STAFF SUMMARY OF MEETING
INTERIM COMMISSION TO STUDY FISCAL STABILITY
|Time:||09:06 AM to 05:27 PM|
|This Meeting was called to order by|
|This Report was prepared by|
X = Present, E = Excused, A = Absent, * = Present after roll call
|Bills Addressed: ||Action Taken:|
|Presentation on Education Issues|
Presentation from the Dept. Health Care Policy and Financing
Presentation on Transportation Issues
Presentation from the Department of Corrections
Presentation from the Department of Human Services
Presentation from the Judicial Department
Presentation from Dept. of Personnel & Admin
Presentation by PERA
Presentation from Department of Higher Education
09:07 AM -- Call to Order - Opening Remarks from the Chair
Senator Heath, chair, called the meeting to order. He provided an overview of the agenda for the two-day meeting of the Long-term Fiscal Stability Commission, as well as the subsequent set of two-day meetings. The meetings will focus on the type of state the commission thinks Colorado should be and the associated role of government.
09:09 AM -- Presentation from Believe in a Better Colorado on Education Issues
Representatives from Believe in a Better Colorado came to the table to discuss education issues in the context of the state's long-term fiscal stability. Believe in a Better Colorado is an alliance among the state’s three largest K-12 education associations formed to inform public school employees and citizens about the need to more effectively invest in all essential public services. The representatives from the group in attendance were Jane Urschel, Colorado Association of School Boards; Karen Wick, Colorado Education Association; and Bruce Caughey, Colorado Association of School Executives. A copy of the group's power point presentation is provided as Attachment A. Mr. Caughey explained that Believe in a Better Colorado thinks the state needs to undergo tax reform to provide better public services.
Ms. Wick discussed the state's ranking in funding for public services, indicating that the state lags behind other states for many services. She stated that public funding per $1,000 in state personal income for both kindergarten through twelfth-grade (K-12) education and higher education ranked 48th in the United States. She also noted that Colorado ranked lower on other education-related measures, such as class size.
Ms. Urschel discussed the state's low performance in graduating its residents from college, despite its high level of college graduates, many of whom have come from other states. She believed that the state needs to improve its entire educational system, from preschool to higher education. She did note that the state's efforts to evaluate student achievement are being modeled by other states.
Ms. Urschel continued by stating that FY 2010-11 is a critical year because the TABOR amendment's fiscal constraints to the state will still be in place, the Referendum C time-out will have expired, and Amendment 23's mandated percentage point funding increase above inflation will also expire. She urged the commission to meet with the school finance interim committee because of the strong nexus between the two committees. She also thought that the state needed to undergo fiscal reform because the state's constitutional fiscal provisions and formulas hinder the ability of the state's elected officials to govern effectively. She also stated that the provisions make it difficult for the state's different levels of government to share in the funding of services equitably.
Mr. Caughey discussed Amendment 23's effect on the state budget and funding for K-12 education. He stated that the intent of the amendment was to reverse the cuts to K-12 education in the 1990s. However, the amendment has acted more as a ceiling on education funding rather than the intended floor, and the state is still falling behind other states in funding.
Ms. Wick discussed the recent rankings in funding for education reported by the Census Bureau which included measures of federal, state, and local government funding. She indicated that the state's constitutional fiscal restraints had an adverse effect on funding for education.
Ms. Urschel discussed ways to improve K-12 education in the state, such as the utilization of more technology in classrooms, but stated that there was a lack of resources to employ such measures.
Mr. Caughey explained that the state needed to customize education to help its population develop necessary skills, such as critical thinking and creativity, to compete in the global economy. He commented that the state's public schools do the best they can with their limited funds.
Ms. Wick explained the changing student population. There are more students who have special needs, such as those in poverty, those learning English, and gifted and talented students. Ms Urschel and Mr. Caughey discussed education's role in keeping the state competitive and reducing poverty. Ms Wick noted the high return on investing public money in education.
Ms. Urschel discussed Believe in a Better Colorado's plans to host discussions this fall about ways for the state to better invest in public services.
Representative Gerou inquired about the state's funding levels for education, how it compares to other states in educational performance, and how public schools compare with other types of schools. Mr. Caughey discussed the state's per pupil spending rankings and indicated that Colorado scores in the top half of states in student performance. He explained that it is difficult to compare public schools with others types of schools for various reasons, such as the different types of testing and student populations in the various types of schools.
In response to a commission inquiry about what level of education funding the state should have, Ms. Wick indicated that it was difficult to derive a specific level. The state first needs to decide what outcomes it wants from its educational system. Mr. Caughey noted that one outcome to strive for is increasing the number of students that are proficient in various educational skills. He noted a presentation was recently made to the school finance interim committee which focused on the types of educational services that produce the best results.
