More state budget cuts likely, officials forecast

DENVER — Colorado is looking over the edge of a $1 billion budget abyss, with key services, from schools to health care for the needy, on the chopping block next year.

In a clear sign that economic recovery is not keeping pace with demand for governments services, economic forecasters warned a General Assembly budget committee on Monday that the state fiscal picture has worsened in the past three months and could be darker still in a year.

Economic forecasts prepared by the Governor’s office and by advisers to the General Assembly backed away from optimism seen earlier this year. They outlined a $1 billion crisis for the budget year that begins July 1, 2011.

“The good news is that at least for this year’s budget we are within the margin of error,” deadpanned Colorado Springs Republican Rep. Kent Lambert after the Legislature’s Joint Budget Committee received the forecasts.

The bad news: State revenue fell from a March economic forecast by more than $120 million, largely because tax collectors are having a difficult time getting people and businesses to pay up. That cuts into the state’s savings account, leaving Gov. Bill Ritter to come up with as much as $75 million in immediate cuts from the state’s $7 billion general fund.

On Monday, Gov. Bill Ritter said he is scouring the budget to cover the shortfall, with a plan due by August. He covered bigger shortfalls last year by furloughing state workers, cutting programs and releasing some inmates from state prisons.

The Democrat who is stepping down after this term warned things could get worse. The state budget in the fiscal year that begins July 1 relies on $211 million in federal cash that may not be forthcoming. The money to pay for low-income health care programs is part of a larger federal stimulus spending plan that deficit-weary lawmakers in Washington have balked at passing.

Ritter warned that with a $211 million hit, he’ll have to look at cuts for public schools, which saw a $260 million cut from the General Assembly this year.

Federal stimulus money has been a major component of the state budget for the past two years, and it’s a big part of the problem lawmakers will face in January when they reconvene.

For the budget that takes hold in July, the General Assembly expected to receive $530 million from Congress to pay for Medicaid and colleges. That cash won’t be available for the budget that begins in July 2011, leaving Colorado to cover the bills.

“We’re looking at somewhere between a $500 million and a $1 billion shortfall,” said Denver Democratic Rep. Mark Ferrandino, who sits on the Joint Budget Committee.
That money will have to come from the general fund, the state’s dwindling pot of discretionary spending money that’s tapped for everything from parks to prisons.

Ritter said that in the past two years he’s done his best to preserve essential state services while closing budget gaps totaling $3.5 billion.

“As you go forward it becomes increasingly difficult to find ways to do that,” he said.

Without hard-to-sell tax hikes — such as extending the sales tax to food — the general fund likely won’t see much growth, state economists said.

While the economy is recovering, forecasters say it remains bedeviled by a weak job market combined with housing prices that may not have found bottom. That means taxes paid to the state aren’t bouncing back quickly enough to meet demands on state programs that is expected to escalate by as much as $300 million next year.

For cuts, Ferrandino said schools and health care will be in the crosshairs.

“You look at the places where we spend our money,” he said.  “You look at education and you look at healthcare.”

Colorado Springs Democratic Sen. John Morse has been predicting deeper budget cuts for months.

“Colorado is recovering, but, as predicted, it will be a slow and long recovery,” he said Monday. “While more cuts are inevitable, we, as legislators, must do what we can to make those cuts as painless as possible.”