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Hickenlooper submits his final state budget, but it may not last long

Author: Marianne Goodland - November 1, 2018 - Updated: November 1, 2018

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Gov. John Hickenlooper won’t be in office when the next Colorado state budget goes into effect next July 1, but he submitted his 2019-20 proposal to the General Assembly’s Joint Budget Committee Thursday, as required by law.

The proposal is likely to be revised by the next governor, who takes office on Jan. 8. Traditionally during such transitions, the new governor suggests an amendment to the budget proposal rather than submitting an entirely new one.

Hickenlooper’s budget proposal asks for a $600 million increase in general fund spending. The total budget, subtracting double-counted funds, is $31.4 billion, an increase of $1.5 billion or 4.6 percent.

The general fund request — which is made up of income and sales taxes — is $13.2 billion, or a 4.7 percent increase over the 2018-19 budget.

The state is just now getting back to the spending levels it last saw in 2009, said Lauren Larson, director of the Office of State Planning and Budgeting.

The governor proposed a variety of increases, such as a boost in Medicaid spending, money for K-12 and higher education, and tax credits to help working families.

Hickenlooper also is making a second stab at boosting the state’s general fund reserve. In the 2018-19 budget, he sought a reserve of 8 percent, but the General Assembly capped it at 7.25 percent

The reserve acts as a rainy day fund for when the state hits the next economic downturn. Last December, Moody’s Analytics said that Colorado’s current reserve is insufficient to stave off major budget cuts in the next recession.

The state reserve, at 7.25 percent in 2018-19, is $813.3 million, but at that level is about $300 million below what Moody’s said the state would need to ward off even a moderate recession, and more than $1.2 billion short for a severe downturn.

Hickenlooper’s request on the reserve is to add $90 million.

The 2019-20 proposal seeks $350 million in new K-12 spending. That includes $77 million to reduce the so-called “Budget Stabilization Factor,” the shortfall approved by the General Assembly after the 2008 Great Recession. The cut to K-12 started out as $1 billion; the proposal for 2019-20 would reduce it to $595 million.

Another $10 million would go to in initiatives proposed by the state’s Education Leadership Council, such as addressing teacher shortages and to provide incentives for students working on internships and apprenticeships. And $6.5 million would go to scholarships to college students who commit to teaching in rural and underserved school districts. The rest, about $261 million, would go to the general K-12 budget.

Hickenlooper also proposes a tuition buydown that would cost the state $121 million but would spare students at Colorado’s public colleges and universities from any tuition increase in the 2019-20 school year.

Among Hickenlooper’s other asks:

  • An average 3 percent salary bump for state employees. Larson said the state is struggling to retain employees, particularly in the departments of corrections and human services, and those employees also will receive a “targeted”  increase to cover health insurance premiums. All other state employees will see a one percent increase to apply to higher health insurance premiums.
  • $462 million more to cover Medicaid. Larson said the increase is not required for boosts in Medicaid enrollment. About $300 million of that request will go to cover higher costs for elderly long-term care that is covered by Medicaid.
  • $1.3 million more for the state’s film incentive program, which would bring its appropriation to $2 million. The General Assembly rejected a request from Hickenlooper during the 2018 budget process for a smaller increase for 2018-19.
  • $200 million for transportation, tied to this year’s Senate Bill 1. However, Larson explained that if Proposition 109 passes, the state would have to cover $175 million to $195 million for bond payments, beginning in fiscal year 2019-20 and about $75 to $95 million in the following year. Proposition 109 would direct the state to bond for $3 billion for transportation projects.
  • The Department of Agriculture is in line for $300,000 to promote Colorado agriculture in international markets. Larson explained that the department has sought those funds for years. However, Commissioner of Agriculture Don Brown told Colorado Politics that the marketing program, which has operated under “a patchwork of funding sources” without a single stable financial stream of its own, “is more important than ever,” given the tariffs imposed by China and other countries in the wake of the Trump administration’s trade wars.
  • The budget proposal also seeks to spend down the TABOR surplus projected for 2020-21. The total surplus is estimated to be around $380 million. About $150 million is already committed to cover the Senior and Veterans’ Property Tax Homestead Exemption. Hickenlooper wants $24 million from that surplus for child care tax credits for families with incomes of up to $150,000. Another $22 million would cover the cost of higher education and retraining, as part of a workforce development plan. Additional tax credits of up for $99 million would be provided to low-income working families, through the Earned Income Tax Credit.
  • The state, for the first time, will use general fund dollars to fund the Colorado Water Plan, a proposal for $30 million over three years. The plan has been solely funded in the past by severance tax dollars, but those dollars have been in short supply in the past couple of years.

In his budget letter to the legislature’s Joint Budget Committee, Hickenlooper looked back on the state’s economy when he took office in January 2011. “Since that time, Colorado has worked hard to rebuild, and our economic recovery has surpassed the nation’s,” he boasted.

The budget proposal is insufficient to address the state’s K-12 funding problems, said Amie Baca-Ohlert, head of the Colorado Education Association. The proposed funding for K-12 isn’t enough to add a fifth day to schools now operating on a four-day school week, she said, noting that half of the state’s school districts, primarily smaller, rural ones, are now on a four-day school week. And two large urban districts — in Brighton and Pueblo — have also now moved to four-day weeks for financial reasons.

A “$595 million hole is still a hole,” Baca-Ohlert told Colorado Politics Thursday. “Clearly, with a $595 million hole, we still have to work at prioritizing funding and [addressing] the fundamental problem with our funding picture” in education.

She also said the teacher shortage is really an educator shortage, as school districts are struggling to hire bus drivers, cafeteria workers and education paraprofessionals. “We want to make sure educators are listened to,” she added, “so that we don’t get to a point where 17,000 people come down and march on the Capitol,” which happened several times during the 2018 legislative session.

She also expressed concerns that if Proposition 109 passes, K-12, higher education and Medicaid would all be tapped to pay for those transportation bonds.

Senate President Kevin Grantham of Cañon City, who will leave office at the same time, also due to term limits, said in a statement that the governor “made no effort to anticipate or think-through contingencies if voters next week approve ballot measures that could have significant negative impacts on the state’s economic and fiscal fortunes. In that sense it is an ostrich budget, which conveniently ignores the problems that could be looming, depending on what happens Election Day. Some might argue that he has no obligation to anticipate the likely consequences of events that haven’t happened. But the Governor in last year’s budget made a point of highlighting all the potential budget-cutting Colorado might have to do because Republicans passed tax reform, even though those cuts resulted in a budget windfall for the state, yet he now ignores the fiscal and economic problems that could lie ahead if voters pass Amendments 73 or Proposition 109 next week.”

House Majority Leader KC Becker of Boulder, who could become the next Speaker of the House next week, thanked the governor “for prioritizing hardworking Coloradans in this budget request. We look forward to working with the next administration to continue developing a budget that reflects our shared values, and to make responsible public investments in key priorities like higher education, transportation funding, and expanding opportunities for every Coloradan to get ahead.”

Marianne Goodland

Marianne Goodland

Marianne Goodland is the chief legislative reporter for Colorado Politics. She's covered the Colorado General Assembly for 20 years, starting off in 1998 with the Silver & Gold Record, the editorially-independent newspaper at CU that was shuttered in 2009. She also writes for six rural newspapers in northeastern Colorado. Marianne specializes in rural issues, agriculture, water and, during election season, campaign finance. In her free time (ha!) she lives in Lakewood with her husband, Jeff; a cantankerous Shih-Tzu named Sophie; and Gunther the cat. She is also an award-winning professional harpist.