The commission discussed issues regarding the appropriate level of funding for education, such as the impacts of continuing the current level of funding, and policies to meet educational goals. Mr. Caughey commented that current performance levels will decline if current funding levels continue, partly because the state will not be able to keep importing college graduates from other states at the same rate; thus, the state will have less educated families over time.
Jim Griffin, representing the League of Charter Schools, started his testimony by noting the increasing number of students in charter schools in the state. He concurred with the prior testimony that the state needed to undergo fiscal reform. He explained how charter schools are mostly responsible for funding facility needs, unlike traditional public schools. However, he noted the legislation that passed in 2009 that will help provide more capital construction funding for charter schools.
The commission discussed the differences in both funding and performance levels between charter and traditional public schools. Mr. Griffin indicated that charter schools perform well in general and that one important measure to look at is the large number of students on waiting lists for certain charter schools. He also explained that charter schools play an important role in helping low-achieving students.
10:06 AM -- Presentation from the Department of Health Care Policy and Financing on Health Care Issues
Joan Henneberry, Executive Director for the Department of Health Care Policy and Financing (HCPF), began by discussing the department's mission and the public health care programs administered by the department, such as Medicaid and the Children Basic Health Plan. A copy of the department's power point presentation is provided as Attachment B.
Ms. Henneberry continued by noting that since the department is such a large purchaser of health care it influences the health care market for all of Colorado. She discussed the Medicaid program and explained that cuts in state funding for the program result in foregone federal matching funds. She stated that Colorado's program is considered "lean" because the state has not chosen to add as many optional services or expanded eligibility criteria as much as other states. Currently, about 10 percent of Coloradans are enrolled in public health insurance programs.
Ms. Henneberry discussed the benefits of the state's usage of "waiver" programs that allow the department to serve populations that are ordinarily ineligible for public assistance.
Mr. John Bartholomew, Chief Financial Officer, HCPF, discussed the state's utilization of the federal stimulus money from the American Recovery and Reinvestment Act (ARRA) for its Medicaid program. The ARRA money results in the federal government increasing its matching funds to the state. He also discussed the various types of populations served by public health insurance in the state and the costs for serving them. The most costly are the elderly and disabled population, though children and adults represent the largest population served. He also provided information on HCPF's budget, noting the relatively small share for administration costs.
Ms. Henneberry discussed HCPF's efforts to be more cost effective, including the use of outside contractors to provide services. The department uses performance metrics to help ensure accountability and quality for the services it administers through contracted providers. She also discussed the department's efforts to deal with fraud and abuse within the public health system.
Mr. Robert Douglas, acting legal division director for HCPF, discussed HCPF's efforts to recover funds paid out for services that the state was not legally required to pay.
Ms. Henneberry discussed the increase in Medicaid caseload during recessions and its impact on the budget. ARRA has helped the state in meeting the increase in demand for services. The ARRA funding expires in December of 2010.
Mr. Renny Fagan, commission member and head of the Colorado Nonprofit Association, inquired about ways to reduce costs for serving the elderly and disabled populations and projections for the increase in caseloads for these populations. Ms. Henneberry discussed ways to reduce the costs for serving the elderly and disabled, such as by utilizing case managers to better coordinate and integrate the care provided to them. She also stated that home- and community-based services can help reduce costs. However, a lack of affordable housing and transportation for the elderly and disabled are barriers to increasing the use of such services.
The commission discussed the costs to the state of funding nursing home care and issues surrounding clients' sheltering of assets which are used to help determine their costs for services. Ms. Henneberry provided information on the state's efforts to better coordinate funding services to clients under both Medicare and Medicaid in order to save money.
The commission discussed House Bill 09-1293 (Health Care Affordability Act of 2009) and its impact on the state budget and increasing health coverage to the uninsured.
Representative Lois Court commented on the need to assess what level of health care services the state should provide and the costs for these services. Ms. Henneberry discussed the needs of the state's health care system, both public and private. She commented on the eligibility tests for public insurance programs and the high costs of health care. Mr. Bartholomew provided statistics on the costs of serving different populations under public insurance programs.
In response to the commission's questions, Ms. Henneberry provided information on providers' efforts to provide preventative health care services and chronic disease management to reduce health care costs. She also noted the Department of Public Health and Environment's programs involving preventative health care and wellness education.
