Between March 15 and March 21, the six members of the Joint Budget Committee — the group of lawmakers in charge of drafting Colorado's spending plan — found themselves with a problem.
With just over a week before the introduction of the state's 2024-25 budget, new revenue forecasts showed they had a hole to plug, with estimates ranging from $160 million to $225 million, depending on which forecast was used.
Unlike the federal government, Colorado's budget drafters must come up with a balanced budget.
That, in fact, is the only constitutional mandate that the Colorado General Assembly is required to accomplish each year.
The problem, JBC Vice Chair Sen. Rachel Zenzinger, D-Arvada, said, was something the committee had not had to contend with before — a difference between what the U.S. Census said Colorado's population was versus what the state demographer estimated.
For purposes of crafting the state budget, the Joint Budget Committee has, in the past, used the state demographer's information, in part because that information was available sooner.
But, technically, the JBC is required to use the federal census data.
It never made much of a difference before, as the numbers were usually pretty close, Zenzinger said.
Not this year, however.
The U.S. Census estimated Colorado's population lower than the state demographer's numbers.
That matters because the census is part of what the Taxpayer's Bill of Rights revenue cap is based on, and with a lower population estimate, that meant a reduction in the TABOR revenue cap of about $70 million or so.
The cap limits just how much general fund lawmakers have available, and reducing it by $70 million offered a larger set of complications.
A $170 million budget hole
The news that revenues would make for a tight budget year wasn't unexpected.
And even with the hole, the JBC went with the more optimistic forecast from the governor's economists. Even so, that put the anticipated shortfall — unless budget writers decided to tap into the state reserve, which they didn't want to do — at around $170 million.
"I've never had to find those kinds of funds before," said Rep. Rick Taggart, R-Grand Junction.
It was the assurances from his JBC colleagues that they would find a way to fill the hole that made the situation less frightening, Taggart said.
The committee spent its longest hours of the week on March 21 coming up with a variety of cash funds and one-time transfers to cover the hole.
They wrapped up their work around 1:30 a.m. on Friday morning.
Then the Long Appropriations Bill — which contains the next state budget — headed off to the printers.
It's expected to be officially introduced sometime this week.
One-time transfers and the ARPA swap
As budget writers tinkered and made modifications, the term "one-time only" began to show up a lot in the decisions.
Indeed, the committee made at least 20 decisions on budget cuts and transfers of cash funds into the state budget.
One of those decisions was making what's known as the American Rescue Plan Act (ARPA) swap.
In the wake of COVID-19, the federal government made $195 billion available to state governments to help them deal with the effects of the pandemic. That was intended to help with economic recovery caused by the emergency, support public health, replace lost public sector revenue, invest in water, sewer and broadband infrastructure and ensure premium pay for essential workers.
Colorado's share was $3.8 billion.
Under the rules, those dollars must be obligated by Dec. 31, 2024 and spent by Dec. 31, 2026.
But the federal government put out an interim rule last November, saying whatever hadn't been obligated could be spent in other areas.
A JBC staff analysis said that out of Colorado's $3.8 billion, about $3.68 billion had been allocated through transfers and appropriations to state agencies.
The governor's office proposed a "swap" back in January: use some of those ARPA dollars — up to $1.5 billion — for personal services lines in the budget for 2023-24 and the first half of the 2024-25 budget year, instead of using general fund dollars.
That largely would apply to the agencies that had programs funded with ARPA dollars, according to Sen. Barbara Kirkmeyer, R-Weld County.
"We had enough personal services" funding available to make it work, she told Colorado Politics.
That would allow the state to use up those dollars by the Dec. 31, 2024 deadline. About $700 million still sits in agencies that they expect to spend by Dec. 31, 2024, she said. That swap also gave the agencies "roll forward" flexibility that allows those dollars to be spent by the final deadline in 2026.
Taggart, the Grand Junction Republican, told reporters last week that lots of states have taken a similar approach — they took all the ARPA dollars that weren't obligated and swapped them back into a personal services line in each department that received those dollars.
Zenzinger said hundreds of bills contained the ARPA funding. When the federal government changed the criteria, "we realized those implementation timelines mattered," and they had to go back to review those bills to make sure the money would be obligated this year and the programs could continue for as long as they have funding.
"We're not changing the intent of the bills or the programming," she said. If a bill is slated to expire this year, it will, she explained.
Last week, the JBC decided to use $197 million from those ARPA dollars to balance the 2024-25 budget, Kirkmeyer said.
One-time money, severance taxes and college tuition
The use of severance taxes to balance the budget is an old JBC trick that goes back at least 20 years, often to the dismay of rural lawmakers and the communities that rely on those dollars to mitigate the impact of oil and gas activity.
Kirkmeyer said the JBC swept $69 million in severance taxes to cover ongoing capital development projects that are already underway. About $44 million came from the severance tax operational account, she said.
The other $25 million came from the Department of Local Affairs energy and rural impact grants, which is also funded with severance tax money.
Coming up with additional money for capital construction was particularly important for Taggart, as the final year of an ongoing construction project for Colorado Mesa University fell just below the cutoff line, along with three other projects.
