Yesterday Governor Hickenlooper presented a budget totaling $7.2 billion to operate Colorado for the next fiscal year. When delivering his budget, Hickenlooper noted that Colorado families were struggling to keep their checkbooks in balance, and the state was no different. “As any family or business knows, the checkbook must be balanced and we can only spend the money we have.” This budget is balanced, primarily by $395 million in spending cuts in the General Fund.

The Governor laid out a three step approach to managing this and future budgets. The first step is to balance the budget. Step two is to effectively utilize existing resources. Toward that end the budget recommends eliminating some programs and “repurposing” some state parks—most of which are on the Western Slope. Step three is better planning so that there are not annual budget short-falls. That’s where an increased reserve comes in.

Balancing the budget is no easy task, as high unemployment has reduced revenues and increasing enrollment in Medicaid, as one example, is increasing mandatory expenses. For the past few years the federal government has filled some of the gap between revenues and expenses in Colorado, but that will not be the case in the future as the federal government looks to reducing its own spending.

Compounding the problems with balancing a budget are conflicting segments of the Colorado constitution that restrict revenue increases while directing specific spending to K-12 education, at the expense of higher education. As a result the state now funds 63% of K-12 spending, where local governments previously funded a majority of this expense. Continued backfilling by the state of local education expenses is not sustainable, and increasing fees for higher education is making it unaffordable to some Coloradans. Nevertheless, the governor shied away from recommending any increase in taxes to support education. A panel on higher education recommended tax hikes in support of education, but the governor is of the opinion that the taxpayer is not ready to support that strategy.

He does, however, plan to increase spending by about $18-million to promote Colorado’s “natural advantages” in order to enhance the possibility of a “sustained economic recovery.” The idea is to use the money to promote Colorado, especially tourism, in order to increase employment and thus state revenues. Given an increased focus on tourism, it is odd to see the governor recommending the “repurposing” of the Bonny Lake State Park, Sweitzer Lake State Park, Harvey Gap State Park and Paonia State Park into hunting or hiking lands.

The single largest portion of the General fund is allocated to K-12 education, with 41% of total allocations, or almost $3-billion. Health and Human Services is second, with 31%, or $2.3-billion. Judicial, Public Safety, and Corrections are at 14.8%, or a little over $1-billion. Colleges and Universities get 8.6%, or a little more than $600-million.

One of the notable changes is fully funding a 4% reserve for emergencies. This reserve had fallen to 2% in recent budgets, as part of the balancing act. Hickenlooper believes the higher level is more prudent so the state can better absorb negative changes in revenues and increases in caseloads.

And if all of this makes your head spin, a new forecast of revenue will be available around March 20, which will necessitate going through the balancing process all over again.

Homework

Hickenlooper Budget

Hickenlooper's Cover Letter to the JBC

December 2010 Revenue Forecast

Denver Post Story About Hickenlooper Budget

Bonny Lake State Park

Sweitzer Lake Stae Park

Harvey Gap State Park

Paonia State Park