_ Governor Hickenlooper recently released his budget for fiscal year 2013. The headline in the
Denver Business Journal was “Hickenlooper's budget plan calls for more funds for eco-devo, less for education.” As a former economic development professional, I was amused at “eco-devo.” It was the first time I ever saw that abbreviation! Cuts to education are less amusing, but were predictable.
The Hick is actually talking jobs with his focus on economic development. Reducing regulation doesn’t create jobs. Cutting taxes absent a requirement to create jobs doesn’t do the job. But economic developers have always been focused on creating jobs. They even track how many jobs are created and retained as the result of their activities by asking their clients to report how money was used, and how many jobs were impacted.
The fights over the budget will likely be extreme. Most members of my party are going to be aghast at the thought of handing out “corporate welfare” checks while cutting education funding by $160 per child. In my opinion, it is the right thing to do in this environment. The economy is still struggling, and people are still losing their homes to foreclosure. We need to focus on creating jobs, and getting people back to work. If we get Colorado back to work, tax revenues will increase, and we’ll be able to stop the cycle of cuts to education. At least, that’s Hickenlooper’s plan.
So, here’s the plan (Warning policy wonkishness ahead):
The budget for economic development increases by 60% over current budgets. Government is going to do its part to create jobs. In order to implement the economic development plan, the office of economic development is going to hire 12 – 15 new workers to recruit companies and to work with local economic groups on implementing the strategies.
$6-million is directed toward companies that create at least 20 jobs that pay more than 110% of the average wage in the county in which they are located. The reward for giving 20 people jobs that are higher paying than the average existing jobs is the company gets to keep half of the federal Social Security and Medicare taxes they would otherwise be required to pay on those jobs. Now, I know that the federal government is not going to forgive those taxes because it messes up their actuarial tables. The state will have to fill that gap and make the federal payments on behalf of the companies.
In Mesa County, the average weekly wage, as measured on 12/31/2010, was $800 - $899. The national average weekly wage for the same period was $971. Under this plan, companies in Mesa County creating at least 20 new jobs would be creating them at $880 - $989. At the high end, Mesa County workers would be getting 102% of the national average, not 110% of the national average. That’s because wages in Mesa County are already relatively low.
The budget for K-12 is decreased by $89-million. Those cuts that School District 51 tried to warn voters about are now on their door step. They are going to be hit by a double whammy-- Lower levels of funding from the state, and lower levels of funding from property taxes. (Property taxes will decrease because property values have decreased.) Parents of kids in K-12 are not going to be happy with the cuts in their local schools, and may very well wish they had voted differently on 3B.
The budget for higher education is decreased by $60-million, absent rounding--the exact same amount as is going into economic development. Half of the $60-million will come from decreases in direct payments to universities and colleges, with the other half coming from decreases in financial aid. This is the truly sad trade-off. Tuition will increase because less money is going into higher education, but kids won’t find a corresponding increase in financial aid. That means they will have to take out more loans or drop out of school until they can earn enough money to pay for the increased tuition. Lots of drop outs never return, thus the outlook for the future just got dimmer.
The drivers for required budget cuts are federal programs that can’t be cut. People, who have lost jobs, are signing up for Medicaid. Medicaid requires the state to match federal funding. The state has 281,000 new people on Medicaid. The Affordable Care Act does not allow states to reduce eligibility standards if they want to continue to receive Medicaid funding. Colorado is trying to control the costs of these programs by increasing co-pays, enrollment fees, and insurance premiums. There are also incentives for Medicaid recipients to use primary care physicians instead of the emergency room—something Mesa County has already tried to do with its wonderful Marillac Clinic.
Finally, the governor’s budget asks for $3.1-million to allow it to develop a comprehensive energy policy. My opinion is that the governor needs to spend all of that money getting people to move away from fossil fuels, and toward renewable energy sources. Homework
Denver Business Journal Story About Budget Comparison of wages at the end of 2010 Hickenlooper's Letter to the Legislature 
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