A senior budget advisor to Gov.-elect John Hickenlooper said his “door is open” to any suggestions to help improve Colorado’s cash-strapped budget.

Todd Saliman yesterday reiterated what economists have been saying for several years: a combination of three constitutional provisions has put the Colorado budget in a stranglehold. The Taxpayer’s Bill of Rights (TABOR) — which requires voter approval for any tax increase — Amendment 23 — which requires per-student funding for K-12 to be increased at a set rate each year — and the Gallagher Amendment — which limits residential property tax hikes — mixed with the economic downturn have created a “perfect storm” to slam Colorado’s budget, according to several economists.

“If we were to design a system from scratch, it would not simultaneously limit revenue and mandate spending,” Saliman said.

Saliman made his remarks at the Colorado Budget Summit (CBS), an open hearing that predominantly featured members from the Independence Institute, a libertarian think tank. Speakers from the Independence Institute called for drastic reforms, including:

» Figuring out ways to decrease the amount of people in jail;

» Using a voucher system for higher education and not having Colorado universities provide dormitories, recreation centers or anything else that students can find outside a college campus;

» Repealing “ObamaCare.” Republican lawmakers warned that the health care reform could create a financial “tsunami” for Colorado in several years. Meanwhile, a non-partisan analysis of health care reform released yesterday found that repealing “ObamaCare” would add $230 billion to the U.S. deficit by 2021. GOP lawmakers doubted those numbers;

» Eliminating the Colorado Old Age Pension program, which provides $699 per month to qualifying low-income seniors in Colorado.

Saliman said while he appreciated the suggestions from the CBS speakers, he pointed out that many of the recommendations would require a vote of the people. Saliman predicted that the state and country are set for a slow recovery. He believes the state must deal in particular with K-12 education and Medicaid, which take up approximately 65 percent of the general fund.

Meanwhile, Colorado Senate Republicans held a separate roundtable with business leaders focused on streamlining business processes. The recommendations included expediting the permit processing time and replacing multiple local regulations with a single, statewide standard to reduce compliance costs.

But Saliman said that the bulk of challenges facing the state are long-standing structural problems, not issues that can be fixed by improving efficiencies.

Combating cynicism

The Republican Study Committee of Colorado (RSCC), a group of lawmakers whose goal is to formulate and advocate for legislative actions consistent with the “RSCC Declaration of Principles,” put on the CBS. RSCC member Rep. Glenn Vaad, R-Mead, said yesterday’s meeting was a useful tool to think out important issues with other lawmakers and scholars.

“I recently read how cynicism is the tool of lazy thinker,” he said. “This is a tool to defeat cynicism.”

In Colorado, several economists predict economic growth for the state in 2011. But any recovery comes after lawmakers have cut spending, reduce costs and close shortfalls of more than $5.2 billion since 2008.

Henry Sobanet, who served as Republican Gov. Bill Owens’ budget director and this week was named to the same post by the Democrat Hickenlooper, told the Republican Study Committee the federal stimulus funds that Colorado used to prop up funding of some services and agencies merely delayed some very difficult budgeting choices, and that the day of reckoning has arrived.

The potential benefits of declaring a state fiscal emergency were laid on the table last week as state lawmakers learned what their options are for crafting a workable balanced budget for 2011-12.

“We’ve done this in the last two years and I believe that the General Assembly will have to do it again in order to move some of the tobacco-tax moneys to back-fill the General Fund,” Joint Budget Committee staffer Melody Beck told the budget-writing panel during a staff briefing on the Department of Health Care Policy and Financing.

Declaring a state fiscal emergency is accomplished by passing a resolution with a two-thirds majority in both the House and Senate along with a nod from the governor, who must sign the resolution for it to take effect. For the past two years the legislature and governor have successfully declared such an emergency in response to dismal revenue forecasts against the backdrop of a constitutional mandate for a balanced budget.

With passage of the resolution, a portion of tobacco tax revenue would be freed up to patch up fiscal holes in the state’s Medicaid program through a provision in Amendment 35, approved by voters in 2004. The amendment allowed the state to increase an excise tax on tobacco products in order to fund expansions in Child Health Plan Plus and Medicaid, primary care serving the uninsured and medically indigent, prevention and treatment of cancer, cardiovascular and pulmonary diseases; and tobacco cessation programs.

