Lawmaker: State’s hidden budget shortfall shocking
December 5, 2010
DENVER – In its struggles to deliver balanced state budgets over the past 10 years, Colorado has amassed $3.7 billion in obligations that it may never pay.
That sum includes severance taxes taken from municipalities, funds collected for such state services as tourism promotion and waste tire cleanup that were never delivered, prison and school bus costs that were never paid for, and other accounting tricks.
State budget analysts told the Legislature’s Joint Budget Committee in November that the 2011-2012 budget, with an anticipated $1.1 billion shortfall, no longer includes the $3.7 billion cut over the years.
The amounts were included in the small print in annual budgets over the years, but this was the first year budget analysts even tried to add up the cost of these potential obligations, and they acknowledged the total figure is impossible to know until lawmakers decide what they think should be repaid.
That won’t happen until the economy rebounds, which may take years, and lawmakers will then have to decide whether to consider past obligations or write them off and move forward.
Potential state obligations include $430 million to cover lost federal funds for Medicaid; $264 million to fund a state reserve designed to cover any spending that exceeds constitutional spending limits; $90 million to cover a 2003 accounting trick in which the state moved one monthly paycheck for state employees into the next fiscal year; $705 million to reinstate public school finance cuts; and $103 million to restore a tax break for senior citizens.
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Some of those cuts are included in next year’s proposed budget beginning in July. Others won’t fall due until 2012 and beyond.
In 2008, the state Supreme Court ruled that lawmakers had the right to take $442 million from 29 cash funds from 2001 to 2004 without a vote by taxpayers because they were discretionary funds and the state had no obligation to pay them back.
Sam Mamet, executive director of the Colorado Municipal League, said local communities believe the state is obliged to repay some funds, like $250 million taken from communities to cover increased demand for services because of oil and gas drilling. But no one knows where the state would find the money, he said.
“We’re upset over the loss of those funds and we’d like them paid back. But from where?” he asked.
John Ziegler, staff director of the budget committee, said total obligations depend on what lawmakers decide to give back.
Lawmakers need to determine which projects were eliminated due to normal budget cuts and which ones were commitments to taxpayers and interest groups that need to be restored, Ziegler said.
“The hole is as big as the guy with the shovel wants to make it,” he told the budget committee.
GOP House Speaker Frank McNulty said the obligations may never be met because Colorado faces another shortfall – and the state should tell taxpayers so.
“I think taxpayers would be shocked to know how much the state has really spent over the past 10 years,” McNulty said.
Sen. Mary Hodge, a Democrat from Aurora who chairs the budget committee, said the state should tell taxpayers in next year’s budget where their money has gone over the past decade. The budget analysts’ report was an eye-opener, she said.
“It was a surprise to me how far down we’ve actually gone. I’m impressed that the state is still afloat,” she said.
Jeffrey Zax, an economics professor at the University of Colorado-Boulder, said lawmakers have no obligation to repay most of the money – but that they need to make it clear what happened to it.
“An asterisk in the budget would be good,” Zax said.
“Putting a footnote or asterisk in the budget is nice, but I don’t it think it gets to the major challenges we’re facing,” Mamet said.