Money Troubles - February 2002

Denver Women's Commission
Money Troubles - February 2002

February 27, 2002
Prepared by Chaer Robert
for Colorado Woman News

MONEY TROUBLES
An interview with Adela Flores

Chaer Robert: You are a policy analyst with the Colorado Fiscal Policy Institute. When and why was your organization formed?

Adela Flores Brennan: In 1996, advocates for a variety of social issues realized that they needed to educate themselves on the state budget, and began meeting informally. Voters approved the TABOR (Taxpayer Bill of Rights) Amendment in 1992, and the advocates realized that they needed to understand its limits on revenue and spending which could affect services to vulnerable populations. In 1999, the Institute got funding and became a staffed project on the Colorado Center for Law and Policy.

What does your organization do?

The Colorado Fiscal Policy Institute conducts research and analysis on tax, budget and other fiscal issues and their effects on low- and moderate-income Coloradans. We look at a variety of issues including family economic self-sufficiency, the transparency of the state budget process, and the state of poverty, wages and working in Colorado.

What is Colorado's current financial situation?

Not good. Currently, the state is facing budgetary shortfalls in the hundreds of millions of dollars. The Joint Budget Committee of the Legislature has cut almost $400 million from capital construction, preferring to cut buildings rather than services to people. The Governor asked all of the departments to make 1% cuts to their budgets for the current fiscal year. Colorado has reached revenue surpluses since 1996-1997. 2001-2002 will be the first year the state will not collect a revenue surplus since 1997. In fact, the state is projected to actually collect less money this year than last.

How did we change from having almost 1 billion in excess revenue to being hundreds of millions short?

A combination of factors and events are negatively affecting the state budget. The economy and the effects of September 11 are major contributors. There is less money going into the state budget from personal and corporate income tax revenues, and sales tax revenues as a result of reduced consumer spending, layoffs and reductions in the travel and tourism industries. The federal tax relief package passed in June 2001 will result in reduced revenue to the state.

The legislature passed two permanent income tax rate reductions in 1999 and 2000 and one permanent sales tax rate reduction in 2000. These two combined reduced revenue by about $500 million. Also, in 2000, voters passed two provisions that have affected the state budget-- Amendment 23 (guaranteeing funding for K-12 education) and the Senior Homestead exemption.

If we don't have excess revenues in 2002, we won't each get a state sales tax refund. What other tax credits will not be in effect until we again have excess revenue?

In addition to the sales tax refund, there are 17 “conditional provisions” that are contingent on the existence of a TABOR surplus. Since the surplus will not exist this year, none of the 17 credits and deductions will exist. These include the Earned Income Tax Credit, tax credit for foster parents and tax credits for rural health care providers.

Medical inflation has been exceeding the inflation rate. What does the TABOR amendment and revenue shortfall mean for Medicaid?

Because Medicaid is an entitlement program, budget cuts essentially cannot be made – every client must be served. With medical inflation and caseloads on the rise, the Medicaid budget is taking up larger and larger parts of General Fund appropriations and decreasing the size of the pot left for other programs.

The TABOR Amendment and the budget shortfall make it extremely difficult to pass any new law or create any new services that might require any money at all. But will we actual cut state services this year? If so, which are likely targets?

In the current year the Governor has called for reductions in department budgets. The budget process for the next fiscal year is barely getting started right now so it is difficult to say with any certainty what will happen for next year’s budget. There are certain parts of the budget that will not get cut like K-12 education (due to Amendment 23) and Medicaid. K-12 education is about 40% of the State general fund. Medicaid is about 20%. And there are proposals in the legislature right now to maintain and increase highway spending.

For more information, visit their website Colorado Center on Law and Policy or contact Adela Flores Brennan Colorado Fiscal Policy Institute (303) 573-5421

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