Sen. Kent Lambert, R-Colorado Springs, said the introduction of such a resolution appears to be likely and quite possibly could become inevitable once December’s revenue forecast is known.

“I’m sure this will be brought forward this year,” said Lambert. “However, I think there’s going to be some debate on it trying to figure out where we are in all of this.”

House Minority Leader Sal Pace, D-Pueblo, said today that he will be taking a wait-and see-approach on the necessity of declaring a state fiscal emergency until more is known on the numbers front.

“I’d have to see what the budget is looking like and what kind of money we’re talking about,” said Pace. “There’s a down side any way you look at it.”

The state’s Civil Rights Division “may be in jeopardy” due to funding woes, a top official told a legislative panel Wednesday. In a hearing at the Capitol before the Joint Budget Committee, Barbara Kelley, head of the state’s Department of Regulatory Agencies, pointed to the same strapped state budget that has bedeviled other state agencies of late, but she also noted the division–which investigates discrimination claims in housing and the workplace–is particularly vulnerable.

The Civil Rights Division is unique in Kelley’s department in that it receives both state tax revenue and federal funds rather than revenue from user fees, which fund much of the rest of her agency. The division, says Kelley, has done its part to help the administration of Gov. Bill Ritter balance the state’s budget for the last three years; the resulting cuts have affected its ability to qualify for federal money. She said the latest round of cuts in state funding to the Civil Rights Division “has reached a point of jeopardizing federal funds the division receives.”

Kelley told the panel that federal funds are based on the quantity of timely, successful investigations into cases of housing and employment discrimination. With fewer investigations completed due to declining state funding, she said, “we don’t have the ability to increase our portion of federal funds.”

Kelley noted that the fee-generated cash funds that make up over 96 percent of her department’s $70.9 million budget are collected through the department’s wide-ranging regulatory activities and only can be used to cover the costs of those functions–not to help sustain the Civil Rights Division.

Nonetheless, lawmakers and the Ritter administration have relied heavily on cash funds from various programs in recent years to fill in funding gaps in the the state’s operating budget. Cash funds are made up of money collected as fees and assessments for specific purposes such as a licensing fee paid by regulated industries.

“The fee-payer dollars that support DORA appropriations are every bit as precious as tax dollars, and fee impacts create very real consequences for the professionals and businesses we regulate,” said Kelley. “We fully understand and remain committed to our obligation for the wise and efficient use of fee-payer resources.”

Kelley lobbied the committee to keep the Civil Rights Division afloat despite the fact that it is the only part of her department receiving tax revenue out of the operating budget–and despite assurances by Rep. Cheri Gerou, R-Evergreen, that the division was not under consideration for elimination.

“You could eliminate every program (within DORA) across the board and you would not impact the state’s budget by one dime, except, with respect to the allocation to the Division of Civil Rights,” said Kelley. “If you’re asking me if I as the executive director of DORA would recommend to you that we disband the Civil Rights Division to save $1.5 million, my response is, absolutely not.”

As economic activity has failed to significantly pick up during 2010, Colorado is among numerous states borrowing from the federal government to cover deficits in its unemployment insurance fund.

Original reports in the late spring of this year indicated that the state had borrowed roughly a quarter of a billion dollars to shore up the fund. That figure now stands at $368 million, according to a U.S. Treasury website.

When measured on a per-capita basis, Colorado is not as deeply in hock as several other states. However, the prospect of continued borrowing still has some legislators concerned. The loans will begin to accrue interest beginning in January.

A June evaluation of the fund by the state auditor noted that the Colorado Department of Labor and Employment had not fully investigated options for deferring interest, and that by not doing so, Colorado businesses were at risk for making up the difference through higher premiums:

Statute requires interest costs on federal loans to be paid by employers. Because Colorado’s loan will likely be outstanding for more than three years, employers in the State will incur two costs: (1) interest accrued on the loan beginning on January 1, 2011, and (2) a decrease in the federal tax credit (i.e., FUTA tax credit) beginning in late 2012. These additional costs will be levied on employers while recovery from the current recession is still occurring. Federal law and regulations offer states options for deferring interest costs on loans, which could help Colorado employers.

Cher Haavind, spokeswoman for the labor department, said that several months ago, the department convened a stakeholder group comprised of business and labor representatives to address fund-solvency issues.

