Colorado Budget Overview

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Colorado Budget Overview

by Ari Armstrong, July 7, 2005

Okay, get out the toothpics to prop open your eyes. But the budget for the state government is something you should care about. For the current fiscal year, the budget allows the state to spend $15.2 billion of your money (though even the calculation of the budget is controversial, as is indicated below).

Under the Taxpayer's Bill of Rights (TABOR), the state can automatically spend more money every year to keep up with inflation and population growth (except when an economic downturn limits revenues). The overall budget has gone up every year under TABOR, and it is expected to go up every year into the future under current rules. This November, Coloradans will decide whether to give the state an additional $3.1 billion (estimates vary) over five years, on top of already-scheduled increases. The Independence Institute's Jon Caldara has called Referendum C a "foverever tax increase" because, at the end of the five-year period, state spending will continue to be higher than it would have been without Referendum C.

Colorado taxpayers should at least have some idea of where their money is going.

In a presentation published by the Independence Institute, Penn Pfiffner discusses the difference between a real budget cut and a cut in a desired increase in spending. Unfortunately, politicians, activists, and the media often blur this distinction, thereby contributing to confusion among voters. Ironically, by conflating real budget cuts with cuts in increases, the supporters of Referendum C might actually hurt their cause by leaving the impression that they're playing fast and loose with statistics. As an example, Pfiffner cites alleged cuts to Medicaid during a period when spending for the program actually went up. Pfiffner rightly distinguishes between a "[r]eduction in spending from one budgeting period to the next budgeting period" and "a reduction to a current budget and has no relationship to a previous budgeting period." Pfiffner notes that the confusing treatment of the two things explains "why government spending increases while politicians and the media constantly talk of 'budget cuts'." All participants in the debate should crystalize the difference between real year-to-year budget cuts and cuts in expected or desired increases. It is, of course, useful to discuss changes in spending according to changes in population or participation in a particular program, but such discussion ought not be used to displace or obscure information about total year-to-year changes.

A June 12 editorial by the Rocky Mountain News does remind us that some programs have been (really) cut. The editorial states, "It's true that after the five years are up, a new TABOR limit for state spending will be based on the highest revenues during that period, and adjusted annually thereafter for inflation and population. So government spending will indeed, as the ad says, ratchet up to a new baseline level... [T]he $15.2 billion budget for 2005-2006 is the largest in the state's history... and it increases general fund spending by 4 percent. What that fact doesn't acknowledge, however, is that while spending in such areas as K-12 education, corrections and Medicaid has been growing, many other areas have yet to return to the levels of the peak fiscal year of 2000-2001. For example, the 2005-2006 budget increases spending on public health and the environment 16.5 percent from the previous fiscal year, but the amount -- $15.3 million -- is still 49.9 percent less than in 2000-2001. Spending on agriculture, which will get a 3.6 percent boost in 2005-2006, is still down 66.1 percent from 2000-2001. The same is true for nine other line-item budget areas, including higher education (minus 19.9 percent), natural resources (minus 21.8 percent) and revenue (minus 23.4). Furthermore, the 2000-2001 recession wiped out $200 million per year in transportation spending that won't be replenished without passage of Referendum C and its companion, Referendum D."

However, the Rocky's editorial does not consider programs that could have been cut, other than the ones mentioned. For example, because of Amendment 23, spending on K-12 education automatically increases faster than the rate of inflation, come good economic times or bad. Yet the legislature refused to agree to a package that included reform of Amendment 23. If it is true, as supporters of Referendum C argue, that the budget shortfalls resulted in painful cuts in essential programs, then the implication is that the legislature made politically expedient cuts, not the most sensible cuts. Unfortunately, political expediency sometimes means cutting programs in a way meant to persuade taxpayers to fork over even more money. However, the legislature could have -- and could still -- look at other reforms, such as altering Amendment 23 and cutting wasteful and lower-priority spending. If legislators are rewarded for making politically expedient cuts rather than the most reasonable cuts, they will only be encouraged to keep avoiding tough choices and keep wasting money.

I'm sure that debate will rage from now till November. For now, here are the basics of the Colorado budget, as outlined in Senate Bill 05-209. That budget bill contains very little detailed information; instead, it contains line items for general sorts of expenses that subsume many specific payments. But it's a place to start.

First is a breakdown of the total budget by type of fund:

2005-6 Budget, By Fund Type
General Fund $6,219,413,983
Cash Funds Exempt$4,559,351,196
Federal Funds$3,567,475,779
Cash Funds$525,894,429
Cash Funds Exempt (Capital)$222,859,642
Capital Construction Fund Exempt$51,727,197
Cash Funds (Capital)$19,750,000
Federal Funds (Capital)$8,979,866
Total:$15,175,452,092

The "general fund" is the main pool of dollars collected through taxation. "Cash funds" include fees and the like. For example, the Department of Corrections is allocated $2,563 for "leased space" from "cash funds," an amount described as coming "from fees collected for monitoring private prisons." "Capital Complex Leased Space" includes $42,600 from "cash funds exempt," described as coming "from sales revenues earned by Correctional Industries." Corrections also includes $114,228 from "cash funds exempt" to pay for "service contracts," an amount described as coming "from federal funds transferred from the Division of Criminal Justice in the Department of Public Safety."

