House Republicans on Fiscal Policy
- 1. The Common Sense Policy Roundtable is a non-partisan informational resource for public policy makers and future leaders. CSPR researches and promotes common sense solutions for economic issues in Colorado. COMMON SENSE Policy Roundtable 1. General Fund revenues increased by 10. Appropriations Report, Joint Budget over 10% in 2006, and around 8% Committee, FY 2010-2011 in 2007. Source: Charles S. Brown 11. Jason Schrock and Natalie Mullis, and Jeffrey A. Roberts, “Colorado’s Analysis of HB 06-1163, Apr. 2, 2009 Budget Tsunami,” University of Denver, Center for Colorado’s 12. * - Includes employees of the Economic Future, Jun. 2009 state’s colleges and universities 2. Ibid 13. Appropriations Report, Joint Budget Committee, FY 2009-2010 3. NCSL, “State Budget Update: 2009” 14. A. Kane and J. Ferrugia, 4. Natalie Mullis, “Focus Colorado: “Thousands Hired Despite Freeze,” Economic and Revenue Forecast,” Channel 7, Nov. 3, 2009 Colorado Legislative Council, Jun. 21, 2010 15. Kerry White, “History of State Payroll Growth,” Colorado 5. Charles S. Brown and Jeffrey A. Legislative Council, Dec. 22, 2009 Roberts, “Colorado’s Budget Tsunami,” University of Denver, 16. Tim Hoover, “State Jobs Pay 6% Center for Colorado’s Economic More,” Denver Post, Jun. 9, 2009 Future, Jun. 2009 17. Ed Sealover, “Colorado State 6. Elizabeth Burger, “Cost Savings Employees Make Pitch for Pay”, Associated with Eliminating Denver Business Journal, Jun. 22, Medicaid and CHP+ Expansions,” 2009 Colorado Legislative Council,” Feb. 18. * - Includes employees of the 23, 2010 state’s colleges and universities 7. Elizabeth Burger, “Medicaid 19. C. Ward, Legislative Council Eligibility Increases and Caseload research request, Oct. 6, 2009 Expansions,” Colorado Legislative Council, November 12, 2009 8. Ibid 9. Edmund Haislmaier, “Expanding Medicaid: The Real Cost to the States,” The Heritage Foundation, January 14, 2010, No. 2757
- 2. COMMON SENSE Policy Roundtable Colorado’S FiSCal PoliCy 2006-2010: Kicking the can down the road Colorado has faced a near perpetual budget crisis since 2000, despite dramatic cumulative increases in government revenue in recent years 1. Additionally, Theapproval of Referendum C in 2005 allowed the state to the Common Sense Policy Roundtable is keep an estimated $3.5 billion in additional General Fund for a non-partisan informational resource revenue. 2 When the recession began in Fall 2008, legislators faced an abrupt public policy makers and future leaders. budget reality. Rather than making tough choices on spending, policymakers relied largely on taxpromotes increases, and other CSPR researches and hikes, fee common sense solutions for economic issues in Colorado. one-time sources of money (such as federal stimulus dollars and state trust funds and reserves) to close the state budget gap. In fact, one-time cash transfers accounted for about 82% of the proposed fiscal year 2010 “budget balancing package”.3 As a result, policymakers will face a cumulative two-year budget gap of nearly $1 billion when the General Assembly reconvenes next year.4 Health Care Spending: Growing on Autopilot, Crowding Out Other Priorities 9 Ten years ago, education, prisons, and health care consumed about 54 cents of every General Fund dollar. By 2009 that figure had grown to 76 cents, and that figure is projected to grow to 91 cents in five years if spending trends continue.5 9 Medicaid eligibility has been expanded more than a dozen times since 2001.6 This has increased total Medicaid caseload in Colorado from around 275,000 people a decade ago to nearly 500,000 in 20097 and more than doubled the state’s portion of Medicaid spending.8 9 The recently approved federal health care bill could cost Colorado as much as $850 million in expanded Medicaid obligations over six years.9 9 The rapid growth in these programs creates tough choices, putting Colorado’s infrastructure and world class higher education system of at risk. 9 In 2009, transportation spending was effectively removed from the state’s general fund, and state general fund support for higher education shrunk from nearly $750 million in 2007 to $428 million in 200910 — a reduction of more than 40%.
- 3. State Government: Making Matters Worse 9 Legislators rejected efforts in 2006 to establish a “rainy day fund” for use during lean budget years. Had proposed legislation designed to create the fund been approved at that time, the fund would have contained an emergency reserve of some $2.1 billion in 2009.11 9 Legislators repealed the state’s decades-old spending limit in 2009, which had limited annual spending growth on General Fund programs to no more than 6% above the prior year. 9 Despite record job losses in Colorado’s private sector, the number of state employees12 rose from around 48,000 in 2006 to 52,430 in 2009.13 9 Some 2,300 new state workers alone were hired during a so-called government hiring freeze.14 9 Average annual compensation for state workers has ballooned to nearly $70,000 per year15, and one recent analysis found that state workers make as much as 16% more than their counterparts in local governments or the private sector.16 9 An executive order issued in 2007 unionized state government workers. Just two years later — during the height of the state budget crisis — the newly created union was actively lobbying state lawmakers for even higher state salaries financed by numerous increases in sales taxes.17 9 Personnel compensation has steadily risen as a percentage of overall state spending since 2006, after dropping as a percentage of overall expenditures between 2000 and 2006. This growth in the state’s personnel costs has diverted dollars away from roads and schools. 9 In all, more than 1,100 state employees18 each earned more than $125,000 in 2009.19 COMMON SENSE Policy Roundtable “Create a pro-business tax environment to increase revenues, make government operations more efficient and keep health care spending in check.”
- 4. The Way Forward # Restore Fiscal Restraint. Reinstate the hard limit on state General Fund spending, establish a “Rainy Day” fund for future recessions, and introduce zero-based budgeting. # Personnel Reform. Bring state salaries into line with the private sector, make it easier for policymakers to dismiss or reduce the compensation of inefficient and incompetent employees, and reduce total payroll costs as a percentage of overall state spending. # Entitlement Reform. Require the approval of a legislative supermajority or state voters for any proposed expansion of existing entitlement programs, or the creation of any new ones. Improve means testing by seeking federal approval to re-impose a minimum asset test for Medicaid participants, and give policymakers the flexibility to adjust eligibility levels consistently with budget constraints. Review recent entitlement expansions that have resulted in a redistribution of state funds away from higher education and infrastructure and toward more social spending. # Enhance Revenues Through Tax Reform. Tax reforms are needed to ensure a pro-growth environment for Colorado businesses. In addition to phasing out the Business Personal Property Tax, policymakers should revisit a number of sales tax hikes that have increased costs for a number of strategic industries. Since 2009 alone, legislators have raised taxes on vehicles, investment, E-commerce, software, agricultural compounds, and energy used for manufacturing. Repealing these tax hikes will help these sectors to expand, create jobs, and subsequently generate additional tax revenue for the state. # Revenue Recovery Strategy. As the economy recovers, and revenues to the state with it, dedicate new state dollars to areas that have been cut — namely, higher education and infrastructure expansion and improvement. # Consolidation of State Agencies, Offices, Boards and Commissions. Many of these bodies serve duplicate or overlapping purposes and do little more than reproduce functions that could easily be handled by existing state departments. These bodies sap state resources in the form of salaries, staff time, travel allowances, reporting requirements, per diems, and budgets. # Privatization of Non-Essential State Functions. A top to bottom review of state services must be conducted to identify functions currently performed by government that could be practically and cost-effectively outsourced to the private sector.