“A deferred interest proposal, among other remedies, is part of the current discussion,” Haavind said. Additionally, she says the labor department has joined the National Association of State Workforce Agencies in lobbying the U.S. House’s Ways and Means Committee for an extension of interest-free borrowing.

GOP Senate Minority Leader Mike Kopp, of Littleton, says over the fall, Senate Republicans laid out an agenda that included weening the state off of federal “backfills.”

“We want to push back on the reliance on federal funds, so the senate (Republican) caucus is certainly ready to have that fight,” Kopp said.

Sen. Rollie Heath, D-Boulder, said the federal loans are troubling, but he argued that they served their purpose over the last year.

“The level of debt is only representative of the fact that that’s how much the citizens of Colorado got,” Heath said. “To do nothing for those folks, would have been more alarming.”

In recent weeks, businesses all across the state have faced rising unemployment insurance premiums to increase cash flows to the unemployment-insurance fund.

“We’re doing a great job, we’re very efficient and, by the way, please don’t cut our budgets.”

That was the basic message distilled from a day’s worth of testimony Tuesday to the legislative Joint Budget Committee by leaders of the state’s colleges and universities.

Beyond that, college presidents were eager to tout their completion rates, growing enrollments of first-generation and minority students, increased cooperation with neighboring colleges and school districts, growing use of online instruction and their big economic impacts on their regions and the state.

All that was packed into the daylong annual hearing that the JBC devotes to the state’s higher education budget. It’s become an occasion for the leaders of individual colleges to show their faces to six of the legislature’s most powerful members and tout the strengths and unique features of their individual campuses. (Lots of other legislators, including several with colleges in their districts, dropped in and out of the hearing.)

While the tone of the presentations was generally upbeat, the longstanding financial challenges facing higher education hung over the meeting, and one president used her time at the microphone to talk about just that.

University of Northern Colorado President Kay Norton didn’t recite encouraging statistics about the university, tout new programs or introduce students to tell their personal stories.

She talked about money, or the lack thereof.

“Over the last 20 years or so we have seen a decrease in the percentage of the state budget that has been devoted to higher education.” Referring to comparative statistics from other states, Norton said, “We are number one in something – disinvestment in higher education” as measured by spending relative to state personal income.

“For a generation or maybe more than that we have been a low state support, low tuition and low financial aid state. … We have gotten away with it because of the mountains.”

Norton continued, “We are much more reliant on tuition than we used to be … as we have really been unable to rely on the state.

“You have to understand that the source of our revenue [now] is students. … That is a permanent change that we see happening. Although we aren’t necessarily thrilled by it, that is the reality of the world in which we operate.”

Although Norton was the only campus leader to focus her remarks on the financial situation, some other presidents touched on the issue.

Mesa State President Tim Foster said that higher ed funding really has been declining for 40 years, and “We knew that all we needed was a good recession to accelerate the defunding of higher education.”

Bruce Benson, president of the University of Colorado System, warned, “Further cuts will hurt higher education and have a devastating effect on the Colorado economy.” (Benson, always well armed with upbeat CU statistics and facts, held forth with a rapid-fire presentation that lasted about half an hour.)

Joe Blake, chancellor of the Colorado State University System, said, “Colorado ultimately has to decide what kind of future higher education system it wants.”

The discussion didn’t get into a lot of financial specifics, although there was some back and forth on the 2011-12 institutional allocations that have been approved by the Colorado Commission on Higher Education. (See this story for background.)

Higher education Director Rico Munn urged the committee to accept the proposal, saying, “This should be only a temporary allocation … until we can realize what the new normal is.”

Most presidents said they support the plan as a least-bad option, but Nancy McCallin, president of the Community College System, said, “I would respectfully disagree that the funding formula is OK.” She said the proposed formula penalizes fast-growing schools and is “very detrimental to our ability to sustain our institutions.”

Committee members got into the weeds on only one issue – whether Mesa State violated the legislature’s 2010-11 9 percent tuition increase ceiling by raising tuition for freshman 16 percent while keeping overall increases under the ceiling.

Denver Democrats Sen. Pat Steadman and Mark Ferrandino said they think Mesa was in the wrong, but Foster said, “We simply believe we complied with the footnote” that specified the ceiling.

(Asked about the issue earlier in the meeting, Munn said, “President Foster is very creative in how he runs Mesa State.”)

