What’s in Gov. Polis’ latest budget proposal?

Every year, the governor is required by law to make a proposal to the legislature for the upcoming budget year. While this is not a binding document, it does give Coloradans their first look at what the next budget will look like, and what areas the governor and lawmakers may focus on when the legislature’s convenes in January. Here are our top five takeaways from this year’s budget proposal:

#1 – Some progress towards fully funding K-12 public schools

While inflation is top of mind for most Coloradans because it’s squeezing their family budgets, it has a big impact on the state budget too. Colorado’s constitution dictates that per-pupil funding must grow by inflation, which is over 8% this year. Gov. Polis’ budget proposal calls for a 9% increase in per-pupil funding, which means K-12 funding would increase even accounting for inflation.

The proposal asks for $704 million over what the state spent in Fiscal Year 2022-23, which amounts to an additional $35 million towards eliminating the Budget Stabilization Factor. If you’re not a Colorado fiscal policy nerd, the Budget Stabilization Factor (formerly called the Negative Factor) is the number that shows how much the state is underfunding public education relative to the amount approved by voters under Amendment 23. This would allow a slight reduction to the size of 3% of funding for K-12. For some context, ten years ago (FY2012-13), the Budget Stabilization Factor was 16 percent of K-12 funding.

#2 – General Fund Reserve should help Colorado weather the next recession

While Colorado does not have a true “rainy day” fund like some states, the General Fund Reserve acts as a sort of de facto rainy day fund. To give some context, during the 2001 and 2009 recessions Colorado’s General Fund dropped 13% in one year. A 15% reserve will provide a necessary cushion to brace for the next recession, which many economists think is on the horizon. 

Between 1986 and 2021, Colorado averaged a 4% General Fund Reserve.  With such a small reserve, when the Great Recession came in 2009 we had to make big cuts to our schools (see BS Factor above). A healthy reserve should prevent that from happening again, but given how many unprecedented economic challenges we’ve faced in the last few years, we can’t rule it out.

#3 – Post-Marshall Fire, climate investments get a bump

Higher temperatures, droughts, and wildfires have wreaked havoc on the state in the past decade. The three largest wildfires in Colorado history happened in 2020, and the Marshall Fire burned hundreds of homes in Boulder County in late 2021. This year, the budget continues to make wildfire mitigation, response, and climate preparedness a priority by investing $38.3 million to help mitigate and recover from wildfires, including $13.8 million to increase aerial resources to fight fires from above and additional staff to coordinate efforts, $7.2 million to support local firefighters and local mitigation efforts, and $3.2 million to establish a statewide fire data system.

Population growth and lower precipitation and drought associated with climate change have also placed pressure on Colorado’s water resources. Gov. Polis’ budget proposal asks for investments to protect the quantity and quality of water resources: $17.6 million for the Colorado Water Plan grant program to support partners advancing high-priority water projects across the state, $1.9 million to protect our water rights under the Colorado River compact, and approximately $30 million towards the State match requirement for the federal infrastructure bill’s supplement to the Clean Water and Drinking Water State Revolving Funds.

The legislature made it a priority to allocate money from the 2021 federal infrastucture law towards improving our state power. The governor’s budget proposal requests a $1.5 million match needed for phase 1 of Hydrogen Hubs—a partnership with neighboring states to design, construct and deliver a hydrogen hub facility for alternative energy. 

#4 – Another free month of transit in 2023

The Zero Fare for Better Air program passed this year offered free bus and light rail service in partnership with transit agencies in August 2022 and successfully increased RTD ridership by 36% year-over-year. This program saved riders more than $15 million in direct fare costs, on top of savings on gas. The governor’s budget proposal asks for $24.8 million to fund another month of free transit.

#5 – More investments in affordable housing

According to a 2022 Colorado Health Foundation poll, 88 percent of Coloradans say the rising cost of living is a serious problem in our state. In 2019, HB-1245 made changes to the vendor fee allowance, which resulted in $65 million of dedicated funding for affordable housing in 2022.

The Governor’s budget proposal allocates $15 million in affordable housing projects through the Public-Private Partnership Office, particularly focusing on building up workforce housing near transit and in rural areas. One major impact of this investment will be the construction of about 80 new workforce housing units in the Vail Valley. 

Last session, the legislature invested over $200 million in homelessness reduction and solutions. The Governor’s budget increases those resources, including putting more money towards foster youth, at-risk adults, and the Fort Lyon Supportive Housing Program.

Proposition 123 is a measure on this year’s ballot that intends to expand the availability of affordable housing in Colorado. Investments in affordable housing are long overdue. Half of renters in Colorado are cost-burdened––which is when the cost of housing exceeds 30% or more of a household’s income––and minimum wage workers need to work 75 hours a week in order to afford an average modest one-bedroom apartment. Colorado is the ninth-least affordable state in the country, and the state is a staggering 500,000 housing units short of where it should be. 

Proposition 123 will fund needed housing investments by funneling 0.1% of all state income tax revenue to create a State Affordable Housing Fund. 60% of the funds will go to the Office of Economic Development and International Trade (OEDIT) and 40% will go to the Department of Local Affairs (DOLA). The measure outlines specific programs that the funds can be used for—including building more affordable housing, providing rental assistance, and supporting first-time homebuyers. 

While these investments are both necessary and important, there are several long-term considerations that complicate how effective this measure will be towards materially expanding the supply of affordable housing in Colorado.

One of Proposition 123’s biggest long-term obstacles lies in the measure’s funding source. Proposition 123 will not create a new revenue source to fund its affordable housing investments in years when Colorado is not issuing TABOR rebates. Non-rebate years may come sooner than expected due to the threat of recession—Colorado’s state Legislative Council finds that from June to September of this year, the risk of a near-term recession has escalated considerably. 