Here's the official explanation, from page 10 of the budget: "The figures in the 'cash funds' or 'cash funds exempt' columns, including the figures in any related lettered notes, indicate all non-general fund and non-general fund exempt sources and all nondirect federal fund sources and may be cash funds established by statute, nonstatutory cash accounts, tuitions, overhead reimbursements, certain fees, governmental and nongovernmental 'third-party' payments, payments for services, and interagency transfers... and such amount shall not be used for any other agency, source, or purpose."

Now, omitting the capital construction, here are the operating expenses by department:

2005-6 Budget, By Department
Department of Education $3,581,195,269
Department of Health Care Policy and Financing $3,271,672,981
Department of Higher Education $2,124,885,766
Department of Human Services $1,782,903,863
Department of Transportation $822,320,629
Department of Corrections $589,304,017
Departmen of Revenue $518,113,040
Department of Public Health and Environment $314,586,861
Department of the Treasury $308,163,652
Judicial Department $306,998,123
Department of Public Safety $220,196,993
Department of Local Affairs $219,919,279
Department of Natural Resources $176,767,383
Department of Personnel and Administration $160,831,502
Department of Labor and Employment $148,316,546
Department of Military and Veterans Affairs $131,472,180
Department of Regulatory Agencies $62,404,657
Department of Law $35,465,384
Governor, Lietenant Governor, State Planning and Budgeting $32,282,228
Department of State $31,682,830
Department of Agriculture $30,086,138
Legislative Department $2,566,066
Total: $14,872,135,387

Finally, following is a breakdown of the general fund. (Three departments do not receive appropriations from the general fund.)

2005-6 Budget, General Fund Only
Department of Education $2,698,318,712
Department of Health Care Policy and Financing $1,384,833,668
Department of Higher Education $597,931,311
Department of Corrections $531,107,461
Department of Human Services $499,692,928
Judicial Department $236,697,656
Department of Revenue $91,603,561
Department of Public Safety $59,412,207
Department of the Treasury $26,071,018
Department of Natural Resources $22,829,206
Governor, Lietenant Governor, State Planning and Budgeting $16,065,909
Department of Public Health and Environment $15,062,378
Department of Local Affairs $8,671,473
Department of Personnel and Administration $8,447,233
Department of Agriculture $7,920,555
Department of Law $7,130,521
Department of Military and Veterans Affairs $4,137,728
Legislative Department $2,384,066
Department of Regulatory Agencies $1,096,392
Department of Transportation 0
Department of Labor and Employment 0
Department of State 0
Total: $6,219,413,983

However, the budget numbers have since been revised. On July 5, I received the following e-mail from Natalie Mullis, an economist with the Colorado Legislative Council Staff:

"We have revised the total appropriation for FY 2005-06... We're doing this revision because we found an anomaly in the appropriation for higher education. For the first time this year, nearly $500 million was being double-counted in the Department of Higher Education. $496.9 million was being appropriated first to the College Opportunity Fund, and then from the College Opportunity Fund to each institution where it was actually spent.

"As you may already know, there is substantial double-counting already in the budget and has been for many years. Most of the double-counting occurs in the Medicaid program between in the Departments of Health Care Policy and Financing and Human Services. Because there is no issue with a consistent series here, we have not corrected for these. We have corrected for the double-count in Higher Education to get a more consistent series and a better indication of the growth rate in appropriations."

Here are the budget numbers from Mullis's office, as revised:

In a follow-up e-mail, Mullis explained, "The $14.61 billion does not exclude all of the double-counting in the budget. According to the JBC, there is about $1.3 billion of double-counting in the FY 05-06 budget, including the $497 million that we excluded in the table I sent you earlier. We did not exclude the remaining $800 million because those sources of double-counting have been in the budget for the entire time period shown, so leaving them in does not skew the overall growth rate. Most of the rest of the double-counting occurs in the Medicaid program between the Departments of Health Care Policy and Financing and Human Services. We took the higher education double-counting out because we were concerned about showing a consistent series."

Here are the original budget numbers from Mullis's office:

The final chart contains historical information and predictions about the budget and levels of tax revenues. The lines of the chart drop for some years. However, the chart details only a portion of the total budget, and so it doesn't reveal trends for the total budget, which has increased every year. The top line is purely hypothetical. It represents what would have happened to state spending without certain TABOR restrictions, starting in fiscal year 2000-1. The line for "Current Law Limit" shows how spending (involving the portion of the budget included) is expected to grow over the coming years. The difference between "Current Law Limit" and "Current Law Revenue" is the amount that will be refunded to taxpayers, if Referendum C is rejected, or that the state will spend in addition to already-scheduled increases, if Referendum C passes.

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