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Strategic Budget Advisory Committee (SBAC)
Strategic Budget Advisory Committee

Colorado Gov. Ritter Tiers Cuts to Budget

January 06, 2009

Spending would trim before cash funds and reserves got tapped.

By Tim Hoover - The Denver Post

Gov. Bill Ritter said Monday he is proposing to slash state spending, raid cash funds and tap the state's budget reserve — in that order — to deal with a projected $600 million shortfall in the fiscal year that ends in June.

Calling it a "tiered approach," Ritter said he would first propose cuts to base state spending from $200 million to $250 million to deal with the shortfall, which his budget analysts have projected to be $230 million but legislative staff have put at $604 million.

If the cuts to base spending, which Ritter did not outline, don't do the trick, the governor then would call for using $250 million to $300 million from the state's cash funds, financed by fees for services.

If forecasts show the hole in the current year's budget is still approaching the $604 million figure, Ritter would propose taking $100 million from the state $320 million general fund reserve.

"We wouldn't use up that reserve, and we don't want to use it up," Ritter said, "but if we got all the way to $600 million necessary in cuts, that last (portion) would come from the reserve."

Ritter said his proposal gives the state some flexibility to handle worst-case scenarios throughout the remainder of the fiscal year.

His predecessor, Republican Gov. Bill Owens, also had to dip into cash funds and cut spending to deal with a budget crisis in the early part of the decade. The state used more than $1 billion from those cash funds during that budget crunch, and the funds have not been fully replenished since then.

"They couched it in terms of a loan, but they didn't pay them all back," Ritter said.

"It would be nice if we never got to get to taking money out of (cash) funds," he said, "and the minute we start identifying ones, we'll have interest groups really wild about their (cash) fund being vulnerable.

"We'll have to do what we have to do."

Ritter in September ordered a hiring freeze, which his office said has saved about $12 million by not filling 463 positions. He also ordered that about $50 million in campus construction projects be delayed along with $35 million in grants for full-day kindergarten construction projects.

Later in the year, Ritter ordered state agencies to propose 2.5 percent cuts to their general fund budgets. He has now asked them to prepare for 10 percent cuts in the coming fiscal year, which begins in June.

Although the shortfall currently projected for the next budget year, which begins in July, is smaller — estimated close to $385 million — there might be fewer ways to fill the hole. That is because already strained cash funds would be further depleted, and the state's budget reserve would be even smaller if the shortfall in the current year tops $600 million.

Rep. Don Marostica, R-Loveland, envisioned more problems. He said he is not convinced that the forecasts for the current and next fiscal years are conservative enough and thinks state revenues are not going to be as robust as predicted.

"I think it (the shortfall) is going to be more," Marostica said.

Ritter on Monday said he was considering a delay in the opening of a state prison west of Pueblo next year. Pushing back the opening of the 948-bed Colorado State Penitentiary II would save $16.6 million in the current fiscal year and $38.6 million the year after that.

Ritter also reacted coolly to a proposal from college presidents that the state stop funding higher education in exchange for allowing the colleges to set their own tuition rate.

Ritter said tuition at state colleges and universities has been jumping up considerably, including a nearly 25 percent increase at the University of Colorado over the past two years.

"I am hesitant to free up those institutions to make their own tuition increase decisions just for that reason," Ritter said, "because I don't think you can rely on those institutions remaining really accessible to all the families in Colorado."

Tim Hoover: 303-954-1626 or thoover@denverpost.com