Nov. 1 (Bloomberg) -- Colorado Governor John Hickenlooper called for cuts to public schools and universities to help close a $500 million gap in the $20 billion fiscal 2013 state budget.
In his second spending plan since being sworn in 10 months ago as Colorado’s 42nd governor, Hickenlooper, a 59-year-old Democrat, also proposed eliminating tax breaks for seniors and reducing spending on road repairs. He didn’t order closures of state buildings or parks or unpaid time off for public employees.
“There’s going to be serious resistance to almost all the cuts,” Hickenlooper said today at a press briefing. “These are the cuts that make the most sense.”
Colorado joined 11 states that previously forecast deficits in fiscal 2013 totaling $15.9 billion, according to a September report by the Denver-based National Conference of State Legislatures. The Colorado general-fund budget for the fiscal year beginning July 1, 2012, is $7.3 billion, a 3.2 percent increase from the prior year.
The state’s deficit is driven largely by an 11.1 percent increase in Medicaid costs and a 3.7 percent jump in prison expenditures, said Henry Sobanet, director of the governor’s Planning and Budgeting Office, in a briefing yesterday.
“The weak economy means more people qualify for this program -- it’s a federal entitlement,” Sobanet said of Medicaid. “So if people show up for the program we’re obligated to pay the bills.”
Medicaid Cases Rise
Colorado’s Medicaid caseload jumped by 101 percent to 553,407 in fiscal 2011 from 275,399 in fiscal 2001, according to an April letter from House of Representatives Speaker Frank McNulty, a Republican, and House Majority Leader Amy Stephens, a Republican, to U.S. Senator Mark Udall, a Colorado Democrat.
Colorado isn’t the only state facing skyrocketing health care costs. State spending on Medicaid is expected to surge 29 percent this year, in large part to make up for the loss of federal economic stimulus funds, according to an Oct. 27 survey by the Henry J. Kaiser Family Foundation.
The increase is forcing states, including Colorado, to take money from education, transportation and other programs. Like other states, Colorado plans to raise copays and enrollment fees to pay for rising Medicaid costs, Sobanet said.
“We are still five percent below the revenue level in 2008,” Sobanet said. “With respect to Medicaid alone we’re $370 million above the 2008 appropriation, but we’re $387 million below on revenue, so that’s a $757 million swing in a $7.3 billion general fund budget.” With federal spending, the state budget totals $20 billion.
Colorado’s 2012-2013 deficit is also fueled by an increasing demand for services and a tangle of constitutional amendments that prohibit lawmakers from raising taxes. In the past five years kindergarten-through-12th-grade enrollment increased by 6.8 percent, higher education enrollment by 20 percent and the children’s health plan caseload by 19 percent, according to Hickenlooper’s office.
Hickenlooper’s budget requires the Legislature to approve several law changes, setting the stage for a battle between Republicans and Democrats over a constitutional amendment enacted by voters in 2000 that provides tax breaks to seniors. Withholding the benefit would save the state almost $99 million.
Senior Tax Benefit
The amendment, known as the Senior Homestead Property Tax Exemption, allows those 65 and older who have lived in their residences for at least 10 years to exempt 50 percent of the first $200,000 of value from property tax. The amendment allows lawmakers to suspend the tax break in lean budget years.
Republican leaders said this summer that they didn’t favor suspending the $99 million tax break in 2012 to balance the budget.
Sobanet said yesterday if the tax break isn’t suspended, the money will need to be cut from somewhere else unless revenue increases in the next six months.
“Half the budget goes to K through 12 education and higher education, and so if $98.6 million goes to senior homestead it means you have to find budget reductions -- most likely in K through 12 or higher education,” Sobanet said.
The governor’s 2012-2013 budget proposes cutting $97 million from schools, or about $160 per student, and $76 million from colleges and universities.
School officials said the cuts mean the state won’t be able to move forward with some education reform measures, including reworking the state’s standardized tests.
“Instead of building programs, we’re dismantling programs,” Jane Urschel, deputy executive director of the Colorado Association of School Boards, said in an interview. “Denver is talking about dismantling their preschool program, which they’ve gone to great lengths to build.”
Education cuts follow three years of decreasing school funding, prompting state Senator Rollie Heath, a Democrat, to sponsor an initiative called Proposition 103 that would generate $3 billion for education over five years by raising income and sales taxes. That measure is up for a vote in a statewide election today.
Sobanet said yesterday that if the initiative -- the only tax increase on ballots nationwide this year -- is approved by voters today, “some of these reductions would not be necessary.”
Colorado’s Legislature will consider Hickenlooper’s budget during a regular session scheduled to begin Jan. 11. New revenue figures next month and in March could affect the debate.
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