Who’s No. 1?

Committee members and others who sat through the daylong hearing might justifiably have been confused by the overlapping claims various presidents made about their institutions in presentations studded with terms like “fastest growing.” “record,” “only institution of its kind,” “largest,” “finest” and the like.

Consider this comments about online programs:

• “The only institution of its type in the entire nation.” – President Becky Takeda-Tinker of CSU Global Campus
• “We’re probably the leader in that.” – CU’s Benson
• “We didn’t give it a fancy name like Mesa State Global, but nevertheless it serves Western Colorado very well.” – Mesa’s Foster
• “We have the largest online enrollment in the state” – McCallin of the community colleges

Quotable, or at least amusing

• “Following CU is like following the proverbial elephant at the circus.” – Foster, who spoke after Benson
• Responding to a question about privatizing CU, “To really change it you probably need a scandal, and I’m going to do my damndest to prevent that.” – Benson
• “I came to Colorado … for a real sense of adventure in the wild, wild west.” – new Fort Lewis College President Dene Kay Thomas, originally from Minnesota
• “Our institutions of higher education are the horses that will help pull our economy out of the ditch it is in.” – Kyle Hybl, chair of the CU Regents
• “Does the Troy Tulowitski contract make you lay awake at night?” – Sen. Al White, R-Hayden, to UNC trustee chair (and Colorado Rockies owner) Dick Monfort
• “Absolutely.” – Monfort

Questions & Answers

The JBC prepares questions for college leaders ahead of time, and the answers are compiled into a briefing paper. Read it here.

Ritter led off the JBC’s fall session with a presentation on the 2011-12 budget and a plea for lawmakers to have an “open mind” with regard to the budget-balancing process.

Denver Daily News Staff Writer

The state should consider ending services like health care for veterans and road maintenance to help balance the budget, according to the union that represents state employees.

The Colorado Legislature’s Joint Budget Committee (JBC) yesterday was briefed on the proposed 2011-12 state budget that addresses a shortfall nearing $1 billion. Colorado Workers for Innovation and New Solutions (WINS), the union that represents more than 31,000 state employees, believes the proposed budget is “more of the same” as it cuts education and continues to “nickel and dime essential services.” Robert Gibson, executive director of Colorado WINS, believes the state must consider making difficult choices as essential services have already been cut to the bone.

“We’re already down to a skeleton budget and now the question is: do we keep starving services and shortchanging taxpayers or make tough choices about ending services like road maintenance, state parks and health care for our veterans?” said a statement from Robert Gibson, executive director of Colorado WINS.

Meanwhile, Gov. Bill Ritter spokesman Evan Dreyer said while criticizing a budget proposal is fine, offering specific proposals or alternatives to keep the budget balanced is better. When asked whether eliminating road maintenance, state parks and health care for veterans counted as specific proposals, Dreyer responded that “realistic proposals are actually the best.”

For his part, JBC member Rep. Mark Ferrandino, D-Denver, said he understands the need to have a conversation about possibly eliminating services as budget shortfalls annually persist despite yearly cuts. And while he disagrees with the possible service cuts suggested by Colorado WINS, he believes lawmakers and Coloradans alike should engage in a conversation about what services they want and how they should be paid for.

Consequences

A press release from Colorado WINS points out that a combination of budget cuts and underfunding have resulted in some facilities within the Department of Human Services to run out of food, soap and toothpaste for patients. In the Department of Corrections, budget cuts have led to chronic understaffing and violent criminals being housed in lower security facilities. The violent criminals in the lower security facilities have resulted in an increase in assaults on officers, inmates and inmate deaths, according to Colorado WINS.

“For the past few years we’ve been shortchanging essential services and that has consequences Đ lower quality education for our children, long lines at DMV, crumbling roads, increased safety risks to our communities,” said a statement from Gibson. “Unfortunately this budget proposal is more of the same. It cuts education and continues to nickel and dime essential services.”

With the proposed 2011-12 budget, Ritter has helped cut spending, reduce costs and close shortfalls of more than $5.2 billion since 2008.

Ritter said last week that the proposed budget was fiscally responsible while maintaining essential services. While funding would increase for K-12 education by $43 million, the funding is $92 million short of what is needed to cover an increase in enrollment and inflation. K-12 education now makes up almost half of the state general fund.

