The 2020-21 state budget proposal that Colorado Gov. Jared Polis submitted Friday to the Joint Budget Committee includes funding boosts for transportation and preschool, and a request that the Joint Budget Committee rectify a temporary financial situation that state employees have dealt with for 16 years.
Polis proposes a state budget of $34.5 billion for 2020-21, the fiscal year that begins on July 1. That’s an increase of 2.7%, or an $897 million increase in total funds, including federal dollars.
For the general fund, which is made up of income and sales taxes, he proposes an increase of 2.9%, or $389 million, bringing total general fund spending to $13.8 million.
However, the actual budget request is $32.35 billion, due to double-counting of about $2.146 billion. That double-counting is known as appropriated funds, or money that one agency pays to another for services, including personnel and legal costs.
Polis told reporters Friday that the budget reflects a savings of $238 million, through eliminating unused, duplicative or unnecessary spending. For example, the state will save $3 million on mailings tied to the Affordable Care Act. More savings will come from using up the state inventory on license plates, and additional savings will come from unfilled positions in state government, he said.
His biggest focus, he said, will be on increasing the state’s rainy day fund by $31 million, which will increase the fund from 7.25% of state spending to 7.5%. According to a 2018 report by the Pew Charitable Trusts, 7.25% covers the state’s operating budget for 41.6 days.
Polis told reporters Friday that he’s willing to spend some of his political capital on building up the reserve.
State economists — both those who work for the governor and those who work for the General Assembly — have been warning for more than a year that economic indicators are showing signs of a downturn. In September, the Legislative Council forecast said that nationally, “leading business and financial indicators suggest an elevated risk of recession” sometime before the end of the 2020-21 fiscal year.
According to a 2018 report from the Tax Policy Center, a project of the Urban Institute and the Brookings Institute, prior to the recession, states relied on about a 5% rainy day fund. Most have reconsidered that, the 2018 report said. Currently, the Government Finance Officers Association recommends states set aside a minimum of two months of operating expenditures. That would be a 16% reserve, and only four states in the nation have that kind of rainy day fund. (All four states are rich in natural resources.)
But the reserve is not the only tool Polis has in his back pocket for covering a recession.
His budget proposes undoing a pay-date shift that took place back in 2003, at a cost (back then) of $75 million.
Under SB 03-197, the last paycheck in June (for employees paid monthly, June 30) was shifted into the first working day in July. That saved the state about $134 million in general funds. It also meant that state employees got two paychecks in July.
The savings helped the state out just once, in the 2002-03 budget year. But it created a hardship for many state employees, especially those who rely on that June 30 paycheck to pay rent on July 1. The problem was most vexing to state employees paid twice a month; in some cases, those employees’ pay was delayed by as much as 10 days.
Polis said that restoring the June 30 pay date for most state employees (except for public colleges and universities, which received permission to restore the June 30 pay date in 2018) means that he or a future governor could tap savings from restoring the pay date shift in the event of a recession.
The governor’s plans for education include paying down the Budget Stabilization Factor — the debt owed to public K-12 education that came out of a $1 billion budget cut in 2010 — by $40 million. That would cut the debt down to around $630 million. He also proposes $27.6 million to expand the state’s preschool program, which he said would eliminate a wait list; and $3.5 million more for school safety. That’s likely to fund bills proposed earlier this week by an interim legislative committee on school safety.
Last year, all the state’s public colleges and universities, save for Metropolitan State University of Denver, held tuition flat for the 2019-20 school year. Don’t expect a repeat of that, Polis indicated Friday. He’s proposing a boost of $26 million for higher education funding, which he said would be sufficient to limit tuition increases to an average of 3%.
As for the state’s water plan, Polis plans to again tap general fund dollars. The water plan calls for $100 million in state funding, beginning in the 2020-21 budget year. Polis proposes $5 million in general fund monies and $5 million from savings from other operating budgets. He admitted that $10 million does not meet the needs of the water plan, but offered no other ideas on how to cover the gap.
Voters next week could help out with that, if they approve Proposition DD, which would levy taxes on the proceeds of sports betting made at casinos in the three Colorado towns that offer gambling. (It would also apply to online sports gambling offered by the casinos). That could provide as much as $16 million per year for the water plan, according to proponents.
The Polis budget does not include revenues that could be added through Prop DD or another ballot measure, Proposition CC, which would eliminate TABOR tax refunds and use surplus revenue for transportation, K-12 and higher education one-time spending. By law, the budget has to be developed based on existing state law, not what voters could decide next week.
However, Polis said that if either measure passes, he would submit a budget letter to the JBC, which actually writes the state budget during the legislative session.
Transportation also could get a boost in funding in Polis’ proposed budget, of $550 million. General funds would supply $500 million, including $25 million in new dollars, as well as $25 million in “redirected savings” coming from the Colorado Department of Transportation.
However, most of that would go to cover a maintenance backlog rather than new construction projects, Polis said.
Polis' budget won kudos from Republican Senate Minority Leader Chris Holbert of Parker, who said in a statement that Polis "seems to have adjusted well from the deficit spending of Washington, D.C., to the budgetary realities of Colorado state government."
Holbert thanked the governor and his staff for sitting down to discuss the proposal.
"While we obviously have some disagreements over budget priorities, we more importantly see many places in this proposal where we can work together," Holbert said. Holbert was pleased with the funding proposal for transportation.
He was less enthusiastic about how little Polis proposes on reductions to the Budget Stabilization Factor. Holbert said that Democrats "have focused on creating new spending obligations" instead of paying down the debt.
Democrats on the JBC reacted favorably to the budget proposal.
“Due to a strong economy, we were able to make historic investments in critical government services like education and transportation this year. However, due to the fiscal constraints imposed by TABOR, we will have to be more focused on cost savings next year,” said Dominick Moreno (D-Commerce City), the 2020 JBC vice-chair.
Moreno said he was encouraged by the cost savings and efficiencies contained in the proposal and that would be redirected to transportation and K-12 education.
Polis' budget proposal will be reviewed by the JBC, which will begin its budget hearings on Nov. 12.