The commission discussed HB 09-1293 and requested various pieces of information from HCPF, such as the department's ways of measuring performance, the CoverColorado program, and caseload costs over the business cycle. Ms. Henneberry indicated that HB 09-1293 included an oversight committee to look at the impact of the bill on hospitals and cost shifting.
11:13 AM -- Presentation from the Colorado Department of Transportation and the Transportation Finance and Implementation Panel on Transportation Issues
Russell George, Executive Director, Colorado Department of Transportation (CDOT), began by providing information on the state's transportation infrastructure and CDOT's functions. A copy of the department's presentation and its Transportation Deficit Report mandated by Senate Bill 09-108 (FASTER) are provided as Attachments C and D, respectively.
Heather Copp, Chief Financial Officer for CDOT, discussed the revenue sources for the state's transportation infrastructure, noting that most of the revenue comes from fuel excise taxes. The federal and state fuel excise tax rates have not changed for close to 20 years. She also discussed the FASTER bill and the transportation funding changes resulting from Senate Bill 09-228.
Ms. Copp continued by discussing federal funding for transportation, the reauthorization of the federal transportation funding law, and the insolvency of the federal Highway Trust Fund. She indicated that revenue from the state gas tax has stayed relatively flat or has experienced some slight declines in recent years. She also stated that construction cost inflation has significantly eroded the value of the gas tax over time.
Ms. Copp continued by providing information on the registration fee increases resulting from the FASTER bill and how SB 09-228 impacts the funding from the General Fund for CDOT.
Doug Aden, a member of the state Transportation Commission and co-chair of the state Transportation Finance and Implementation Panel, discussed the panel's efforts to identify funding options for the state's transportation system. The panel recommended an increase of $1.5 billion in annual funding for transportation to provide the type of system necessary to support a growing and vibrant economy and a high quality of life for Coloradans. He commented on the large gap in revenue that is currently available for transportation compared to what is needed. He indicated that keeping the status quo in funding will result in increased congestion and further deterioration of the state's roads and bridges.
Mr. Aden continued by discussing the panel's recommendations for dealing with the state's transportation funding and infrastructure problems, such as policies to improve mobility, increasing funding for local governments, and increasing mass transit and tolling options. He also provided information on the condition of the state's transportation system. For example, 47 percent of the state's roads are rated in poor condition.
The commission discussed the condition of the state's transportation system and funding issues. Mr. Aden and Mr. George discussed the transportation infrastructure problems faced throughout the United States. Mr. Aden indicated that Utah has made progress in developing ways to meet long-term transportation needs, such as developing successful long-range plans and raising the sales tax for transportation improvements. Ms. Copp discussed issues surrounding tolling, including the potential increased usage of tolls to support the transportation system. She commented that tolling for certain road segments has been successful, such as on E-470 and I-25 north of downtown, but that it would not be viable everywhere.
The commission discussed the potential impact on General Fund money for roads due to the repeal of House Bill 02-1310 and Senate Bill 97-1 as a result of the passage of SB 09-228. Mr. George discussed the need for the state to find a sustainable, consistent revenue source to fund transportation infrastructure. He stated that the state needs to decide what it wants its future transportation infrastructure to look like; what it will cost; how much the state can afford; and then find the best funding mechanism. In response to commission questions, Mr. George commented on CDOT's efforts to make its operations more cost effective.
The commission talked about the best ways to fund the state's transportation needs, such as whether transportation should receive General Fund dollars. Mr. George discussed the state's ways of funding transportation in the past, including the user fee concept of the fuel excise tax and the use of a portion of sales tax from vehicle-related purchases. He reiterated the need to have a predictable and sustainable revenue source. Mr. Aden mentioned the state's obligation to pay the debt service for "TRANS" and how SB 97-1 money was one funding source to pay for the state's "7th pot projects."
Senator Heath recessed the commission for lunch. He stated that he will not be present for the rest of the afternoon and for the next day's commission meeting due to medical issues.
01:22 PM -- Presentation from the Department of Corrections
Representative Ferrandino, called the meeting back to order. Ari Zavares, Executive Director of the Colorado Department of Corrections (DOC), reported on the state of the department's budget and the services offered by the department. A copy of the department's presentation is provided as Attachment E. He shared his professional background. He also discussed the size of the department in terms of number of employees, number of facilities, programs offered, and budget. Mr. Zavares discussed the department's programs in relation to their impact on recidivism rates and the relationship between recidivism and crime rates. He also reported on trends in prison population growth, indicating that the rate of growth has slowed in recent years and has declined for some populations.
