With $2.5 billion to cut from the 2020-21 budget, the Joint Budget Committee is looking everywhere they can for savings that will avoid bigger cuts to state services for vulnerable populations, stave off layoffs and preserve K-12 education funding.
Among the big ticket items on the table: $220 million for full-day kindergarten and just under $60 million for the second year of reinsurance.
Both fall under signature accomplishments for Gov. Jared Polis in his first year in office.
The reinsurance program is something of an insurance program for health insurers. It covers large claims through a fee paid by insurers and hospitals, matched with federal and state funds, and is then used to pay those big claims.
Health insurers, under the Affordable Care Act, could no longer deny coverage to those with preexisting conditions, and have said that reinsurance helps cover those costs.
The point is to lower the cost of health insurance for those in the individual health insurance market. It's a short-term solution, intended to be in place for only three years while the state figures out a long-term solution, which so far has been the public option.
Reinsurance has lowered health insurance premiums on average 18% statewide, with bigger savings for those in rural Colorado, as much as 30%.
A 2019 state law changed how the state pays for full-day kindergarten, with the state now picking up 100% of the tab. Prior to the 2019-20 school year, the state paid for 58% of a day. For parents who want their children in school all day, they either had to pay tuition to cover the balance, or relied on school districts to pick up the rest of the cost through mill levy overrides. For the rest, the last portion of the day didn't exist.
But with a $280 million general fund cost in the 2020-21 budget, both are hard to protect when there's a $2.5 billion hole to fill.
The Joint Budget Committee has already drafted a bill regarding the second year of reinsurance. They haven't taken a similar action regarding full-day kindergarten, but are talking about what increasing the debt to K-12 education, known as the budget stabilization factor, would do to the K-12 system.
On Monday, the governor's Office of State Planning and Budgeting submitted more than $250 million in cuts. That's in addition to cuts already proposed by the office, which became part of the budget cutting that took place last week and in total resulted in about $700 million in cuts and transfers.
When asked what the governor would cut to protect funding for kindergarten and reinsurance, Polis spokesman Conor Cahill pointed to those OSPB recommendations.
“The Governor is committed to ensuring every child and family in Colorado has access to free full-day kindergarten and that families can continue to benefit from the bipartisan reinsurance program," Cahill said. "Now is certainly not the time to make Coloradans pay more for their child’s education or for health insurance. In addition, at a time in which we are concerned about learning loss and ensuring parents are able to go back to worth, cutting free full-day kindergarten will move us backwards — when we need to move forward to support families at this time.
"The Governor’s budget office submitted more than $250 million in savings proposals to the JBC on Monday and committed to supporting the Committee with identifying additional reductions as necessary to meet the budget constraints determined by the forecast.”
But the OSPB memo doesn't mention full-day kindergarten funding. The biggest cut proposed by OSPB is that the JBC take another $35 million out of the Building Excellent Schools Today program, which is funded by marijuana tax revenues. The BEST program has already been tapped for $25 million. That leaves about $100 million available for 2020-21 school construction grants.
The memo discusses what's known as comebacks. In the budget process, once the JBC has taken action on budget items, state agencies have an opportunity to say "take another look."
The OSPB memo said that the administration disagreed with some of the decisions made by the JBC during the first week of budget-cutting action. Those decisions totaled about $40 million. To offset those cuts, OSPB suggested $33.5 million in savings in other areas.
As to reinsurance, OSPB asked the JBC to leave the $60 million for reinsurance alone. "Continuing the Reinsurance Program is critical at a time when people are losing their jobs and can’t afford to pay the high cost of private insurance," the memo said. "We would be pleased to work with the sponsors should they wish to consider alternative sources to address the program’s funding."
OSPB did not have any suggestions on where to find that $60 million. Or the $220 million for full-day kindergarten.
