Colorado lawmakers warned to cut another $207.5M
DENVER, Colorado ” A new economic forecast predicting a deeper and longer recession in Colorado means state lawmakers will have to go back and cut another $207.5 million from this year’s budget.
The forecast by legislative economists released Friday shows that tax revenue is now expected to drop a total of $900 million between this year and next year, $400 million more than predicted in December.
Chief economist Natalie Mullis said the main reason is the wave of job losses and furloughs the state has seen since then, which is expected to lower state income tax revenue. Economists had predicted a drop in capital gains because of the troubled stock market, but Mullis said they didn’t anticipate the speed and depth of the job cuts that also followed.
State economists originally predicted Colorado’s economy would recover by late 2009, but now Mullis believes that won’t happen until mid-2010.
How lawmakers decide to take care of the additional $207.5 million shortfall will affect how much they will have to cut from next year’s budget. State Rep. Don Marostica, R-Loveland, said another $600 million in cuts could have to be made in next year’s budget year, which begins in July.
State lawmakers have already cut and transferred money to plug a $600 million shortfall in the budget for this fiscal year. Marostica, a member of the Joint Budget Committee, said lawmakers could suspend a property tax break for senior citizens, which would bring in an extra $94 million, or cut funding even more for higher education. It’s often on the chopping block in lean times because it’s one of the few areas of the budget not protected by the state constitution, like public schools, or federal funding, such as Medicaid.
Marostica said some lawmakers may also be interested in taking even more money out of the state’s reserve fund, but he thinks the state should hold on to that in case the next forecast, due out in June, is even worse.
The federal stimulus package could provide some help to mitigate the cuts. Gov. Bill Ritter will get an estimated $752 million to reverse budget cuts over two years, but 80 percent will have to go toward restoring cuts made to public schools or higher education. The rest, about $137 million, can be spent anywhere he wants, although Ritter’s spokesman Evan Dreyer said he plans to work with lawmakers to come up with a solution.
He has not yet released his plans for the money.
Rep. Jack Pommer, D-Boulder, said stimulus money and cuts could help the state balance its budget for the next two years but eventually the one-time money will run out. Once tax revenues recover, the state’s budget rules will prevent the state from immediately replacing that money because the amount it can spend on its operating budget will be ratcheted down because of the recession. Money leftover above that limit will flow into transportation and construction projects under current laws.
“The reckoning is going to come in two years when we have to face the fact that we don’t have enough money to run the state the way it’s running now,” Pommer said.
Marostica and many other Democrats have been pushing to abolish the law that allows the state’s budget to grow only 6 percent above the previous year. But opponents, including many Republicans, argue that the change would wipe out much-needed tax dollars for transportation as Colorado drivers are being asked to pay higher registration fees to build roads and bridges.
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