Reactions to the Budget Deal

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Reactions to the Budget Deal

Editor's note: The following comments about the legislative proposal to increase state spending in Colorado are by State Senator Ken Gordon and Treasurer Mike Coffman, respectively. Gordon distributed his remarks via e-mail on March 24, 2005, and he graciously granted permission to reproduce them here. Coffman's remarks were sent from his office on March 23. My position is that, while Coffman is right to talk about mandated spending and reserve funds, state spending still should not be increased more than what the Taxpayer's Bill of Rights would otherwise allow. (Indeed, I think state spending should be reduced in real terms, not increased at all.) Furthermore, Republicans should become nervous whenever Democrats lavish so much praise on the state's top Republican official. -- Ari Armstrong

Ken Gordon

Strange Bedfellows

When I was at the press conference last week watching the Governor speak in favor of the budget proposal that those of us in legislative leadership had worked out with him, I asked myself how this could have happened.

After all, there has been very little in recent Colorado history that would make someone think that an agreement between Democrats in legislative leadership and a conservative Republican Governor -- this conservative Republican Governor -- was a likely outcome.

Like the rest of the country, we have been polarized and sometimes bitterly partisan.

Our Democratic leadership and the Governor were, seemingly, at the far ends of the political spectrum. Would we both be able to move?

When we both did, to meet somewhere in the middle, I felt that I was participating in a healing moment, and after what we have been through in Colorado in recent years, it was needed.

What had brought us together was reality.

In the complex and subtle real world it defeats ideology every time.

The Governor and the Democrats in legislative leadership deserve credit for making some hard compromises to get to an agreement. Also deserving mention are the Republicans who sponsored and voted for the proposal. Sponsors were Steve Johnson, Norma Anderson, Lou Entz, Ken Kester and Jack Taylor.

On observing the Governor being beaten up by The Wall Street Journal editorial page and many local conservatives, Senator Moe Keller said to me, You know, I forgive the Governor for his sins.

The bill to fix the budget, HB 1194 passed third reading in the Senate today. The vote was 26 to 9. The yes votes were all of the Democrats and 8 moderate Republicans. (The Republicans who voted yes were Spence, Anderson, Owen, Teck, Kester, Entz, Taylor and Johnson.) The more conservative Republicans voted no.

How can you help?

Now for the hard part. We have to run a campaign and it is likely going to be a tough one. If you are willing to volunteer, and many of you have told me that you will, send an email to Adam**AT**kengordon.com and copy me, Ken**AT**kengordon.com. Adam is the ThisMatters staff member.

We are going to ask people to take their precinct and help organize, educate and mobilize people to vote in November. When you write back do not chat. We have 26,000 people on this list and we need your name, address, phone number and precinct number, if you know it. If you can make phone calls but not walk or vice versa let us know that as well. If you are an elected official or activist and you are willing to take responsibility for your district, let us know that. Please do not make us read long emails.

With your help we can get this referendum passed.

It isn't that complex:

Last week when I sent out the detailed summary of the agreement some people complained that it was too complicated. It can be explained much easier.

This is basically a five-year time-out for TABOR with a repair of the ratchet. In the sixth year an additional $100 million in revenue can also be spent on bonding for capital construction. Repair of the ratchet means that revenues can recover from a recession as the economy recovers. I hope this is simpler.

Validators:

Most people will never understand our budget scheme and what we are trying to do to fix it. Most people will never be able to explain the ratchet effect to their neighbors. An important part of this campaign will be validators. People will vote for the referendum if their employer recommends it, or their church, neighborhood association, newspaper, school, doctor, nurse, non-profit organization and so on.

If you are a member of some group such as a neighborhood association, a sports team, a book club, a union or something else and you are willing to help educate your group let us know. We will help get you materials or speakers.

Our side of this is going to have to do a lot of education. The other side is going to say things like Vote no. It's your dough. They will never talk about the services that will get cut, because they know that people really do want a good education system, health care, roads, a judicial system and the other things that we work together as a community to provide.

Click here to read my earlier e-mail that explained what was wrong with the TABOR amendment and click here to see the more detailed version of the agreement. As a post script I have attached some of the cuts we had to make because of our budget scheme.

I hope you are well. It is always good to hear comments or questions. If you do write, though, try to be succinct. Brevity is the soul of wit.

Sincerely,

Ken Gordon

State Senate Majority Leader

P.S. For a list of those cuts click here.