The proposed 2011-12 budget also preserves the same level of funding for higher education. However, the $89 million dollars in stimulus funds that helped prop up higher education this fiscal year will not be available during 2011-12. The Higher Education Strategic Plan last week proposed that Coloradans vote on a tax increase that would help fund Colorado colleges and keep them competitive.

The proposed budget also continues a 2.5-percent reduction to state employee take-home pay for a second year, and includes no pay increases for the third year in a row.

Gov.-elect John Hickenlooper and the new legislature will have the ultimate say on the 2011-12 budget. Ferrandino believes the proposed budget is well balanced and a good starting point, though he believes it won’t be the same budget that is passed into law.

Ferrandino is hopeful based on yesterday’s JBC meeting that the six-person committee, which is now evenly split between Democrats and Republicans, will be able to work together going forward.

“There is definitely going to be a need for more compromise being a three-three committee,” he said. “My hope is that we can do that in a way that (is) best for the state.”

A term-limited Gov. Bill Ritter on Wednesday presented his final budget to the legislature’s Joint Budget Committee, encouraging committee members to approach this coming budget cycle “with an open mind.”

“There was a lot of rhetoric during the recent campaigns, but when it comes to budgeting, everything must be on the table and the political posturing must come to an end,” the Democratic governor told JBC members.

In prepared remarks, Ritter began first with education. He said the executive branch was doing “everything we can to minimize impacts to K-12 education” and “everything we can to shield higher-ed from deep and painful cuts. …However, we must acknowledge that higher-ed will lose Recovery Act funding in 11-12.”

Some Republicans, critical of Ritter’s unwillingness to make sweeping cuts to the bureaucracy, are lobbying Gov.-Elect John Hickenlooper to radically adjust the budget, or to start over.

Ritter submitted his budget proposal on Election Day, Nov. 2.

The full text of Ritter’s remarks are published below.

Chairwoman Hodge, members of the Committee, and other members of the General Assembly, good morning. Today I am presenting you with my Fiscal Year 2011-12 budget proposal.

Thank you for allowing me and Budget Director Todd Saliman to review the budget with you and answer any questions you may have. This, as you know, is my final presentation to you as Governor. I’d like to take a moment to thank the JBC staff for all their hard work these past four years, and particularly the past two years as they have dealt with multiple budget-balancing plans. I also want to thank Todd, Deputy Budget Director Lisa Esgar, their staff and the budget staffs in all of our departments.

They have served the people of Colorado with distinction and with calm, steady hands during an extremely volatile recession. I also want to thank you, the members of the JBC and the full General Assembly. While we have cut spending and closed shortfalls well into the billions, you face even more tough choices and painful decisions in the months ahead.

I know you will scrutinize this budget proposal closely, as well you should. I also urge you to approach this budget cycle with an open mind. There was a lot of rhetoric during the recent campaigns, but when it comes to budgeting, everything must be on the table and the political posturing must come to an end. So, examine things like the cash-fund transfers or other revenue-related parts of our budget request, and be open to program cuts we haven’t had to consider up to this point, because in the final analysis, this is about balancing the budget, maintaining essential services and preserving the safety net as best we can.

This is about finding common ground, forging bipartisan solutions and doing what’s best for Colorado. If ever there was a place where Mario Cuomo’s famous line about campaigning in poetry and governing in prose was true, it is here, with you, with this budget.

This is a balanced budget. It is a fiscally responsible budget, and it is a budget that continues to move Colorado forward on the road to recovery by investing in priority areas we value and care about the most – public safety, education, economic development, healthcare and transportation:

· We are doing everything we can to minimize impacts to K-12 education. This proposal increases classroom funding by $43 million, and while that is not enough to cover enrollment and other cost increases, K-12 funding has actually gone up 7 percent since FY07-08 and now makes up almost half of the General Fund budget.

· We are doing everything we can to shield higher-ed from deep and painful cuts, and this proposal preserves the current level of state support for higher-ed. However, we must acknowledge that higher-ed will lose Recovery Act funding in 11-12.

A few other notable investments in the FY11-12 proposal:

· In our prisons, we are actually seeing a decline in the number of inmates, and this proposal continues to invest in anti-recidivism programs, because they are working.

· I am proposing new resources to cover the increasing need for emergency placements for children and adults with developmental disabilities.

