New Forecast Shows Overall Budget Growth

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New Forecast Shows Overall Budget Growth

by Ari Armstrong, October 1, 2005

Without Referendum C, "actual appropriations," a portion of the budget related to the general fund, will increase 21 percent from 2005-06 to 2010-11, according to Legislative Council's September predictions. Legislative Council shows "actual appropriations" at $6.2 billion this year and $7.5 billion in 2010-11, under current rules.

With Referendum C, that category of state spending would increase by 34 percent, from $6.3 billion to $8.4 billion over the same period, according to the predictions.

The economic predictions are a little different than those issued in June. In June, Legislative Council predicted that "total funds available" and "actual appropriations" would increase to record highs every year into the future, under current rules. The September predictions show that those categories dip next year, after which they increase to record highs every year after that.

Of course, reality likely won't match either set of predictions very well. The Austrian free-market economist Ludwig von Mises pointed out "that trends manifested in history can change, often or rather always did change, and may change even in the immediate future."

In general, economic predictions depend on a wide number of assumptions, any of which may be wrong or debatable. Legislative Council even revised the figures for for the 2005-06 total state budget, after the fact, from $15.11 billion to $14.61 billion. So budget predictions should be taken with a grain of salt, though they are still worth checking out.

In June, Legislative Council showed "actual appropriations" increasing from $6,123,300,000 this year to $6,154,700,000 in 2006-07. Now Legislative Council shows that category decreasing from $6,181,600,000 to $6,059,800,000 in 2006-07 (after which it goes up several hundred million dollars every year). That's a one-time decrease of $121.8 million.

According to the new numbers, the 2005-06 level is up $246.4 million from 2004-05.

Why the change from June to now? Legislative Council explains, "The forecast for cash funds revenue increased by a total of $319.3 million... Because the state is in a TABOR surplus situation, changes in the forecast for General Fund revenue do not help or hurt the General Fund budget. The extra revenue in the cash funds does cause an impact, however, as it raises the required level of the refund but the extra money must go to its dedicated purpose... This will result in a $121.8 million reduction in appropriations that year when compared with FY 2005-06."

In other words, "actual appropriations" are only part of the state budget. Because other parts of the budget are expected to increase faster than previously expected, "actual appropriations" are expected to be cut to compensate, under current rules.

How do the predictions for "actual appropriations" relate to Referendum C, the net tax hike to be decided in November?

While the new predictions show a one-year cut in "actual appropriations," after which spending goes up to new highs every year, Referendum C would totally wipe out all TABOR-related refunds for five years, and then permanently ratchet-up state spending every year thereafter.

According to the blue-book numbers, Referendum C would cost taxpayers an extra $577 million in 2006, about five times the amount needed to cover the cut. The TABOR refunds over the first five years would be an estimated $3.743 billion, about 30 times the amount of money needed to cover the predicted one-time cut in "actual appropriations."

But, assuming the September predictions are accurate, is it too much to ask that state politicians make a one-time, 2 percent cut in "actual appropriations" spending next year (even as total spending increases), after which time "actual appropriations" spending is already expected to increase to record highs every year?

Every year the legislature wastes millions of dollars on corporate welfare and subsidies. For example, the state's Economic Development Commission, which was allocated $959,795 of general funds this year, approved a grant for $97,200 to Red Robin Gourmet Burgers, Inc., a grant for $144,000 to Kodak, and a grant for $500,000 to Mexicana Airlines.

Colorado politicians have blown your hard-earned money on items including Viagra for registered sex offenders, an art grant based partly on the work "12 Dildos on Hooks," booze for the University of Colorado, condoms, and Ward Churchill's salary. (See Wasteful Spending by Colorado Government.)

The paper Priority Colorado outlines numerous other ways for the state to operate more efficiently and cut wasteful and low-priority spending.

Mises reminds us that, as taxpayers, we "foot the bill and must consequently renounce many satisfactions which [we] would have enjoyed if the government had spent less for unprofitable projects."

The Colorado Freedom Report--www.FreeColorado.com