After Tuesday's grim news that the state budget shortfall for 2020-21 will reach $3.3 billion, on Wednesday the Joint Budget Committee began the most difficult work of all: where to find it.
Last week, the committee began preparing for big budget cuts, moving available cash funds into the general fund and cutting dollars from programs across many state agencies.
The end result of that work: according to a JBC budget balancing document released Wednesday, if the committee taps what's left of the general fund reserve, about $256 million, they will still have to cut $2.5 billion from the general fund portion of the budget.
That means the cuts are going to become a lot more painful and unprecedented.
"I tried to think of appropriate adjectives [to describe the 20-21 budget situation] but my mind was a blank," JBC staff director Carolyn Kampman told the committee Wednesday.
The $3.3 billion represents about 10% of the overall budget, which is made up of federal funds, cash funds that must go directly to the services they pay for, and general fund dollars, the sales and use taxes and corporate and individual income taxes that cover the state's discretionary spending.
But since the cuts will primarily come from the general fund portion of the budget, the real slashing is about 25%.
Agencies funded with substantial general fund dollars include services to vulnerable populations, higher education and K-12 education.
The only good news in the budget-balancing situation: that the 2019-20 budget is short $600 million to $625 million, depending on whose forecast the committee works from, Legislative Council, which is the committee's standard, or the governor's office of State Planning and Budgeting, which is a little more optimistic. That's good news because the state has enough in general fund reserves to cover that shortfall and even have about $200 million left over to begin to help covering the shortfall for 2020-21.
The general fund reserve, based on current law, is set at 7.25% of general fund appropriations.
Kampman, however, advised the committee to keep a modest general fund reserve, perhaps 2%, which would require a change in law. That's based on uncertainty in the forecasts about what will happen when 2019 income tax filings come in. It would also give the General Assembly flexibility to deal with mid-year corrections, she said.
The committee put off decisions on larger budget cuts last week in hopes that they wouldn't have to make them.
- A $225 million annual payment to the state's pension plan to help pay down its unfunded liability
- $220 million to cover full-day kindergarten. A 2019 law changed the state's share of the costs of kindergarten from about 0.58% of a day to a full-day.
- $60 million for the second year of reinsurance, the 2019 law that decreased health insurance premiums in the individual market by 18% statewide and higher in rural communities.
- $50 million annual payment by the Colorado Department of Transportation to cover a certificate of participation (a type of bond) payment for roads and bridges, tied to 2017 legislation
- Whether to increase the state's debt to K-12 education, known as the budget stabilization factor. The current debt stands at $572 million, but it's been as high as $1 billion.
- $163 million for the senior homestead property tax exemption, which covers property taxes for seniors 65 years and older and who have been in their primary residence for a decade.
Kampman's budget document also raises the possibility of cutting the legislature's own budget. The 2020 bill, HB 1345, is currently in the Senate with a $53 million general fund appropriation, and that's an area where cuts could be considered, Kampman explained.
House and Senate Democrats on the JBC will hold a news conference at noon to discuss the budget forecasts and what they will do to resolve the shortfall.