In years when Colorado tax revenue is not above the TABOR limit, affordable housing will compete for revenue dollar-for-dollar with existing public services including Colorado’s already underfunded K-12 education system. 
That underfunding means school districts will continue to struggle to pay teachers. Colorado has the highest teacher pay penalty in the country. This means Colorado teachers make almost 36% less income than similarly-educated workers. Additionally, only one in five homes are affordably priced for teachers. Nationally, Colorado also ranks near the bottom for per-pupil funding. Our state’s General Fund budget is already struggling—and at times, even failing—to provide proper resources for students and educators. Colorado needs a funding source for affordable housing that is truly sustainable and does not make Colordans choose between education or affordable housing.

Pay Discrepancy Between Teachers and Similarly-Educated Workers in Each State as a Percentage of Wages

With these caveats in mind, CFI chose to support Proposition 123 knowing that in years when Colorado’s TABOR surplus is large—like this past year when it reached  $3.7 billion—the measure’s State Affordable Housing Fund would receive considerable funds, and these investments are a good use of TABOR rebate money that would otherwise be refunded in ways that are not as equitable as they could be. However, achieving the goal of materially expanding the supply of affordable housing in Colorado is a long-term investment that needs a reliable and sustainable funding source.

Sustainable solutions include implementing a real estate transaction tax or fee. In most states, when the title of a property is transferred between owners, the parties involved must pay a fee or tax that is then used to fund things like affordable housing. To make it equitable, the amount  could be based on the property’s value, and some amount could be exempted to ensure it falls on higher income earners, instead of lower income earners who are disproportionately people of color. Colorado is one of only thirteen states that do not have any kind of real estate transaction tax, due in large part to the fact that TABOR specifically prohibits them (though some local governments with already established taxes are exempted from this ban).

Under the current funding mechanism for Proposition 123, the State Affordable Housing Fund is estimated to collect $145 million for the upcoming state budget year of 2022-23 and $290 million the following year. However, a 0.5% real estate transaction tax that exempts the first $200,000 value of a home could generate $375 million in tax revenue in just one state budget year.

Whether Proposition 123 passes or not, establishing a dedicated funding source to invest in affordable housing is necessary to ensure that the state has the revenue to meaningfully expand Colorado’s housing supply, uplift renters, and support first-time homebuyers. If it passes, we’re hopeful Proposition 123 can be another step towards removing barriers to affordable housing in Colorado. 

Note: This is the second part of a blog on Proposition FF and its economic and health benefits. Click here to read the first part.

How will schools make sure the Proposition FF money is used properly?

Proposition FF empowers participating school food authorities to create parent and student advisory committees to make major decisions on their own food purchasing, supported by local food purchasing grants which allow them to purchase Colorado-grown, raised, or processed products for school meals (SB22-087). Local communities would be empowered to co-create a school food supply chain that aligns with the values and needs of students and families. The bill opens the door for communities to connect with farmers like Roberto Meza to help feed our kids with healthy, locally sourced food. “It’ll give us a chance to build up our infrastructure…. that we know we have secured markets, and potential contracts, we’d be much more able to find a loan, feel secure in investing in our infrastructure or scaling our operations.”

This requires that we give schools the budget power to pay a fair price; while it takes some investment to serve quality food that helps kids learn their best, it beats the cheap and easy status quo, which only benefits the pocketbooks of big food corporations. 

“On a systemic level, in order to address food access, we have to pay the fair price, so farm owners don’t have to cut corners by underpaying their workers, mistreating their livestock, or undermining the sustainability of their land.”

Roberto Meza, farmer

Does Proposition FF make our food system more reliable?

Proposition FF also increases the resilience and stability of our food system at large in the event that a crisis like Covid leads to the breakdown of fragile, long supply chains. School’s over-reliance on a few suppliers with a monopoly on schools lunches puts our access to food into a precarious balance, with climate change shifting weather patterns and the threat of extreme weather events like drought increasing, this is sorely needed. 

Covid must serve as a lesson; “it’s not in our best interest to support that type of model or system in the future—it’s not sustainable, and we place ourselves at risk by only depending on those larger players, whose supply chains will break down in the event of another pandemic.” Meza and other local, sustainable farming operations are the key to bolstering food security in our state, by keeping our supply chain local. Meza says localizing the school lunch supply chain will create economic stability and resilience.

Participating school food authorities would also receive additional funds to increase the wages for individuals employed to prepare and serve food. These workers are currently making much less than a living wage; for example, Denver is raising its starting pay for food service workers to $18 this year, but we know that inflation is eating away at wage gains. One estimate by MIT places a living wage for an adult living in Denver with no children at roughly $20 an hour, $39.48 for an adult with one child, and ​​$21.52 and 2 working adults with one child. In less highly resourced school districts such as Pueblo, these gaps are even wider; 2022-2023 base pay for a school cook is $13.98, falling far short of a living wage for an adult with one child ($30.95).

These workers are feeding Colorado’s children, but lack the economic security to feed their own families; Colorado voters have the power to change this by giving schools the funding they need to pay these essential workers a living wage. 

How will Proposition FF promote tax and racial equity?

Not only does this bill proactively create a more just food economy, but it also takes a major step to address our upside-down tax code. The bill is financed by placing a cap on state income tax deductions for the top 3% of Colorado income earners. By ensuring the wealthiest folks in our state pay what they owe in taxes, Healthy School Meals for all will help us to invest in building a more human-centered local food system where every child has access to fresh, healthy food. 

Meza’s farm, Emerald Gardens, prides itself on the dignity and sustainability its model of business creates, and how they are able to advance “the values of racial equity, dignity for farm workers, food security, and sustainability.” Promoting these values in a public institution that kids interact with every day allows our state to reimagine how we see food; not just as consumers, but as a part of an ecosystem and community that prioritizes shared prosperity for all Coloradans.

“It’s in our best interest to promote these values, not just for our own well-being but for that of future generations as well……As eaters, we’ll begin to think of ourselves not as passive consumers, but as active participants in co-creating and designing a food economy that promotes equity and dignity for all of our communities.

Roberto Meza

All communities and families should have a say in which food makes its way to kids’ plates, and how it affects our local economy as it travels from the farm to the lunch counter. A vote for Proposition FF is a vote to reinvest in Coloradan people, providing a historic opportunity for Colorado’s families, schools, and communities to come together for school lunches to meet the nutritional, social, and economic needs and priorities of Colorado’s children and the workers who help feed them. 

