Five Takeaways from the Governor’s Proposed 2017-18 Budget
By Chris Stiffler
CFI Economist
The governor submitted his recommendations on Tuesday for the 2017-18 budget. Here are five important things to understand about his spending recommendations and the budget realities he must grapple with.
- Cuts of $500 million proposed for FY 2017-18:
To cover the costs of inflation, population, caseload growth and some other obligations in next year’s state budget, the state needs $926 million, but new revenue available for next year is only $426 million. That leaves a $500 million gap. To deal with that shortfall, the governor suggests reducing money available for roads (reducing 228 transfers by $30 million), making more cuts to schools and reducing a Medicaid funding mechanism known as the Hospital Provider Fee to avoid issuing TABOR rebates.
- Fees reduced to eliminate TABOR refunds:
One of the demands for revenue in FY 2017-18 is taxpayer refunds required by Art X Section 20 of our constitution. Collections are projected to exceed the FY 2017-18 TABOR revenue limit requiring $195 million in rebates. The governor suggests reducing the amount of money collected through the Hospital Provider Fee by $195 million as a means of eliminating the need for rebates. While this move helps close the general fund shortfall, it does so by costing the state federal matching dollars that flow into Colorado to help pay for health care for low-income, disabled and elderly populations.
- Schools failing further behind:
The governor’s budget recommends an increase in the “Negative Factor” — the amount by which funding for schools has fallen below inflation since 2009. Our schools are currently getting $831 million below inflation increases since 2009. The governor suggests adding an additional $45 million to the current shortfall increasing the Negative Factor to $876 million for the FY 2017-18 school year. If per-student support for school had kept pace with inflation since 2009, schools would be getting $1,007 more per student.
- More with marijuana:
The proposed budget recommends new uses for marijuana tax revenue, including programs for affordable housing, behavioral health needs, homelessness and expanding the state’s marijuana-impaired driving public awareness campaign. The governor also recommends tapping into the school capital construction fund known as “BEST,” an account into which $40 million of marijuana excise tax goes every year along with money from other sources, to help pay for school operating costs. Specifically, the governor proposes to use $15 million from the BEST fund to pay operating expenses for K-12 education.
- Tapping into savings to maintain the current level of services:
Because the amount the state is expected to collect in taxes has fallen over the last several months, the current budget (FY 16-17) was short. To make up the difference, legislators tapped into the general fund reserve, dropping the 2016-17 reserve amount from 6.5 percent of general fund spending to a 5.5 percent. The governor’s proposal for FY 17-18 would restore the reserve to 6.5 percent. This move would put the state in a better position to weather a downturn but contributes to reductions for schools and roads. Of course, the budget that ultimately gets adopted could mitigate the cuts to schools and roads by tapping into the reserve again. It’s alarming that our economy is relatively strong but our revenue isn’t keeping pace with demand for services.
