, knocking the majority party for launching a "runaway train of spending."

The GOP's main complaint is the loss of more than $200 million that would have gone to highways. A recent report from the Office of Legislative Council indicates that only about $28 million left over from last fiscal year will be available for that purpose this year.

"We tried and tried to get them to not spend every dime that was forecast," said Senate GOP leader Andy McElhany of Colorado Springs. "We saw the gathering storm of recession, but they didn't see a cloud on the horizon."

No spokesperson for the Democratic caucuses in the House or Senate was available to comment on the Republican legislators' accusations.

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.

Senate Beats Back GOP Effort to Disregard Increased Revenues Generated by Levy Freeze

Yesterday the Senate defeated a Republican amendment to a budget resolution that would have forced the legislature to disregard the revenues generated by the mill levy freeze approved by the General Assembly last year.

SJR 004 was a routine matter, one of the first steps taken by the legislature to begin writing a budget for 2008-2009.

However, Sen. Greg Brophy, R-Wray, introduced an amendment that would direct the legislature to disregard increased tax revenues generated by the mill levy freeze enacted by SB07-199. Brophy's rationale was that the constitutional validity of the mill levy freeze bill is being litigated.

His amendment went down, 21-13. All Democrats opposed it, as did Republican Steve Johnson of Fort Collins. The "no" votes were from the other Republicans in the chamber, with the exception of Steve Ward of Littleton. Ward, a colonel in the U.S. Marine Corps Reserve, is on active duty in Iraq.