The economy is not an intangible institution. It is the families, farmers, and workers who make up our. economy. Let’s demand that our taxpayer dollars are used to build food systems and a local economy that works for all Coloradans.

Look for Part 3 of this series out soon!

By Sophie Mariam

What is Proposition FF?

This November, Colorado voters have the opportunity to begin rebuilding our state’s food economy to put our children, workers, and families first. Proposition FF presents an opportunity not only to ensure all students get the nutrition to reach their full potential, it’s also a chance to harness the full capabilities of our local food economy by shifting decision-making power back into the hands of the students, families, and communities who are most affected.

Proposition FF would allow communities across the state to reinvest public money in ways that create opportunities for the hardworking Colorado farmers and food service workers who grow and prepare the food our kids eat. The measure is paid for by capping a tax break for people who earn over $300,000 a year. Recently, over 100 local nonprofit organizations came out in support of Proposition FF.

How will Proposition FF help schools and local farmers?

We all believe Colorado should be a place where our food systems are built by Coloradans, for Coloradans, in a way that promotes widely shared economic prosperity. However, our current food policies are falling woefully short. Colorado’s existing school lunch program allows the vast majority of public money we set aside to feed kids to flow into the pockets of wealthy, out-of-state agribusiness corporations.

Many large food corporations are able to provide cheap products only by cutting corners like underpaying their employees, often pushing workers and their families into food insecurity and sacrificing the long-term viability of the land. Moreover, long supply chains from farm to fork can often feel out of reach, making it hard for Coloradans to understand the economic impact that the food on our plate has the power to make. 

Meanwhile, many Colorado farm owners are struggling to compete with these corporations. Roberto Meza is a first-generation farmer who co-founded Emerald Gardens, a 35-acre, year-round agricultural operation right outside Denver. Current policies at the U.S Department of Agriculture, coupled with the meager budgets many Colorado public schools are given for food procurement, push schools towards buying cheap, often highly processed foods from big suppliers.

The deck is stacked against small farmers like Roberto due to what says are “intentional barriers set up to incentivize larger corporate farm producers and suppliers, and to de-incentivize values-based, small and midsize scale producers and suppliers.” 

The dominance of big agribusinesses over local farming operations is insidious. Not only does it dominate our state’s school lunch program, but insufficient food budgets and capacity for local sourcing mean this is the status quo for how other public and semi-public institutions like hospitals interact with the agricultural sector more broadly. Meza is building an alternative model, which emerged from a time when many food suppliers in Colorado were experiencing an unforeseeable crisis.

How did the pandemic play a role?

At the height of the pandemic in spring 2020, many farms lost their main sources of revenue as local restaurants shut down for the public health emergency. Levels of food insecurity across the state skyrocketed as families struggled to make ends meet, and donations to local food banks couldn’t keep up with demand. But a creative solution emerged to address both these problems: food banks received emergency federal funds, which allowed them to supplement donations by buying food directly from Colorado farmers like Meza. 

“Covid allowed us to experiment with those things because of the state and federal funding that came in to address food insecurity”

Roberto Meza, Emerald Gardens farm

Instead of letting small farming operations go under and Colorado kids go hungry, farmers like Meza stepped up to meet the needs of local communities by forming a new organization called the East Denver Food Hub. Meza, both as a farmer himself and the leader of multiple cooperative farming operations, is creating a local, values-based supply chain to, as he says, “work with farmers that honor the land and support worker dignity.” He’s linking small farmers with the demand for fresh food in local communities to create a new model for addressing community food needs while keeping farmers’ business models viable.

But these farmers can’t keep this effort to advance food justice going alone, and public policies aren’t currently built to support local, family farmers. Proposition FF would help scale up Roberto’s model for food justice to more communities by breaking down some of the barriers preventing local farmers from contracting with schools, creating what Roberto calls an “equitable supply chain from seed to table.”

This blog is the first part of a two-part series exploring some of the impacts of Proposition FF. Stay tuned for part two next week!

#1 — Are we headed towards a recession?

via GIPHY

After almost two years of quick recovery after the 2020 lockdowns and ensuing demand and supply disruptions, our economic output is slowing down. Due in no small part to the Federal Reserve’s response to high inflation, the first two quarters of 2022 saw a reduction of 1.6% and 0.6%. The current economic outlook is cloudy, and despite lots of available jobs and high demand, several indicators show a recession could be on the horizon.  That uncertainty clouds all future budget and TABOR refund outlooks.

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#2 — Inflation has hopefully peaked, but costs are still way up (and wages aren’t keeping pace)

via GIPHY State economists are projecting an 8.2% inflation rate for Colorado in 2022, which is higher than the 7.9% rate projected for the nation. Historically, inflation has normally been closer to a 2-3% rate. Fortunately, it looks like inflation has probably peaked, but while energy costs have started to come down recently, they’re still way up since August 2021—along with the cost of food and transportation.. Housing, which accounts for about 40 percent of inflation, continues to rise as well. Colorado’s labor force participation is the 2nd highest of the states.   Inflation is taking a toll on the money Coloradans are working hard for: Taking increased prices into account, the average worker’s wages in Colorado are down 2.7% since last year.

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 #3 — Not an optimistic outlook for next year’s budget

via GIPHY The Fiscal Year 2023-24 budget our legislators will start work on when session convenes in January doesn’t look like it will have any additional room for spending compared to the current budget. At first glance, it looks like next year’s budget will have $1 billion more than this year’s, but that’s without accounting for growth in students, caseload growth, employee compensation, reservice requirements and capital maintenance. When factoring in those increases, it looks like there will be just $85 million more in next year’s budget for legislators to work with. This doesn’t even fully compensate for inflation, so the real number is actually a little lower still. Plus, this will only happen if we don’t slide into a recession.

