We’ve Been Talking About the Structural Deficit for Years

At the Colorado Fiscal Institute, we’ve been talking about the structural deficit for roughly the last seven years. We’d bring it up constantly to anyone who’d listen

Spoiler: No One Wanted to Hear It

“Have you considered the structural deficit?” we’d ask, helpfully.

“Budgeting to the TABOR caps doesn’t allow spending to keep up with actual needs,” we’d explain, usually while gesturing at charts and looking slightly unhinged.

We’d go on and on: “Have you thought about the structural deficit?” “Budgeting to TABOR caps doesn’t work in real terms.” “Yes, but what about the structural deficit?”

Then finally, they’d look at us and say, “We were just asking if you wanted coffee.”

And then they’d slowly back away.

(To be fair, we were wearing budget forecast spreadsheets like shawls and muttering about Medicaid growth.)

This went on for years. YEARS.

It was like yelling into a canyon where instead of hearing your echo, you just hear someone shout back, “You guys still talking about that?”

Then Came the Pandemic (and the Federal Money)

Then the pandemic hit, and suddenly Colorado’s budget got hit with a federal money cannon. But instead of solving the structural deficit, this masked it, like a bad toupee on a bald eagle.

Fast Forward: A $1.2 Billion Budget Deficit

Now, we have a $1.2 billion budget shortfall, and guess what? Suddenly people are like, “Hey, what’s this structural deficit thing you keep shouting about while hiding in our break room?”

Here Comes the Math: Why the Numbers Don’t Add Up

Finally! Now follow this math example as we explain the structural deficit.

The TABOR cap, which grows by inflation plus population, will only allow state revenue to grow by 3.6%. But at the same time, Medicaid premiums are up 5.7% to cover the rising cost of long-term care. The cost of Child Health Plan Plus, for children whose families make too much to qualify for Medicaid, is up 20%. 

That Math Don’t Work! 

Toasters vs. Teachers: TABOR’s Inflation Formula Is a Joke

Look at it another way, the inflation formula used by TABOR measures the cost of toothpaste and toasters—which is super helpful if the government is planning to fight poverty by handing out minty smiles and crispy bagels. Unfortunately, it does not account for the actual things the government buys, like nurses, teachers, school buses, roads, and anti-anxiety medication for budget analysts.

Meanwhile, Colorado Gave Back $8 Billion in TABOR Rebates

In addition, we’ve spent the past 3 years giving back $8 billion in TABOR rebates. Now we are making a billion dollars’ worth of cuts.

How Did We Close the Budget Gap? Cuts, Mostly.

So what happened? How did the General Assembly close a $1.2 billion budget shortfall that’s equivalent to 7% of the General Fund?

Hospitals, Schools, and Even Food Pantries Took a Hit

The budget cuts the state workforce by 1.5% by not filling job openings. It cuts $114 million from transportation projects and $1 million from food pantries.

The budget calls for a 1.6% increase to the state reimbursement rate for Medicaid providers. This sounds nice until you realize inflation is more like 4 percent. This means hospitals and providers that accept Medicaid clients will see a pay cut in real terms.

And here’s the kicker: when the state doesn’t keep up with rising costs, it becomes harder for private doctors to take Medicaid patients—because they can make way more money seeing Medicare patients (who at least bring decent snacks) or private insurance clients (who pay more but are less likely to have pocket candies).

Although schools got an extra $150 million from the General Fund, that’s not enough to keep up with inflation and pupil growth, nor is it enough to implement the new school finance formula. The cuts that schools took involved shifting from a five year-average pupil count to a four-year. That trimmed about $40 million. Not all students will get free lunch next year either. We’re also dipping into the B.E.S.T. fund, which is a pot of money—literally funded by marijuana taxes—originally meant for important capital construction projects like new gymnasiums, upgraded playgrounds, and schools where the roof doesn’t fall on the band room. So, we are delaying school construction projects to pay for part of the school finance formula. And to keep this up, we’ll have to deplete the State Education Fund.

Prop 130: More Pressure on an Already-Stretched Budget

Because voters passed Proposition 130 in November, requiring the state to find $350 million in the budget to transfer to local law enforcement. That was part of the $1.2 billion shortfall. It looks like this will be paid over a ten-year period by creatively investing part of the General Fund reserve.

This Year: Duct Tape. Next Year: Who Knows?

This year’s state budget was held together with bubble gum and duct tape. And bad news: next year we’re out of bubble gum. The math don’t work. That’s not a policy position—it’s just a fact, like gravity or the universal law that IKEA screws vanish the moment you open the box.

Here’s the Real Problem

Here’s the problem: healthcare and education costs are rising faster than the TABOR limit.

So unless we find new revenue—or discover that teachers can be legally paid in expired coupons—we’re looking at even deeper cuts next year.

Conclusion: Please, Let’s Not Yell into the Void Again

“We need to raise revenue,” is now what CFI staffers will tell coffee wielding waitresses.

Don’t make us scream that into the void for the next seven years. 

By Chris Stiffler, Senior Economist