Mr. Zavares continued by discussing the mission of the department which is to reduce recidivism. He also commented on the profile of individuals in prison and relayed some statistics on prisoner attacks on officers and other offenders as well as trends in the number of prison lock-downs. Mr. Zavares also discussed the rise in prisoners with mental illness and gang activity in prisons and noted that there is a high percent of offenders with substance abuse problems.
Karl Spiecker, Chief Financial Officer, DOC, discussed the department's budget. He noted that the budget has increased faster than population growth in recent years. Mr. Spiecker also indicated that budget growth is driven by inmate and parole population growth. He also indicated that the number of department employees has been reduced and educational programs have been cut due to budget cuts in the recent past. He described the impact of these cuts on recidivism rates and public safety.
In response to a question by Representative Court, Mr. Spiecker and Mr. Zavares indicated that inmates are not eligible for Medicaid (including mental health services) while in prison pursuant to federal law. In response to another question by Representative Court, Mr. Zavares noted that the Colorado Commission on Juvenile Justice is addressing issues related to sentencing and reducing the number of inmates without impacting public safety. Mr. Zavares also noted that sentencing report would not affect the current budget because it has longer term affects.
In response to a question from Ms. Boigon, Mr. Zavares offered statistics on recidivism rates and offered to provide additional details in a written report.
Mr. Zavares discussed the relationship between increasing funding for specific programs and the effect on recidivism rates. He indicated that the focus of the department has been on "honor pods," where offenders are rewarded for positive behavior while in prison and on parole. Concluding their presentation, Mr. Fagan and Mr. Zavares encouraged legislators to tour corrections facilities in the state.
01:57 PM -- Presentation from the Department of Human Services
Karen Beye, Executive Director of the Department of Human Services (DHS), discussed the department's budget and some of the challenges facing the department. Ms. Beye discussed the "Department Summary" which was provided to commission members (Attachment F). The document summarizes the services offered by the department. Ms. Beye provided an overview of the department budget in terms of the number of staff employed, and discussed funding sources for the department, including the General Fund and federal funding.
Will Kugel, Budget Director, DHS, highlighted a number of points regarding the budget. He discussed General Fund appropriations to the department, growth in the budget which has grown at about the rate of inflation, federal stimulus funding, and budget drivers such as the number of employees and caseload growth. In response to commission member Donna Lynne's question, Mr. Kugel described how Medicaid funding is distributed to programs within the department. In response to Representative Gerou's question, Ms. Beye discussed the gambling intercept program which increased funding to the department.
Ms. Beye discussed the increased use of assistance programs within the context of the current economic downturn and how the department has responded to increased caseloads. She also described some of the positive outcomes of the department's programs, as well as additional programs offered in recent years. She noted some department challenges, including budget constraints, maintaining a certain level of services, and meeting ARRA requirements to receive federal funds.
Lynn Johnson, Director of the Jefferson County Social Services Department, described the human services system at the county level. She provided a number of materials to commission members as follows:
- Attachment G: Biography for Lynn Johnson
- Attachment H: 2009 Human Services Fact Sheet
- Attachment I: Diagram of Interaction Between State and Federal Agencies
- Attachment J: State FY 2008-09 Major Program Funding Snapshot
- Attachment K: Application for Colorado Public Health Insurance for Families
Ms. Johnson shared her story of working at a women's correctional facility and the success of unique programs offered by the facility. She then discussed how budget cuts negatively impacted the success of the facility. She compared her experience at the correctional facility to that of the Department of Human Services. Ms. Johnson discussed successes in Jefferson County human services that have come from community partnerships. Ms. Johnson also described the connections between escaping poverty, education, opportunity, and community partnerships. She also discussed challenges in coordinating efforts between programs offered by DHS and other departments and how simplifying complex regulations could result in better services. Ms. Johnson described lessons learned from other states in reducing costs and increasing services by coordinating interdepartmental efforts and coordinating with the community.
Ms. Beye, Representative Ferrandino, and Representative Gerou's discussed the developmentally disabled waiting list. In response to Representative Court's question regarding what health and human services should be offered by the state and how much they should cost, Ms. Johnson and Ms. Beye discussed the need to simplify regulations, provide stable funding, and increase investment. Ms. Beye and Ms. Johnson also discussed community centered boards.
02:51 PM -- Presentation from the Judicial Department
Gerald Marroney, State Court Administrator, described the services of the Judicial Branch and indicated that caseload is the main factor that drives costs for the court system. He provided the commission with a handout (Attachment L) of slides to complement his presentation. Mr. Marroney stated that Judicial Branch funding has shifted from 19 percent cash funding to 31 percent over the past nine years. He also explained that offenders are assessed based on their prospective risk to the community when considering parole or other programs.