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#4 — Huge TABOR rebates will favor the wealthy

via GIPHY The state will return $3.7 billion to Coloradans this year and $3.6 billion next year. Even with very little wiggle room in the budget in the event of an economic downturn, lawmakers are forbidden from allocating even one penny to schools, roads, or government workers’ salaries to compensate for high inflation. Despite the fact that rich people have seen some of the biggest increases in income over the past two years, the money the state will rebate will mostly go to wealthy people. Lawmakers made this year’s rebates fairer for working people by reducing the amount of money rich people would have gotten and putting it into the pockets of working Coloradans instead. Without more action from lawmakers, the money will go out in a way that can only be described as unfair.  

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#5 — The data has economists scratching their heads

via GIPHY Normally, if a recession was on the horizon we might see fewer job openings, but right now, there are currently two job openings for every unemployed worker.  Normally, General Fund revenue drops in years when GDP falls for the first two quarters, but  revenue grew 23.7%, a historic increase.  Normally, we say that TABOR rebates only happen during good economic times, but now state economists believe we may be entering a recession and the state is returning rebates that are four times larger than any in the past. The COVID-19 pandemic continues to pile up unprecedented economic consequences even two years in.

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By Sophie Mariam

The most recent jobs report showed modest growth, but digging into the numbers, our analysis found we still haven’t caught back up to 2020 job levels. This is especially true for working Coloradans in some of the industries that were hardest hit by the pandemic, such as leisure and hospitality, education, health care, and state and local governments. 

Working Coloradans, especially workers in these industries, have been facing the highest exposure to the virus, while simultaneously dealing with the biggest economic consequences. These workers also happen to be disproportionately workers of color and women, who have long faced some of the biggest barriers to economic opportunity. 

Now, they’re facing a second wave of economic hardship caused by the pandemic in the form of inflation, which is largely being driven by artificially high international shipping costs, a broken “just-in-time” supply chain, and high fuel prices (though we’ve gotten some relief from record high prices recently). Our economy can’t truly be successful unless those people who work low- and middle-income jobs can get ahead. 

Check out all the details in our newest monthly feature: JobWatch.

Meager short-term job growth masks the harm of inflation, sluggish long-run recovery

Colorado’s economy grew by 4,500 new non-farm payroll jobs in June and only 2,200 new jobs in July, according to the most recent jobs report. While these numbers seem to indicate modest economic growth, these short-term gains may mask the harms of the lagging long-run recovery in state and local governments, education and health, and the leisure and hospitality sectors. 

Recent inflation has been driven largely by a broken, unsustainable, inequitable “just-in-time” supply chain that was never fair for workers. Meanwhile, wages have been lagging behind rising prices. While Colorado’s working people bear the brunt of persistent inflation at gas pumps and grocery stores across the state, billion-dollar corporations are pulling in “astronomical profits” using inflation as an excuse to keep shareholders rich at all our expense. 

While job growth may have supported a small drop in the unemployment rate from 3.5% in May to 3.3% in July, zooming out of the monthly data paints a new picture. Colorado’s unemployment rate is still 0.5 percentage points higher than it was in February 2020, ranking 5th worst in the nation for overall recovery.

Workers, especially immigrant workers, in Southern Colorado and other rural areas of the state are also being hit the hardest by the slow growth. The Colorado counties with the highest unemployment rates in June were Huerfano, Pueblo, Las Animas, Fremont, and Rio Grande. These industries and rural regions tend to employ low-wage workers, immigrants, women, and workers of color at high rates, indicating that even throughout the recovery, the pandemic has exacerbated pre-existing barriers to economic opportunity for these groups.

Colorado is still suffering economically from the COVID recession

Colorado has added 43,300 new jobs since the pandemic began in February 2020. However, the state’s economy needed to expand by 74,300 new jobs to have kept up with the booming 2.6% population growth during that time. Despite recovering the initial pandemic-related job losses, Colorado’s economy is still experiencing a “jobs deficit” of 31,000 jobs. The Colorado Department of Labor and Employment reports that Colorado’s job growth rate over the past year is 3.6 percent, lagging behind the U.S. rate of 4.2 percent. (One note: while CDLE reports a job recovery rate of over 110%, this figure does not factor in population growth.)

One bright spot, which should come as no surprise to most Coloradans: people want to work. The share of Coloradans participating in the labor force jumped to 69.5 percent in June, the highest since March 2020, and held steady in July.

Workers are struggling to keep up as wages get eaten up by high inflation

Workers are seeing their wages go up, but inflation is eating up most of the gains, forcing many hardworking Coloradans to draw down their savings or take on debt to keep up with spiking prices. CDLE establishment survey numbers indicate that average hourly earnings grew from $31.60 to $34.21 in June and $34.60 in July, placing Colorado $2.23 above the national average hourly earnings of $32.37. 

Inflation isn’t being driven by wage growth, according to the Economic Policy Institute. Their study hows that while nominal wage growth over the past year has been faster than recent decades, it has lagged far behind historical inflation. 

Some help may be on the way for the lowest-paid workers: Colorado’s minimum wage is expected to get a hefty increase due to high inflation, and local governments like Denver are also expecting to see raises for workers. Increasing local minimum wages to reflect rising living costs has been shown to protect households without stoking inflation, empowering working people to put food on the table for their families and afford gas at the pump. 

Denver is set to increase its minimum wage by 9% to $17.29 in 2023, and Colorado’s state minimum wage will increase to ​​an estimated $13.68 this January. It’s good policy to protect working Coloradans from rising prices instead of forcing them to foot the bill for the real culprits behind inflation: corporate price gouging, a broken supply chain that was designed to put profits over service, and global political turmoil.

Unemployment still exceeds pre-pandemic rates

The economy is a far cry from the days of double digit employment like we saw for much of 2020, but not all Coloradans who are looking for jobs have been able to find them. The state unemployment rate is still 0.5 percentage points higher than in February 2020, when it was 2.8%. 

While the July jobs report estimates a 3.3% unemployment rate, placing Colorado 0.2 percentage points below the current U.S average, the change in long-run unemployment levels since pre-pandemic times tells a different story about Colorado’s recovery. The U.S unemployment rate has recovered to its pre-pandemic levels, while Colorado is still 0.5 percentage points behind, indicating that the state’s economy is lagging the national trend.

