Today, the state Senate began the process of reviewing a $26.8 billion* budget that will cover the operations of state government for the year beginning July 1.
That $27 or so billion represents every penny the state is expected to collect and every penny it expects to spend from July of this year through June of next.
Under the proposed spending plan, for every dollar you pay in income and sales taxes, almost 40 cents would pay for K-12 education, a little more than a quarter goes to the Department of Health Care Policy and Financing (which pays for Medicaid), not quite a dime would go to higher education and 8 cents goes for the Department of Human Services, which provides services to the disabled and runs the state’s mental health and youth corrections facilities.
What’s left, not quite 20 cents per dollar would pay for state government operations for 21 state agencies, including the Department of Revenue, which collects income and sales tax, the Division of Motor Vehicles, the Department of Corrections, and the Department of Public Safety, which operates the state patrol.
By law, Colorado’s budget is required to be balanced, although lawmakers fudge it by covering shortages with “borrowed” funds that almost never get paid back. Two years ago, the General Assembly borrowed $20 million from severance tax funds to cover shortfalls in the 2015-16 budget. Severance taxes are taxes that oil and gas and mineral companies pay. That money is intended to pay local communities for the impact of those activities, such as wear and tear on roads caused by heavy truck traffic. Some of those dollars also pay for water projects. Over the past half-dozen years, the General Assembly has “borrowed” $400 million from the severance tax fund to cover shortfalls.
The budget basically breaks down this way: Out of that $27 billion in revenue, the largest chunk, more than $10 billion, comes from Colorado taxpayers in the form of income and sales tax. The federal government kicks in the second largest chunk, about $8.3 billion, which includes matching dollars for health care costs. The federal government also covers most of the budget for the state Department of Public Health and Environment and about half the funds spent by the Department of Labor and Employment.
Another $7.5 billion comes through what are known as cash funds — that includes the money that comes from such things as state park admissions fees, severance taxes, college tuition, and the much-debated fee hospitals pay, which is matched by the above-mentioned federal dollars and then used, among other things, to cover healthcare costs for low-income patients. Cash funds are restricted, and are supposed to go back into program funding.
As the state Senate begins discussing year’s the new spending plan, two major topics are expected to dominate. The first is how to get more money to education.
The state cut funding for education by about $1 billion in 2010, a move that was unsuccessfully challenged in court. The state has paid back only a small portion of that funding, and this year because they didn’t fully fund education as required by law, that amount that is supposed to go to education grew, from about $831 million to $881 million.
Sen. Chris Holbert of Parker, the Senate Majority Leader, pointed out that funding for public schools will increase by $185 per student in 2017-18. But that is still less than is required by a 2000 law approved by voters that requires school funding to be increased annually according to the state’s population and the state’s cost of living.
The second big issue is what to do about the hospital provider fee. The money that fee brings in, about $700 million, is counted as revenue under the voter-approved Taxpayer’s Bill of Rights, which has caps on how much money the state can bring in (and therefore spend). In order to keep from hitting the cap, and triggering the tax refunds that come with it, the proposed budget instructs hospitals to reduce the amount of revenue they send in by $264 million. But losing that money also means sacrificing the matching federal dollars and would represent a significant cut in the funds to the hospitals, many of them rural, that rely on the provider fee dollars. That isn’t sitting well with the hospitals nor rural lawmakers.
One way out is the path Democrats long have been clamoring for: reclassifying the fee so that it no longer counts against TABOR limits. Last week, they were joined in that call by a surprise ally: Republican President Pro Tem Jerry Sonnenberg of Sterling.
Sonnenberg, who has 11 rural hospitals in his district, said he intends to sponsor a bill to reclassify the provider fee. His announcement won praise from the Colorado Hospital Association. The association called the proposed cuts “unsustainable” and said they would force some hospitals to reduce services and eliminate jobs, while others may have to close.
“There is growing consensus among Republicans and Democrats in the Senate and House that doing nothing would have broad and devastating impacts on very basic hospital, road and education programs, especially in rural Colorado,” said Kevin Stansbury, CEO, Lincoln Community Hospital in Hugo.
The Senate is expected to debate the state budget on Wednesday and vote on it Thursday. It then heads to the House.
*An earlier version of this story said the state budget is $28.3 billion, but that included double-counted funds that are no longer being used in the state’s calculation.
Photo credit: Pictures of Money, Creative Commons, Flickr.