"Accounting gimmicks’ won’t cure state’s budget woes
“I sympathize with the tremendous pressure the Legislature is under to find ways to balance the budget while minimizing cuts in politically popular programs,” Coffman told a meeting of the Colorado Association of Ski Towns Friday. “However, if we continue to rely on accounting gimmicks to balance the budget, we run the risk of literally running out of cash to pay our bills.”
Coffman took issue with Gov. Bill Owens’ proposal of postponing the payday for state employees from the end of June to the beginning of July. Other proposals include changing the way Medicaid and income tax refunds are paid. What each idea has in common, Coffman said, is that no money is saved, but rather the day of reckoning is simply postponed.
“The problem,” said Snowmass town manager Mike Segrest, “is a lack of discipline in making spending meet revenues. It’s about not spending everything that comes in.”
Last year, Coffman pointed out, state revenues fell 13 percent, but the Legislature increased spending 7 percent anyway.
“I have no sympathy for the state Legislature,” said Segrest.
Coffman said part of the problem stems from House Bill 1414, in which the Legislature gave itself the authority each year to spend part of this year’s budget surplus on capital projects, then repay the money out of the following year’s budgets. That practice assumes the state will have budget surpluses every year, Coffman said, and lawmakers are learning the hard way this year that that’s not the case.
The Legislature’s habit of spending money it doesn’t yet have only exacerbates the problem, Coffman said.
“I am also concerned about the Legislature’s continued raids on cash and trust funds to meet the budget shortfall,” said Coffman, referring to funds dedicated to a specific purpose, such as the Major Medical Insurance Fund and the Tobacco Settlement Trust Fund.
That, coupled with myriad accounting gimmicks have driven the state’s credit rating down from “AA” to “AA-minus,” Coffman said, and if the Legislature actually goes through with its “accounting shell games,” that credit rating could drop even further – making it more expensive for the state to borrow money.
“When legislators beat their chests and say they cut government while not raising taxes, they aren’t telling us the entire story,” said Coffman.
“Rainy Day Fund’
Coffman joined University of Colorado Economics Professor Dr. Barry Poulson in proposing what he calls a “Rainy Day Fund.” The goal, he said, would be to stabilize the state’s budget in the face of economic downturns.
It could also keep the Legislature from raiding cash and trust funds, then increasing fees to offset it.
“Raiding cash funds is nothing short of a hidden tax increase because fees go up,” said Poulson.
The Rainy Day proposal calls for a reserve built up during good times to stabilize the budget when times get tough, Coffman said. The plan would create two funds:
– A budget stabilization fund, equal to 6 percent of the state’s revenues allowed under TABOR.
– An emergency reserve fund equal to 2 percent of state revenues, used to meet natural disasters.
To fill the funds more quickly, Coffman and Poulson proposed eliminating 19 special-interest TABOR refund credits the Legislature created the past few sessions. In the past two years, Coffman said, 32 percent of the TABOR refund went to special interests rather than back to the taxpayers.
While many local metro districts and governments have been successful in repealing TABOR’s taxing restrictions, Coffman said, the state government can expect no relief.
“I don’t see the confidence in state government that voters have in their local governments,” Coffman said.
Coffman said many of the state’s current economic woes can be traced to economic projections that assumed every year would be like March in a ski resort: The money would keep flowing, there would be no Mays or Octobers, and the new economy would never slow down.
“The governor’s desk was covered with economic projections based on the new economy, that technology would know no downturns,” said Coffman. “That bubble burst and it will haunt us for decades to come.”