The last major item on the panel's list of decisions on funding state agencies was just how much they could put into public higher education. That decision was put off until after the March revenue forecast, according to JBC documents.
It was a mistake, according to Kirkmeyer, to leave higher education until the very end of their decision process.
"We did all the 'comebacks'" — the final requests from the governor's office and state agencies — first, and then whatever was left went to higher education.
"We should have voted on all the departments" and then dealt with the "comebacks," she said.
The decisions on higher education included the Colorado General Assembly's assumptions on tuition increases, how much general fund dollars could go into their budgets, and the amount of financial aid that would be available.
The JBC's decision on tuition came in the form of a 3% cap on tuition for resident and 4% for non-resident students. The recommendation from the General Assembly is not a mandate to the colleges and universities, although they have largely followed them for decades.
It's in the general fund where the institutions took the hit. The governor's office requested $48 million for both general fund increases and financial aid, while the institutions asked for $148 million.
The JBC decided on $56.3 million.
What was notable in the JBC staff analysis was a claim that the institutions' funding request, tied to inflation, was built on assuming a stable enrollment, that all costs are fixed, and that they must provide salary and benefits commensurate with the rest of state government.
That's not reality, the analysis said.
Enrollment is not stable, particularly for resident students; not all costs are fixed, particularly the institutions reliance on adjunct faculty; and, the institutions are not required to provide the same increase in salary and benefits as the rest of state government, the analysis said.
Most of the employees in higher education are not state employees, a move the institutions began making about 20 years ago in an effort to get as many of their classified — meaning state — positions out of the state system as possible.
The educational institutions had sought a 5.2% tuition increase, which is just shy of the increase approved for 2023-24. But the analysis said Colorado resident students already struggle with high tuition rates compared to the rest of the nation.
Medicare provider rate
The Medicaid provider rate also took a hit, something JBC members didn't enjoy.
The draft reduced the increase to those who provide Medicaid services from 2.5% to 2%.
Kirkmeyer wasn't happy.
"It was a big decision that saved about $19 million," she said.
Healthy Meals for All school lunch program
The news that Proposition FF funding didn't cover the actual costs of providing free lunches to Colorado school students came just as the JBC was grappling with how to cover everything else.
The budget panel ultimately decided to cover the $56 million shortfall for 2024-25 with the state education fund — which meant they would take money away from public education.
And that didn't sit well with Kirkmeyer.
"That was not supposed to happen," she said. "It's not my fault the people who pushed that referendum through didn't tell people the truth or didn't figure it right. They overspent and we told them, 'We're not doing that again.'"
"And they need to figure out how to stay within the funding they get," Kirkmeyer said.
The balancing acts
The March 15 forecast meant the JBC members had to go back and revisit a lot of their previous decisions, which led to the 20 cuts they made in the past week.
That, in turn, meant a lot of scaling back or not doing some things at all.
They also looked for ways to boost revenue, such as with the severance tax, and a way of reclassifying gaming and cigarette tax money that would free up room under the TABOR cap. That also included looking for a different fund source to cover gaps, such as using the state education fund for the Healthy Meals shortfall.
There were also placeholders for bills that required a reserve, and that meant reductions somewhere else, Zenzinger said.
Then there were these cuts and reductions.
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The JBC early on decided to expand the CHIP+ (the state's low-income health insurance program for kids) population to allow children to have access to autistic therapies, an addition to the CHIP+ program. "We thought it was a great idea," Zenzinger said. But they had to reverse that expansion decision.
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Local public health agencies asked for $12 million; the Department of Public Health & Environment requested $7 million. The $12 million was not extra funding, Zenzinger said. It's the current level the agencies are operating under, although that goes back to the COVID-19 pandemic. CDPHE, on the other hand, got nothing in the JBC's original decision. That was reduced to $10 million for the agencies, although CDPHE got $7 million.
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On dental provider rates, the JBC adopted a targeted adjustment based on an analysis. But then the last week happened — and that got cut. Members promised to revisit the matter next year.
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The JBC went back and forth on a Department of Public Safety grant program, a $10 million request from the department. The lawmakers ultimately settled at $3 million.
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Homecare workers would be slated for an increase to match the Denver minimum wage, which would cost $7 million. Too much, the JBC learned, so that got placed into a two-year, phased-in decision.
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Federally-qualified health centers were not recommended for any additional funding from the governor's office. The JBC decided to fund it with $7 million, but then scaled it back by $500,000.
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A Kirkmeyer/Zenzinger bill that directs the Department of Local Affairs to come up with a methodology for doing statewide, regional and local housing needs assessments will get its $15 million from the department's energy and rural impact grant program, instead of general fund money, which Kirkmeyer called an appropriate use of those dollars.
"Everyone's turning over every single stone we can," Taggart said. "Unfortunately, we won't be able to fund everything. This is not a year when you can depend on your priorities getting fully funded."
The Link LonkMarch 26, 2024 at 07:00AM
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Colorado lawmakers adopt cuts, hard choices as state faces $170 million budget shortfall - coloradopolitics.com
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