Key 2018 Colorado Budget Takeaways

The Governor’s 2018-19 Budget Request was released  on Nov. 1 and he presented it this morning in front of the Joint Budget Committee. Following a seven-year stretch that saw the end of the worst recession since the Great Depression and unprecedented growth that has made our state’s economic activity the envy of many in the U.S., this is Governor Hickenlooper’s final Colorado budget proposal before the transition into the next administration.

Related: Colorado’s Budget in Plain Talk

A significant part of Colorado’s story is marked by massive population growth. The Colorado budget letter notes our population has grown by 10 percent from 2011 to 2017. Much of that growth has come from in-migration from other states. The other part of Colorado’s story, of course, is the strain that both population growth and time has taken on public structures like our roads and education systems.

As total funding in the Colorado budget — which includes federal, state, and cash funds — surpasses the $30 billion mark, much is being made of the number. Big as that number may seem, it’s important to remember that as a percentage of Colorado’s economy, our General Fund spending is just a little more than it was during the 2002-2003 recession.

Related: On the Chopping Block: Colorado Public Investments

With our economy on solid footing — and for a short while longer, no immediate artificial cap on how much revenue we can use — Colorado is in position to modestly increase spending in some important areas of public sector activity. That’s exactly what the governor’s proposal does. And while that’s good news, in nearly every category, there’s a structural caveat that follows.

Overall, the biggest winner in this year’s budget is higher education. The governor is proposing a 9.7 percent increase in General Fund spending on our state universities and colleges. Even though he is proposing an additional $85 million over last year, tuition rates will still increase by 3 percent. This comes after years of average increases of 6 percent.

The next biggest increase is in K-12 education. Here, the governor proposes a 5 percent increase in spending that should buy down the “negative factor” by $70 million. This helps, but our schools remain chronically underfunded to the tune of at least $750 million.

Related: Facts: Fiscal Policy

We’re keeping a close eye on the effort to pit education funding against Medicaid funding. The governor’s budget proposes a 3 percent increase in General Fund Medicaid spending. This is a smaller increase than last year and in the next fiscal year, Medicaid spending is a much smaller portion (25 percent) of General Fund spending than K-12 (36 percent). Only when we look at total funds, which include federal matching funds, does Medicaid spending surpass K-12.

One last important proposal to mention is his recommendation to increasing our reserve fund from 6.5 percent to 7 percent. This means moving an additional $77 million in 2018-2019. Past recessions have led to revenue shortfalls that led to cuts equaling as much as 16 percent of the budget. When we hear voices telling us there’s plenty of money in our budget and we should squeeze more blood from the turnip, we should consider just how little we tuck away in our reserve fund and how hard it is for the legislature to allocate these dollars for the future rather than for current needs. Preparing for the future is yet one more pressure we struggle to handle within our existing resources.

Even with these modest increases and obvious gaping needs that are left, we’re still in for a tough debate in the coming legislative session around the Colorado budget. This debate will be driven by those who think we should simply prioritize the money our state already receives and fund transportation needs though cuts to other vital areas.

Related: Colorado’s TABOR

Sensing what’s coming, the governor’s budget proposal includes a comprehensive rebuttal to the argument we can fund our transportation needs with existing revenue. In an appendix, Hickenlooper’s team reminds us, “Over the last 20 years, overall legislative tax policy in the General Fund has been to reduce available revenue.”

At the same time, it also says “other state constitutional rules have increased obligations and reduced local property taxes that would have otherwise been available to fund K-12 education.”

This observation that our revenue is shrinking while demand increases is nothing new, but it must be repeated, verified, and amplified as we head into 2018. Colorado’s growth will only translate into inclusive prosperity for all Coloradans when we are able to beat back the voices insisting we do more with less.