This is especially concerning once we account for the current barriers to accessing jobless benefits in Colorado. As of August 16th, CDLE estimated a 10- to 12-week backlog in processing unemployment claims, leaving many workers who lost their jobs through no fault of their own in the dark. Recent economic evidence from the National Bureau of Economic Research suggests unemployment benefits help bolster spending power, contributing to a growing economy that benefits all Coloradans. Simultaneously, these benefits do not have a significant impact on job-finding behaviors, empowering working families during tough times without disincentivizing work more broadly.

By Elliot Goldbaum, Pegah Jalali, and Caroline Nutter

What’s in the Inflation Reduction Act?

This week, the U.S. Senate passed the Inflation Reduction Act. If it becomes law, it will make big investments in the fight against climate change and close tax loopholes for people making over $400,000 a year and some large, rich corporations. A House vote is expected this week. 

The Inflation Reduction Act comes after nearly two years of negotiations, stalled legislative efforts, and other barriers to more expansive and transformative economic legislation. It addresses fewer issue areas than Congressional leaders and the Biden administration—not to mention advocacy groups like the Colorado Fiscal Institute—were hoping for, but taken as a whole, it is a significant investment in a stable climate future and clean energy jobs, will provide people savings on health care costs, and it’s paid for with fair tax changes that ask wealthy people and rich corporations to pay closer to their fair share. 

Additionally, the legislation includes policies like deficit reduction designed to help curb inflation. (Interestingly, a recent New York Times newsletter went into the economics of inflation and climate change, and the two are much more linked than one might think).

Fighting climate change by drastically reducing pollution

The Inflation Reduction Act contains several provisions that will reduce pollution, create jobs in the clean energy energy industry, and do so equitably and justly. The legislation will reduce the type of pollution that contributes to climate change by 40% by 2030. 

Among the provisions included in the legislation:

• $20 billion in consumer incentives to purchase electric appliances, rooftop solar, and other improvements designed to make homes more energy efficient and less reliant on fossil fuels. People who earn low incomes and communities facing the greatest barriers to these types of improvements will see a substantial amount of the benefits.
• $60 billion in clean energy manufacturing incentives to create jobs that pay well and will be critical in advancing a clean energy future.
• $70 billion to decarbonize the transportation, manufacturing, construction, and agriculture industries.
• $60 billion in environmental justice priorities to drive investments to communities that have historically been the most likely to experience negative environmental impacts from industrial facilities.
• $20 billion to support sustainable agriculture projects.
• $4 billion for drought resliency in the Western U.S.
• Tax credits and grants to support biofuel production, designed to power the air travel of the future.
• Reduce methane emissions created during natural gas extraction. Reducing methane emissions earlier is considered one of the most cost effective ways to prevent catastrophic increases in global temperatures.
• Increases the royalty rate for oil and gas development leased on federal lands, ends noncompetitive leasing on federal lands, raises minimum bids and rental rates for oil and gas companies leasing federal lands, 

Additionally, despite the need to transition to clean energy, some concessions were made to ensure the passage of the overall package, including requiring onshore oil and gas leasing and tying it to clean energy development. The Inflation Reduction Act also removes authority from the Secretary of the Interior to raise royalty rates on federally leased lands for 10 years. Finally, though an initial draft of the bill included reforms to the oil and gas bonding system, this provision was ultimately removed. Those bonding reforms are still badly needed to stop the practice of oil and gas companies abandoning wells without cleaning them up (also known as orphaned wells).

Saving people money on health care costs

In addition to the historic climate provisions, the Inflation Reduction Act includes provisions designed to reduce health care costs for people across the country. Most of the cost saving measures center around reducing the cost of prescription drugs, especially for Medicare patients. Among the most important short-term policies was to extend the subsidies authorized under the American Rescue Plan Act last year. According to an analysis by the Center on Budget and Policy Priorities, failing to extend these provisions would have caused insurance premiums to skyrocket for many middle class families.

Provisions in the Inflation Reduction Act related to health care:

• Authorizes the Secretary of Health and Human Services to negotiate the prices of certain drugs with pharmaceutical companies.
• Requires rebates on certain medications if drug companies raise prices faster than the rate of inflation.
• Caps the amount of money a Medicaid Part D patient must spend out of pocket on prescription drugs at $2,000 per year.
• Extends the Affordable Care Act subsidies authorized in 2021 that allowed more people to purchase subsidized plans on state health insurance marketplaces.

Taxing wealthy people and rich corporations closer to their fair share

While not as ambitious as the tax plan laid out in previous federal legislative proposals, the Inflation Reduction Act has several provisions that will be used to pay for the climate, health, and deficit reduction policies in the bill. Additionally, the bill authorizes investments in Internal Revenue Service nforcement of existing tax laws.

• A 15% corporate minimum tax will raise an estimated $273 billion. Prior to Senate passage of the Inflation Reduction Act, Sen. Ron Wyden released research showing that over 100 companies with average profits of $8.7 billion paid a 0% effective tax rate in 2019.
• A 1% excise tax on stock buybacks will raise an estimated $73 billion. The Economic Policy Institute found that corporate stock buybacks increased by 50% after the passage of the Tax Cuts and Jobs Act in 2017, and soared to $580 billion in 2018.
• $80 billion in spending for increased enforcement of existing tax laws by the IRS is anticipated to raise an additional $203 billion in revenue.
• An extension of the limitation on the amount of losses businesses can deduct on their income taxes from 2026 to 2028 will raise an estimated $52 billion in revenue.

Additionally, the Inflation Reduction Act will be used to reduce deficits. Current estimates show the bill will reduce the federal deficit by over $300 billion. 

What does the Inflation Reduction Act mean for us?

The Inflation Reduction Act will go a long way towards reducing carbon emissions that are causing climate change. In addition to buying us some time to come up with more substantial climate policies, the legislation is estimated to create 9 million jobs.

For health care consumers, especially older people and others who are on Medicaid Part D, the legislation will mean reduced costs on prescription drugs. And for those who get their health insurance through state exchanges, the bill will help them avoid potentially huge increases in premiums.

