Balanced budget, not there yet

Today I had planned on writing about the status of some of the bills I am carrying, but that will have to wait.

The number one thing that the Legislature has to do every year is to come up with a balanced state budget and I don’t think we are there yet. The Joint Budget Committee will present a balanced budget to the Legislature this week and this year it will start in the Senate.

So what’s the problem if the budget balances? The problem is that to get there they are proposing to cut Higher Education $300 million, or about half of their general fund support. Our two largest universities might be able to survive such cuts, since the general fund is only a small portion of their funding. But our smaller state schools and community colleges can’t shift their loss of general fund to increases in tuition without losing students.   So why did the JBC make this recommendation?

They’re desperate.      

The state had seen huge declines in projected revenues and to balance the budget for the current year they have already had to use much of the state reserve, transfer most of the cash reserves  and make the easiest cuts.  Taking the rest of the reserves and cash balances don’t get us there. Cuts to programs don’t get us there. Even eliminating most of the state agencies wouldn’t save enough. 

You may have heard about the proposal of the JBC to take a portion of the reserves from Pinnacol Assurance.   This was proposed because it is large enough to plug the hole. Pinnacol is a state-created insurance company whose purpose is to provide worker compensation coverage for employers. Even though it was created to be an insurer of last resort it has a majority of this type of coverage in Colorado. Despite having the fourth lowest premiums in the country, Pinnacol has accumulated large reserves. The JBC believes that the reserves are easily $500 million more than is needed. Pinnacol of course will disagree. They are also arguing that the reserves belong to them and not the state. Given that the state created them and the governor appoints their board I tend to think that the state can  take  them.  After all, their profits are tax exempt. Which is one of the reasons for their success and their ability to accumulate reserves. One could argue that the reserve is the equivalent of  taxes that they weren’t required to pay.  

Since  the Pinnacol board has taken the position that they won’t willingly give the reserves to the state, the JBC could not use this to balance the budget and instead used the cut to Higher Education to balance the budget.  The JBC will be introducing a bill to require Pinnacol to  make the transfer, but even passing such a bill may not make the transfer happen if Pinnacol refuses.  That means that with only a month left in this legislative session we probably won’t have this resolved in time to help with this year’s budget.  

So what do we do next week when the budget comes to the Senate? 

I won’t support a $300 million cut to Higher Education and I know that many of my colleagues won’t either. Assuming no quick resolution of the Pinnacol issue I would like to send the budget back to the JBC so that they can go back and look again at some of those measures that could help reduce the impact to Higher Education. It won’t be easy, and may not prevent some higher education cuts, but would be more equitable. 

In closing, there is one point that I need to make: I occasionally hear from constituents who are upset and want to know when we are going to stop raising their taxes. I think they forget that in Colorado only the voters can raise taxes. The Legislature can only cut taxes and did in 1999 and 2000. The cuts should have been temporary, but weren’t.  The current shortfall we are experiencing is close to the amount of revenues the tax cuts removed from the budget.