November 23, 2010 Budget Balancing
Colorado’s Constitution requires a balanced budget. It also places limits and restrictions on growth in the budget and requires voter approval for many fiscal policy changes. Being a budget writer in our complicated system is quite a challenge.
State government is funded through a variety of sources of revenue, although three broad categories describe these sources. Federal funds, as the name implies, are derived from the federal government. They generally come with lots of strings attached and little or no opportunity for the state legislature to control their use. Cash funds are generated by fees and fines and revenues from purchased services, such a tuition. The General Fund is where most tax revenues are deposited, mainly income tax and sales tax. The legislature has the greatest discretion over General Fund spending, but most of the General Fund is already allocated to a handful of major programs such as schools and prisons. To say the legislature has discretion is a bit of a stretch, as most spending is dictated by the state constitution or participation in federal programs such as Medicaid. The vast majority of the state’s budget is on auto-pilot.
The need to make spending cuts to keep the budget in balance has challenged this notion of a budget on auto-pilot. Last year the legislature made cuts to the school finance act despite the state constitution’s ”Amendment 23″ requirement to keep pace with growth and inflation. Clever interpretations of the constitution and some mental gymnastics to implement them permitted education cuts, and so far no one has challenged the result.
Additional discretion to deal with budget shortfalls could be found in drastic measures such as closing prisons and setting inmates free, but that’s not a realistic solution. Hence our corrections budget is largely on auto-pilot, driven only by caseload increases. Fortunately, we’re now seeing the second consecutive year of declining prison populations.
Health and Human Services is another area of the state budget where discretion theoretically lies, but most programs bring federal matching funds to our state, so any reductions in state spending are amplified as they become service reductions to vulnerable or needy populations. It’s not feasible to eliminate Medicaid, mental health or child welfare services because the resulting pain would be acutely felt and greater costs to other systems would soon come home to roost. For instance, reductions in mental health spending invariably lead to increases in prison spending. In theory we could make these cuts, but in reality people would suffer and we’d end up paying even more in the future.
Courts and colleges round out the “Big 6″ program areas where most of Colorado’s General Fund is spent. In fact, these 6 departments of state government consume almost 96% of the General Fund, leaving about 4% for things like agriculture, the National Guard, the legislature, and protections for civil rights, public health and the environment (to name just a few).
As a member of the Joint Budget Committee I’ll be working for the next five months to draft a balanced budget and move it through the legislative process and onto the governor’s desk. I’m in the process of adding some new features to my website to increase transparency and help citizens follow the process. I’ll be writing most of my blog posts about budget issues, as I’ll be most focused on this work. I welcome your questions and suggestions.
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- Posted under General Assembly Business