· And I am proposing that we keep all of this state’s driver’s license offices open and serving the public.

All of that said, the road to recovery will not be straight. Revenues are rising, but not fast enough to keep up with mandatory healthcare, human service and education cost increases. So this budget proposal continues many of the same tough, unpopular and unenviable decisions we’ve been making for two years now. This budget continues to spread the burden, the pain and the solutions among state employees, senior citizens, schools, people who use our parks, retail customers, Medicaid clients, businesses and more.

As difficult as these decisions are, our strategies the past two years are working. How do we know that? One measure is that our credit rating has remained strong. Another – Colorado remains one of the best states in the country for businesses, and our unemployment rate has stayed well below the national average. We have minimized pain, made government more efficient and have served as responsible stewards of taxpayer dollars.

In concluding my final JBC message, let me suggest that the most important thing Colorado needs as you develop a balanced budget is civil, thoughtful, and rigorous debate. A debate that is respectful of different positions; a debate that sets politics and partisanship aside; a debate that insists that all proposals to reduce revenue or increase spending has an equal and off-setting increase in revenue or decrease in expenses.

Budgets are moral documents and they are investments in our vision for the future of the state. With that in mind, we owe nothing less to the citizens of Colorado than civil, thoughtful and rigorous debate. During these final two months of my administration, I remain at your disposal to assist with the hard work of keeping the budget balance

An independent audit presented today to a legislative panel shows that Colorado still trails other states in state-government employee benefits, but some lawmakers cried foul in light of benefits in the private sector that they say lag even further behind the state’s offerings.

The audit of the Department of Personnel and Administration’s employee-benefits program, carried out by Sjoberg Evashenk Consulting, Inc., under the auspices of the Office of the State Auditor, was presented at the Capitol to members of the Legislative Audit Committee. It shows that state employee health insurance benefits are still shy of catching up with those of peers in other states in terms of overall value to the employee.

However, Colorado’s policy of extending full health insurance benefits to part-time employees–defined as working one “regular” day per month–and of granting 10 days of sick leave annually, far exceed that of other comparable employers.

Health insurance benefits eat up 86 percent of the $281 million spent annually by the state on employee benefits. Approximately 29,000 state employees avail themselves of health insurance benefits with the remainder opting out.

The state has a fixed-dollar amount, regardless of the employee’s salary, that is applied toward health insurance. It amounts to $357 per month toward covering the employee and up to $883 per month toward covering the employee’s family. Plans range from as little as $7 per month for employee contributions for an individual, and $205 for family coverage, to as high as $85 per month in employee contributions for individual coverage and $436 per month for family coverage.

Sen. Dave Schultheis, R-Colorado Springs, who chairs the audit committee, said any lag in benefits received by state employees can’t compare with hardships in the private sector.

“When I look through this report … I think to myself, ‘How many private companies can afford the benefits that we’re seeing here?’” said Schultheis.

State statute enacted in 2004 requires that state employee benefits must be similar to benefits offered by comparable employers. The audit makes comparisons to 12 other states, local cities and counties, and to limited information gleaned from voluntary surveys of the private sector. Sen. Jim Kerr, R- Littleton, said such comparisons are not reflective of the real world, where employers have to respond quickly to economic pressures.

“Your market (used in the audit) is primarily government. That’s the dilemma that I have when we’re trying to do comparatives,” said Kerr. “The private sector better reflects what is happening in our economy.”

Sen. Lois Tochtrop, D-Thornton, disagreed.

“I don’t feel like the audit is skewed because we are comparing apples to apples with other states,” Tochtrop said. She also said state employees earn their benefits.

Yet, Schultheis said taxpayers can’t help but make the comparisons to their own experiences.

“People are angry out there. They see a growing government, and it’s taking more and more money out of their pockets. For us to have an audit that is basically a cocoon….if the public begins to know about this….I think there’s going to be a lot of anger,” said Schultheis. “We’re not looking at the people that are struggling out there and trying to make a living and have no benefits close to this in most cases.”

However, Sjoberg Evashenk’s George Skiles said that with a few cost-saving measures, employee benefits should be safeguarded and if possible improved upon.

“Employees in the state are paying more than they should be for medical benefits, and there can be improvements made to the benefit plan structure overall,” Skiles said.