Senator Ken Gordon


Mike Coffman

Colorado Department Of The Treasury
Mike Coffman - State Treasurer
Treasur-E-Notes
Vol. 6, Issue 12
Email Edition
March 23, 2005

www.treasurer.state.co.us

COFFMAN PROVIDES ASSESSMENT OF RECENT BUDGET COMPROMISE

PROPOSAL FAILS TO ADDRESS CRITICAL ELEMENTS NEEDED IN STATE BUDGET REFORM

State Capitol -- State Treasurer Mike Coffman provided his assessment of the budget-reform compromise announced last week between Gov. Bill Owens and the General Assembly's Democratic leadership. According to Coffman, the proposal agreed to by Owens, Senate President Joan Fitz-Gerald and House Speaker Andrew Romanoff neglects several critical issues within the state's budgeting process.

"The deal between the Governor and the Democratic leadership places the entire burden of addressing the state's fiscal problems on the taxpayers and fails to address the most important part of the state budget equation -- ever-increasing mandated spending," Coffman said.

According to Coffman, the state's budget crisis has three distinct components, and unfortunately, the governor's plan seeks to solve all of them with a one-dimensional solution -- a massive increase in General Fund revenues and spending.

The first component is the so-called structural deficit, the gap that currently exists between the TABOR revenue limit and the statutory limit on annual increases of General Fund appropriations. Due to the recent declines in revenues and the Legislature's past failure to create a budget-stabilization reserve, TABOR's "ratchet effect" has forced the revenue limit lower than the annual 6 percent increase in General Fund appropriations allowed under state law.

The compromise plan eliminates the ratchet effect by allowing the base in future years to grow from the prior year's revenue limit rather than the lower of the revenue limit or the actual revenues collected; however, it makes no provision to stabilize the budget during an economic downturn.

"Without the fiscal discipline imposed on the General Assembly by a constitutionally created reserve, when revenues drop, there simply is no money. This spending plan does nothing to address this critical problem. Any comprehensive solution has to include a reserve," Coffman said.

Second, any budget solution must address mandated spending. Mandates force spending to grow even in times when revenues do not, and since these mandates cause a portion of the budget to keep growing, they lead to disproportionately large cuts in other portions of the budget such as higher education. The compromise claims to retain the 6 percent per year limitation on appropriations, but it also states that some of the additional funds will be used for health care and public education. These two areas account for about 70 percent of the total budget. So this "earmarking," according to Coffman, evades the limit and eliminates any incentive to either reform spending or to revisit spending mandates.

"This compromise only deals with spending mandates by raising enough money to accommodate them," Coffman said. "Reasonable changes in Amendment 23 are necessary, and they must be part of any budget solution. This proposal eliminates the need for reform, and that is a dangerous precedent."

Finally, the proposed plan calls for about $1.7 billion in bonding mostly to pay for additional transportation projects. Certainly, General Fund appropriations for transportation have fallen off dramatically since the last recession, but bonding against future General Fund revenues for transportation projects is unprecedented in Colorado. Without the above changes to the budget process, this strategy will place a considerable strain on future budgets during the next economic downturn, Coffman said.

The state constitution bars general obligation debt, and roads typically are funded by a dedicated tax on fuels. But of greater concern, according to Coffman, once the bond obligation is incurred, the state must use General Fund revenues for repayment. During another recession, the state would have to make about $100 million in annual bond payments its first priority. Doing so will most likely lead to an even tighter squeeze on other state services such as higher education than Colorado witnessed in the last economic downturn.

"Colorado's economy inevitably will have another downturn, and when it does, the Legislature once again will have to make steep cuts to deal with revenue shortfalls. The current compromise simply piles onto those problems another huge annual outlay that another generation will have to pay for the roads that the state builds in the near term," Coffman said.

"These problems with the proposal are why I am currently developing a fresh approach that addresses the critical deficiencies of the Governor's and the Democratic leadership's compromise. Colorado voters deserve to see an alternative that provides the state with an appropriate amount of fiscal relief, respects the core elements of TABOR and Amendment 23, and puts in place a reasonable reserve to deal with future economic downturns. And I intend to do just that," Coffman concluded.

Please send your questions and comments by email to State Treasurer Mike Coffman at mailto:treasurer.coffman**AT* state.co.us or by fax at (303) 866-2123. To place your name on this confidential email/fax list, please write "Add Name" in the subject line of your email, or call (303) 866-2441. To unsubscribe, write "Remove Name" in the subject line or call the number above.

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