Myth of the $400 Million Cut

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The Colorado Freedom

Myth of the $400 Million Cut

by Ari Armstrong

The following article was originally released by the Independence Institute on August 15, 2005.

The state budget is expected to increase substantially through 2009-10. Yet in a quote for the August 7 Denver Post, Governor Bill Owens's spokesperson Dan Hopkins claims, "We are going to have to cut $400 million from the next state budget if Referendum C doesn't pass." What's really going on?

Economists from Legislative Council predict that "actual appropriations," a portion of the total budget related to the general fund, will increase modestly from $6,123,300,000 this fiscal year to $6,154,700,000 in 2006-07. [*]

By 2009-10, "actual appropriations" are expected to grow to $7,172,000,000, an increase of more than a billion dollars from this year's level. That's a 17 percent increase under current rules, without Referendum C.

Henry Sobanet is the governor's economist who threw out the $400 million figure in a July 12 letter to The Denver Post. His office, State Planning and Budgeting, predicts that "total funds available" will increase from $6,750,400,000 in 2005-06 to $6,923,900,000 on 2006-07. That's a $173.5 million increase.

However, expenditures show $159 million more for the "TABOR Refund" and $65.8 million more for the "Homestead Exemption," a property tax credit that the legislature reduced to zero from 2003-04 through 2005-06. If we subtract those figures, we get a budget cut of $51.3 million from this year to the next.

Yet Sobanet's office shows that "general fund appropriations" is cut by $207.8 million. Where did he get that extra "cut" of over $150 million? He assumes the legislature must increase spending on the "year-end general fund reserve" from $84.1 million to $238.8 million.

And where does Sobanet get the extra $200 million to make the $400 million "cut?" He assumes spending on Medicaid and K-12 education "will have to grow by some $200 million."

Under Sobanet's assumptions, then, the budget will have to be cut by around $50 million next year. The rest of his $400 million "cut" is really an increase in other parts of the budget.

But does Referendum C ask for an extra $50 million in taxes, or even an extra $208 million? No. It asks for an estimated $3.6 billion over the first five years alone. That's about 70 times the amount of money needed to cover the cut.

Sobanet's office shows "general fund appropriations" increasing after next year to $7,078,800,000 in 2009-10. That's nearly a billion dollars more than this year's level, a 15 percent increase under current rules, without Referendum C.

Sobanet claims that spending on Medicaid and K-12 education is "untouchable." Yet both those programs can be addressed by the legislature. The legislature could refer a measure to the ballot next year to fix Amendment 23, which increases spending on K-12 education faster than the rate of inflation, even during economic downturns.

What about Medicaid? Priority Colorado, a paper published by the Independence Institute, estimates the state could save $45 million to $90 million by instituting reforms.

The Associated Press reported in June that Colorado's Medicaid program spent $2,013 to supply "Viagra and other impotence drugs to five registered sex offenders." That practice was stopped following the report. State Senator Dan Grossman, a Democrat, told the AP: "The fact that our system is so loose and so ad-hoc that it would allow sex offenders to receive sexual enhancers at public expense is not that surprising, but it [is] outrageous nonetheless." If Grossman is correct, then isn't Colorado's "loose" and "ad-hoc" Medicaid system something to examine further?

On July 18, the New York Times published an article titled, "New York Medicaid Fraud May Reach Into Billions." The possibility of such problems here should be explored.

The Wall Street Journal offers another possible source of reform ideas: "All 50 states agree: Medicaid, the federal-state partnership to provide health care for the poor, is a fiscal and moral mess. The question is, what are our politicians going to do about it? By far the most promising answer to date comes from Florida, where Governor Jeb Bush is proposing a radical restructuring of the program..."

The legislature can also cut wasteful and low-priority spending elsewhere. During the period of the alleged "budget crisis," the legislature spent millions combined on such wasteful programs as an art grant given partly on the basis of ceramic dildos, booze for the University of Colorado, corporate welfare, art grants for the wealthy, student projects featuring antiwar exercises and an internet discussion about orgasms, thousand-dollar chairs, and fun-colored condoms.

The budget is already expected to increase through 2009-10. Poll results show passage of Referendum C is unlikely. If voters reject it, legislators could make government more efficient, cut wasteful and low-priority spending, and, like Colorado families, learn to live within their budget.

The Colorado Freedom