Finally, we will all benefit from a fairer tax code. Rich corporations have been racking up huge profits in recent years, and by closing tax loopholes that mostly benefit them and people who make over $400,000 a year, Congress is sending a message that the tax code should be fairer for working people. 

Unfortunately, many important policies that were discussed in previous iterations of federal budget legislation did not make it into the Inflation Reduction Act. Permanently expanding the Child Tax Credit and the monthly advance payments that helped families afford rising costs, offering child care and preschool to families of young children, investing in the growing care economy and ensuring care workers can be paid what they deserve, a $15 federal minimum wage, and other policies would all benefit our country and our economy and help fight economic challenges like inflation and labor shortages. We also still have a lot of work to do on climate, despite the big wins in the Inflation Reduction Act.

However, given the many barriers to passage, this is an important piece of legislation that will address several important issues simultaneously, and provide avenues for an equitable economy and a just climate future.

By Pegah Jalali and Elliot Goldbaum

How do we get gas prices to come down?

Though gas prices have started to drop just a bit from the record highs we’ve seen this year, they’re still a big concern for families across the country, and policymakers are looking for ways to lower costs more. While some in Washington have floated the idea of a gas tax holiday (we wrote back in April about why that probably wouldn’t help), others are saying the only way to bring prices down is to increase fuel supplies.

Global events, especially the war in Ukraine and ensuing sanctions like banning Russian oil imports, are driving prices to record levels and are largely outside of our control. While the pandemic continues to create supply chain problems that are driving inflation, including the price of gas, the other main factor in the cost of gasoline is a sharp increase in demand now that more people have returned to daily commutes to and from work. More oil production should lead to bigger supplies to meet that demand and, at least in theory, lower gas prices.

So are they going to increase supply?

Based on statements from Colorado oil and gas executives on earnings calls with investors, we know the industry isn’t especially interested in trying to meet that demand and get prices back to normal levels. Instead, they’re using the spoils of high gas prices to further enrich themselves and their shareholders. This comes despite the industry engaging for months now in what is clearly a disingenuous lobbying campaign for more drilling on our public lands. 

Despite already sitting on 12 million acres of undeveloped leases and 9,000 unused drilling permits, the industry was demanding even more access to public lands. Instead of caving to pressure, the U.S. Interior Department came up with a smart plan that will protect cultural areas, wildlife habitat and migration corridors, and areas with low development potential. The wisdom of the decision to limit the amount of land available for leasing was confirmed when oil and gas companies left nearly one third of available land parcels sitting on the table at last month’s federal oil and gas lease sale.

To understand why this matters, let’s take a closer look at federal oil and gas leasing.

How does federal oil and gas leasing work?

The Bureau of Land Management (BLM) manages the federal government’s onshore oil and gas program, which oversees oil and gas leasing and development on federal lands. BLM field offices first prepare plans which determine what lands can be open to oil and gas leasing. Any individual or company can then nominate—at no cost and anonymously—any of the lands that are open to leasing to be included in the next federal onshore oil and gas lease sale. Next, BLM holds public auctions where bidders can compete for a lease by placing bids. The highest bidder gets the rights to explore the leased land for oil and gas deposits. 

Before being issued the lease, the lease holder must pay a bonus, which is the amount of highest bid, as well the first year’s rental fee of $1.50 per acre. Initial lease terms are set for 10 years, with the rental fee increasing to $2 per acre after the first 5 years of the lease. After production begins, the leaseholders have historically been required to pay 12.5% of their production value in royalties. The term of the lease is automatically extended as long as production continues.

How much are royalties from public oil and gas leases worth? 

A report released by Department of Interior in November 2021 showed federal onshore oil and gas development provided over $3.46 billion in revenue in FY 2020. That includes $2.3 billion in royalties, $92.9 million in bonus bids, and $23 million in rentals. 

Those numbers would be much bigger if the federal government updated royalty rates, according to a report by Taxpayers for Common Sense. That report estimated that if the federal government had increased the onshore royalty rates to 18.75%, the same rate it charges for offshore leases, it would have earned up to $13.1 billion in revenue between 2012 and 2020. Many oil and gas producing states have updated their royalty rates for leases on state land several times over the past decades. Colorado, Pennsylvania, and Texas have a 20% royalty rate. 

When oil prices rise as a result of global market fluctuations, the lost royalty revenues to the federal and state governments also increases. Onshore revenues fund water reclamation projects and may also contribute to the National Parks and Public Land Legacy Restoration Fund. 

In Colorado, the Department of Local Affairs distributes the Federal Mineral Lease revenues to local governments directly and through grant programs. As shown in the chart below, royalty revenues are distributed to the state public school fund (48%),  Colorado water conservation board (10%), direct distribution to school districts (1.7%), and local government mineral impact fund (40%). Increasing royalty rates gives Coloradans a fair return and helps us invest in our schools and other important services.

While the Interior Department smartly increased the federal onshore royalty rate to 18.75 for the sale in June, there are other ways the oil and gas industry exploits these century-old rules at our expense.

What happens when leases go unsold?

Despite the industry calling for opening up as much land as possible to drilling and nominating over 700,000 acres of public lands that the BLM initially evaluated for lease, they still left a lot of it on the table and didn’t try to bid on it. When nominated land goes up for sale but doesn’t receive any bids, it becomes available for what is known as “noncompetitive” leasing. That means companies can swoop in and buy federal leases for pennies on the dollar. 

Because a little less than one-third of the leases up for sale in the June lease sale went unpurchased, they will now be up for noncompetitive leasing—including over 2,000 acres of public lands in Colorado alone that went unsold last month. 

This is just another example of how our federal oil and gas leasing system, most of which hasn’t been updated for over 100 years, is allowing the oil and gas industry to line their pockets at the expense of wildlife, clean air and water, the communities who live on the front lines of oil and gas drilling, and all Coloradans who miss out on critical revenue due to outdated oil and gas royalty rates.

What can be done to help gas prices?

