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Study: Recovery won’t help budget

Colorado’s budget problems will persist for years even after the economy bounces back, University of Denver researchers have concluded.

Spending on K-12 education and Medicaid will continue to grow faster than state revenues for the next decade and a half, squeezing the amount of money available for other programs, including higher education and human services. And the state share of school costs will continue to rise.

A summary of the preliminary report from the DU Center for Colorado’s Economic Future was presented to an audience of legislators, Capitol staff, lobbyists, reporters and others Friday afternoon. The report was commissioned by the 2010 legislature, and the estimated $500,000 cost paid by DU and nine foundations.

“The state general fund is increasingly structurally unbalanced and unsustainable,” said Charlie Brown, director of the center.

Following the 90-minute session, Sen. Rollie Heath, D-Boulder, told reporters he will make an announcement Monday on a proposed plan to deal with the state’s financial challenges. Heath, who was a major force in getting the DU study launched, wouldn’t provide details except to say he’s not going to propose a resolution for legislators to refer to voters.

Heath has been a leading proponent of state fiscal reform and the need to modernize the state’s revenue system.

In a broad sense, the DU report provided no surprises about the challenges facing the general fund, which is the state’s main “checking account” supported by income and sales taxes. (Read the summary report here.)

Many state officials have noted the growing pressure that school spending and Medicaid place on other programs and on the overall state budget, which must be balanced annually and which also is restricted by revenue limits in the state constitution.

Regarding school finance, Brown said, “There’s got to be a redefinition of the overall financial partnership” between school districts and the state, because constitutional limitations have depressed property tax revenues and shifted school costs to the state. Or, Brown said, policymakers “need to be thinking of a whole new mechanism” to pay for schools.

But the DU report does provide a longer view of the problem – making projections out to the 2024-25 budget year – than do the shorter-term projections typically made by legislative and executive branch economists.

Click on graphic to enlarge.

The document released Friday is only a first installment of the project’s work. Brown said an expanded report will be available in a few weeks and that the full analysis won’t be ready until June.

It also appears that the study won’t be able to take a detailed look at the whole state budget, including transportation funding, or at local government finance.

“This turned into a much bigger job that any of us anticipated,” said Brown. “It became infinitely more complicated the more they got into it,” Heath said.

The DU project isn’t intended to make specific action recommendations to policymakers, such as constitutional change or tax increases.

Asked during the meeting for suggestions, Brown jokingly replied, “Invade Wyoming.” That’s an old quip that’s been used in lots of contexts, including meetings of last year’s higher education strategic planning panel. Wyoming is in the enviable position of having relatively high mineral revenues and low population.

It appeared that about a quarter of the legislature’s 100 members were in the audience Friday, including only a handful of Republicans.

Later in the day, Senate Minority Leader Mike Kopp, R-Littleton, issued a statement saying, “I think the DU study has it right where it stated that we can no longer ignore the budgetary problems we face or pass the work off for a later time. This is why Senate Republicans have introduced legislation to reduce the cost, size and complexity of government by establishing core functions and a clear set of priorities.”

Conclusions similar to those in the DU report were reached in a recent report by the Buechner Institute of Governance at the School of Public Affairs, University of Colorado Denver.

“Without raising revenues, it is becoming increasingly clear that we will not be able to maintain even current service levels. Soon, the citizens of Colorado will have to decide what they want from their state government and whether they are willing to pay for it,” that report concludes. You can find an executive summary and the full report here.

Heath also cited the UCD report when teasing his Monday announcement.