Colorado lawmakers are adjusting to a new reality when it comes to the state budget: The boom years are over.
A pair of forecasts presented Friday to state budget writers suggests the state’s economy will continue to grow, but it will come at a slower rate, which will limit discretionary government spending in the future. The revenue cap in the Taxpayer’s Bill of Rights is another factor that will constrain the budget.
“The forecasts confirm that this year’s budget will be much tighter than before and will require difficult decisions on how to balance our state’s important priorities,” Rep. Daneya Esgar, the chairwoman of the Joint Budget Committee, said in a statement.
The December projections serve as the baseline for the lawmakers as they start to put together the $30-plus billion state budget for the fiscal year that starts July 1.
Here are the three numbers that will set the tone for the budget debate in the 2020 legislative session:
The discretionary state spending controlled by lawmakers (in what’s known as the general fund) is expected to increase 4% in fiscal year 2020-21 compared with the current year, according to the different forecasts from the governor’s office and legislative economists.
It’s a far cry from the 2017-18 fiscal year when discretionary spending spiked 14% and the next year when it increased 7.2%. The significant increases ended in the current budget year, when year-over-year growth hit 3%.
For the coming fiscal year, legislative analysts project $13.5 billion in general fund revenue for lawmakers to spend.
Much of the general fund is earmarked for existing programs, so the total available for budget writers to spend in the upcoming session is far less than it appears.
To give lawmakers an idea about how much is available, the legislative council analysts put together three scenarios. The lawmakers will start with about $832.5 million in new money to appropriate for current or new programs.
But the costs to provide services increase each year. So if current state spending increased at 3.3% — the rate of inflation plus population growth — it leaves $407.1 million for lawmakers to dole out.
The rate of spending growth is usually higher, however. The state spending typically increases in growth years an average 6%. If the trend holds and spending in the next fiscal year increases by this rate, there’s only $55.5 million in additional money for lawmakers to put toward new legislation — a small sum given the expensive proposals being considered by lawmakers.
To find more money for their priorities, the Democratic-led budget committee would need to cut existing programs. Alternatively, the lawmakers could not spend the additional money or put it in reserves.
“It’s not enough to do everything we want,” said Sen. Bob Rankin, a Republican budget writer from Carbondale. Noting the slower budget growth rates, he said it “obviously creates some different expectations.”
One reason state spending is limited in the next budget year is TABOR. The constitutional amendment — which survived a challenge in the 2019 election — sets a cap on state revenue and mandates any excess tax dollars get refunded to taxpayers.
The TABOR surpluses are projected to reach $1.1 billion over three fiscal years, according to legislative economists. The governor’s office estimates it could reach as high as $1.3 billion by fiscal year 2021-22.
In addition, another $428.3 million will get sent back to taxpayers in the 2020 calendar year.
The result didn’t stop Democratic budget writers from bemoaning the effect of the TABOR caps on the budget. “Despite increased revenue forecasts, we won’t be able to invest those additional resources in transportation, K-12 education, or higher education because of TABOR,” said Rep. Chris Hanson, a Denver Democrat, in a statement. “The budget is tight, and we know it will be a challenge to continue this progress.”
Republicans suggest Democrats need to stop blaming TABOR and they should instead point the finger at themselves. “The truth behind the budget is that Democrats continually add new spending obligations to our budget at every opportunity instead of spending available revenue on priorities such as education and transportation,” said Sage Naumann, a spokesman for Senate Republican lawmakers.