Making the increase in royalty rates that was adopted for the June lease sale permanent would mean more money for our communities through federal royalty revenue. 

Additionally, Colorado’s own Senator John Hickenloooper has made the issue of ending noncompetitive leasing a priority. “Non-competitive leasing encourages speculation on public lands at taxpayers’ expense,” Hickenlooper said in a press release when the bill was announced. “Westerners lose out when large swaths of land are set aside for speculation instead of conservation or recreation.”

While the newly announced Inflation Reduction Act does include some reforms to the federal oil and gas leasing program, it also includes less helpful policies that will tie the hands of the Interior Department and potentially make it harder to protect our public lands. While the bill contains a lot of other important provisions, especially related to climate change and fair taxes, there’s more work to be done to fix some of these issues.

Western voters agree that these reforms are important for maintaining our state’s beauty and the health and safety of our public lands and our communities, according to a poll conducted in February by Colorado College. These common sense reforms would go a long way towards protecting our communities from both an environmental and fiscal standpoint.

As far as gas prices go, In the short term, there’s not much we can do to lower them by big chunks. That’s why it’s more important than ever for us to find ways to transition to clean energy, end our dependence on fossil fuels, and continue our progress toward a carbon neutral future.

In the meantime, smarter, more fiscally and environmentally responsible leasing policies will be a big win for Colorado and the rest of the West.

By Sophie Shea, Policy Analyst

What’s causing inflation?

Amidst the turmoil of shutdowns, testing, masks, and all the other disruptions to daily life caused by the pandemic, now rising costs everywhere from the gas pump to the dinner table have created financial challenges for families across the country. Shutting down and reopening the entire global economy produced a prolonged shock felt by the entire world, and panelists at a recent event hosted by nonprofit news outlet ProPublica said it precipitated the highest U.S. inflation in more than 40 years. The biggest drivers? Extremely high global shipping costs, a failure of our “just-in-time” supply chain, and record-breaking high corporate profits. 

Why are shipping costs so high?

Reporting from ProPublica journalist Michael Grabell, one of three panelists at the event, found that three ocean shipping conglomerates control 90% of the transportation of U.S. imports. Carrier rates for shipping between Asia and the U.S. have increased by over 1,000% from January 2020 to today, according to Grabell. A White House analysis estimates that the ocean shipping industry made a record-breaking profit of $190 billion in 2021, which is seven times more than 2020 profits and 5 times more than the profits accumulated over the decade of 2010-2020. 

A rise in predatory and potentially illegal penalty fees contributes considerably to the sharp increase in international shipping costs––and profits. The fees in question are called demurrage and detention, which are essentially late fees. During normal times, they act as an incentive to maximize the efficiency of the flow of goods. However, pandemic shutdowns and a rise in consumer spending caused massive congestion in U.S. ports. Despite gridlock in the ports creating scenarios where on-time delivery became impossible, shipping companies continued to charge these exorbitant fees.

Reports also find that ocean carriers are engaging in predatory practices in the pickup stage as well. Importers of perishable goods complained that while they struggled to pay the high fees, their fruits and vegetables were left to rot. Several other businesses have filed complaints concerning ocean carriers’ exploitative behavior, and recently Congress approved the Ocean Shipping Reform Act, which gave the Maritime Commission more power to crack down on exploitative fees. However, more policy action is needed to effectively address predatory practices and corporate profiteering.

What happened to the supply chain?

While the pre-pandemic supply chain brought consumers cheap goods, existing infrastructure was not resilient enough to withstand the shock brought about by Covid, according to Dr. Rakeen Mabud, chief economist at Groundworks Collaborative and a panelist at the event. Mabud argues that brittle supply chains have been strategically cultivated across decades of corporate consolidation and disinvestment.

The strategy of megacorporations to corner vital markets put them in a prime position to take advantage of economic shocks and raise their prices at rates that are actually higher than inflation. Additionally, with a market set up to give corporations lots of power and little oversight, CEOs can raise prices without the threat of competitors undercutting them. While this has brought cheap prices in the past, corporate consolidation has come at the cost of resilient and stable supply chains for consumers.

Are corporations using inflation to raise prices?

Beyond the inflation we’re all feeling, groups like Groundwork and the Economic Policy Institute (EPI) argue higher corporate profit margins are responsible for more than half (53.9%) of consumer price increases. While some have pointed to rising wages as a driving force behind inflation, the same research from the EPI finds that labor costs have contributed to less than 8% of the rise in costs. Recent polling from Data for Progress and Groundwork Collaborative finds that 63% of voters agree that “large corporations are taking advantage of the pandemic to raise prices unfairly on consumers and increase profits.”

Additionally, Groundwork Collaborative found that corporate leaders are excited about the prospect of inflation as a means to increase shareholder profits, a sentiment expressed openly on public corporate earnings calls with shareholders. On one earnings call, Kroger CEO Rodney McMullen, whose company recently lost a labor battle with striking grocery workers in the Denver Metro Area, even went so far as to tell investors that “a little bit of inflation is always good in our business.”

What about high gas prices?

Panelists at the ProPublica event pointed to the war in Ukraine as a reason why fuel prices have climbed so high, but consumers shouldn’t expect to get any help from oil and gas companies. As gas prices continue to spike, fossil fuel producers have made it clear that they’re fine with limiting production and riding the cash cow of record high gas prices. 

Elsewhere, the first public lands leasing sale of the Biden era resulted in some land parcels going unsold in Wyoming, Colorado, and other western states, which CFI’s Pegah Jalali recently told the Associated Press was a sign that oil and gas companies weren’t actually interested in boosting domestic oil production, just maximizing their profits. 

Will raising interest rates actually stop price increases?

In response to rising inflation, the Federal Reserve began raising key interest rates earlier this year. This comes despite the fact that many economists, including Groundwork’s Dr. Mabud, predict this could lead to a recession without having any effect on the price of groceries or gas. Mabud argued during the ProPublica panel discussion that aggressively increasing interest rates would “artificially [create] a recession [and] put millions of people out of work, especially Black and Brown workers,” and called the notion of putting all our hopes in Fed action to solve inflation a “fundamental misunderstanding of why we have rising prices in the first place.” 