Neither did the Colorado Children's Campaign. In a statement Tuesday, the campaign said the state should "continue the state’s investment in preschool and full-day kindergarten, rather than passing the costs on to parents who are dealing with financial insecurity, so that parents can get back to work and ensure children do not suffer additional learning loss." But how to pay for it?
On March 30, a "sequestration" memo OSPB director Lauren Larson sent to state agencies said programs that resulted from 2018 or 2019 legislation — which would include the full-day kindergarten and reinsurance programs — should be on the list for potential pauses or elimination. The caveat, Larson explained, is that this should apply only to "non-essential" programs. Under a public health order issued March 25, health care was defined as critical, but schools were not, and had already been closed to all but remote learning for the rest of the year.
But backers of full-day kindergarten now say that it's a moot point.
The Children's Campaign's Bill Jaeger told Colorado Politics that after 2019, the funding for kindergarten just became a part of the K-12 budget. "I don't see anyone proposing to cut third grade or seventh grade," Jaeger said. "This notion that the best decision we can make on targeting cuts is cutting five year-olds doesn't make sense." And that's a decision, he said, that could be left to local school districts, if they decide to go back to the .58% of a day. Putting that decision in the hands of the General Assembly would block local school districts from deciding the best use of their funds, Jaeger said.
Rep. Jim Wilson, a Salida Republican, carried legislation attempting to fund full-day kindergarten for six years, including the 2019 bill. He said the cost of full-day kindergarten is a very small percentage of K-12's $7 billion budget. It's now up to the JBC to protect it, he said.
Parents have paid millions in tuition for kindergarten, and if the increase is eliminated, it will have a devastating impact on local communities, working parents or districts that are facing budget cuts, Wilson explained. "We know that that getting a good start is beneficial to students. "If we're going to protect K-12 education, if there needs to be a cut to K-12, make it to the whole budget," Wilson said. "Don't put the target on the back of kindergarten students.
"A student who doesn't get a good start in kindergarten is a waste of money at the high school level."
A third idea on how to protect full-day kindergarten funding, among other state programs, is to increase taxes, a provision allowed under TABOR's emergency tax language.
The Colorado Fiscal Institute has been looking at ballot measures that would strike down TABOR. CFI's Carol Hedges wrote in a blog post on April 29 that while she's no fan of TABOR, it does recognize emergencies that would require more investment. "It outlines the specific conditions under which the legislature can authorize emergency, temporary taxes."
Such a decision would require a two-thirds vote of both chambers of the legislature, "full depletion of emergency reserves, and whatever revenue is raised can only be used for emergency costs," Hedges wrote.
But that would require the support of at least three House Republicans and five Republican senators, which would be a tall order.
Hedges suggested an emergency tax could provide relief to low- and middle-income families, as well as support public services. "An emergency tax that lowers the income tax rate on the first $250,000 in income and then increases the rate incrementally on income above $250,000 would mean we could all share the costs of this pandemic more equitably than we are now sharing the costs for providing our public services," she wrote.
“Coloradans need the legislature to be bold and creative to protect critical programs that support students and families from impending budget cuts," said Amie Baca-Oehlert of the Colorado Education Association. She backs the emergency tax idea, including changing the tax brackets for high income earners. Baca-Oehlert also suggested the legislature scale back on excessive testing, consultants and "unfunded mandates that do not close achievement gaps between students.”
There's an additional risk to cutting full-day kindergarten, and it's a political one, tied to the views Coloradans have on the job their governor is doing. The state recently got an "A" grade on its handling of the pandemic from a group that included a conservative economist and think tank and as reported by The Wall Street Journal.
"There are no sacred cows" in a time of unprecedented budget cuts, according to Colorado Politics columnist Eric Sondermann, a longtime political consultant. But Sondermann said that Polis is riding a high-approval wave right now. That's due in part to his more hands-on approach to governing, a shift from previous governors, and one that has served him well in this crisis. Sondermann wrote in an April 26 column that Polis' biggest test lies ahead, in how he manages the recovery.