Based on Federal Reserve Chairman Jerome Powell’s own comments, it does not appear he’s concerned about workers. In May, when Powell announced a large 0.5% interest rate increase he told reporters at a press conference that raising interest rates and reducing hiring demand “would give us a chance to get inflation down, get wages down, and then get inflation down without having to slow the economy.” Though workers have seen their wages increase in the past two years, that’s after more than 50 years of essentially stagnant wages.

The other panelist, economist Dr. Claudia Sahm, argued that “the Federal Reserve can do nothing to get gas and food prices down,” and said it’s Congress and the Biden administration who have the power to address the supply chain and shipping issues that are driving inflation. 

What policies will help address the real causes of inflation?

In order to attack the root source of inflation, policymakers must crack down on corporate profiteering and invest in more resilient and equitable supply chains, says Dr. Mabud. She suggests an array of tools that Congress can use: a federal price gouging statute, taxing corporations more effectively through a windfall tax, and generally implementing more aggressive corporate taxation. She also recommends empowering the Department of Justice and the Federal Trade Commission to enforce corporate regulation and investing in clean energy sources to avoid the economic, climate-related, and geopolitical problems of fossil fuels. 

Dr. Sahm questioned why prices were so low pre-pandemic and argued that the globalization of production and the ensuing race to the bottom are considerable contributors to historic low prices. Dr. Sahm says, “the thing about inflation is understanding exactly how we had gotten all those really low prices. We have gotten these low prices off the backs of workers in Asia, people who get very low pay in the United States. These systems that are just put together with shoestring and bubblegum… Fixing these systems may come with a cost, but a benefit will be a more resilient and a more equitable system.” 

By Kaylee Kaestle

Reproductive rights are an essential part of the ability for women and all pregnant people to achieve socio-economic independence. Now that Roe has been officially overturned, drastic economic disadvantages are likely to plague women around the country. Colorado has long been at the forefront when it comes to policies on abortion, contraception, and other reproductive health policies. We were the first state to loosen abortion restrictions — even before the landmark 1973 Supreme Court decision in Roe v. Wade — making it a groundbreaking setting for reproductive rights advocacy and legislative decisions. 

This year, Colorado lawmakers codified the right to abortion in the state in response to the possible overturning of Roe. The Reproductive Health Equity Act (RHEA) had already been passed by the legislature and signed into law a month before Politico leaked a draft of a Supreme Court decision that would overturn the nearly 50-year-old precedent. Colorado will almost certainly see an increase in people seeking services created by a ripple effect of surrounding states —  like Oklahoma, Idaho, and Utah — passing bans and restrictions. Knowing that Roe was likely to be overturned, Colorado abortion providers have already been working hard to ensure they can continue to serve people seeking abortion and other reproductive health services without overwhelming our clinics and practitioners by preparing for a major influx of people coming from surrounding states seeking services. 

Because of these expected restrictions, it’s never been more important to lift up the economic implications of abortion bans and the widespread research that supports the sentiment that anti-choice legislation leads to drastic economic instability for those already facing numerous economic barriers. 

Historically, abortion bans have been detrimental to the overall economic prosperity of women. According to a 2019 analysis by the Institute For Women’s Policy Research, “Existing children in the households of women who were denied abortions were more likely to be living below the federal poverty level several years later than existing children of women who received abortions.” Likewise, half of all people who seek abortions live below the poverty level and 75 percent earn low income. Without the proper financial resources, women are much more likely to struggle with providing economic stability for themselves and their children, often leading to a continuous cycle of poverty.

Because of the structural barriers that limit access to reproductive health care, Black women are most likely to be negatively affected by abortion bans, and they are more likely to live in states that have restrictive reproductive health care legislation that typically doesn’t fund contraceptives through Medicaid programs. And even when these programs do fund reproductive health care, the copayment for services is often too expensive for many to afford. Because of these structural barriers, women of color have higher rates of unintended pregnancies, and, therefore, need more access to abortion resources than white women, but are more likely to live in areas with less access and have less financial resources to travel to seek care. A study of census information and IRS tax returns shows that unmarried Black teens who give birth reduce their probability of future employment by 47-58 percent. However, when Black women live in areas where abortion is safe and available, they are likely to see about a seven percent increase in employment opportunities. Considering Black women – and women of color in general – face more barriers to economic mobility in their lifetime than white women, abortion bans are just another barrier to closing the racial wealth gap. Without Roe v. Wade in law to ensure these services are allowed, there is a very real risk of further drastic economic disparities among women of color.

With surrounding state governments likely to implement abortion bans in the near future, Colorado is going to see an even greater influx of out-of-state people seeking reproductive services. According to the Texas Policy Evaluation Project, within the four months after Texas’s strict abortion ban was implemented in 2021, 5,500 Texans sought out-of-state abortions compared to 500 during the same timeframe in 2019. About half of those seeking out-of-state services went to Oklahoma and Kansas, which are now two of the primary states looking to rid reproductive services altogether. Colorado providers are worried flooded clinics and overworked practitioners will be left trying to deal with an increase in patients seeking reproductive health care. 

Despite Colorado’s longstanding history of being a pro-choice haven, abortion laws and restrictions are not perfect here either. According to the Guttmacher Institute, abortion is not covered by insurance policies for public employees and is only publicly funded in cases of life endangerment, rape, or incest, leaving those unable to afford abortion services potentially being subjected to forced births and additional economic barriers.

The decision to overturn Roe comes with a multitude of social and economic consequences, and though Colorado is one of the most progressive states in the country for reproductive health, there’s still more we can do to implement further protections to ensure that reproducing people have control of what happens to their bodies regardless of the color of their skin, where they were born, or how much money they make. To learn more and see what some of our partners are doing about the state of reproductive rights in the country, please check out the Colorado Organization for Latina Opportunity and Reproductive Rights (COLOR), Progress Now Colorado’s Keep Abortion Safe project, Planned Parenthood of the Rocky Mountains, Cobalt and the ACLU of Colorado.