Mr. Marroney described the Judicial Branch's efforts to share data between departments to improve coordination as well as efforts to utilize emerging technologies such as e-filing and online payments to reduce administrative costs. Mr. Marroney relayed the performance metrics and standards the department utilizes for efficiency and accountability.
Mr. Marroney continued by describing the budget cuts of the early 1990s and indicated that cuts result in furloughs or layoffs and declines in quality of service for the Judicial Branch. Further, he noted that budgets cuts in personnel impact the community and increase costs for other programs and departments. He also discussed the need for sentencing reform.
Mr. Marroney continued by describing solutions to the challenges the Judicial Branch is facing such as the use of a fee that would go to a rainy day fund. In response to commission member Carol Boigon's question, he detailed the number of employees and budget for the Court of Appeals and Supreme Court. He also provided metrics and information in response to Ms. Boigon's question about judge and caseworker caseloads and the tracking of youth cases.
03:24 PM -- Presentation from the Department of Personnel and Administration
Jennifer Okes, Deputy Executive Director of the Department of Personnel and Administration (DPA), provided an overview of the department. Ms. Okes described the department as the business arm of the state government and described the services that the department provides. She directed commissioners to a DPA report responding to the questions the commission posed to the department (Attachment M).
Adrienne Benavidez, Director of the Division of Finance and Procurement, provided an overview of the services offered by the division and also discussed the use of price agreements. She provided a written summary of her testimony to the commission (Attachment N). She described the bidding process and the use of procurement cards, which she stated improved efficiency of the division. Ms. Benavidez also described expense reporting in the Colorado Financial Reporting System (COFRS).
Tom Montoya, Deputy Director of Human Resources, discussed the number of employees working for the state which totalled 38,740 excluding higher education employees. He estimated that there were approximately 40,000 additional employees within the higher education system. He also provided information on the total cost of benefits for state employees, employee cost relative to total department costs, and surveys comparing Colorado's salaries and benefits to other states. He responded to questions regarding the cost of pensions for state workers and the expected impact of retirements on the cost of employee pension programs. He commented on the concern for loss of institutional knowledge when retiring workers but noted cost savings in hiring replacement employees at lower wages.
Mr. Montoya indicated that turnover rates for the state's employees are below the market average. In regard to the recent audit on the state compensation system, he explained that the state has a bimodal compensation structure, in which older employees are paid more due to the step system which was once used for all state employees. He indicated that this system was abandoned 10 years ago and that state is now using a compensation structure based more on achievement.
Mr. Montoya also indicated that the compensation audit did not address benefits that employees receive and that the state is near the market rate for compensation when accounting for total benefits. Mr. Montoya and Ms. Okes provided further detail regarding the audit in response to commissioners' questions.
The commission took a brief recess.
04:01 PM -- Presentation by the Public Employee's Retirement Association (PERA)
Representative Ferrandino called the meeting back to order.
Meredith Williams, Executive Director of PERA, discussed the background of PERA and its plan and schedule for addressing its unfunded liability. Mr. Williams provided a print out of a presentation that provides an update on PERA (Attachment O). He also provided commissioners with a legislative timeline for PERA (Attachment P). He described the causes of PERA's current unfunded liability. He also described the increase in the employee share of contributions in recent years under the Amortization Equalization Disbursement (AED), and supplemental AED (SAED).
Mr. Williams described the legislation that has affected PERA in the last decade. He also discussed the impact of the current recession on PERA investments and indicated that significant changes are necessary for PERA to pay benefits in the future. He also discussed the role of the PERA board and the legislature regarding PERA investments as well as actuarial analyses. He described recent actions by the PERA Board, including an examination of the cost of each component of PERA pension plans and PERA's upcoming "listening tour," in which the PERA board will travel around the state to receive input and feedback from the community.
Mr. Williams indicated that a comprehensive proposal to address PERA's financial situation is expected by mid-October. In response to Representative Gerou's comments regarding lack of action during the 2009 legislation session to address the unfunded liability, he expressed his belief in the need for deliberate study and a comprehensive approach to the problem. He also compared PERA's pensions to other states' pension programs. Mr. Williams also reported the rate of return on investments for 2008, which was negative 26 percent, and year to date return in 2009, which was 3.15 percent from January through June.
Mr. Williams and Gregory Smith, General Council, PERA, concluded their presentation by discussing folding Denver Public School System (DPS) retirement fund into PERA and indicated that PERA will inherit the liabilities of the retirement fund but any unfunded liabilities within the DPS division will not flow to other divisions of other trust funds.
04:27 PM -- Presentation from the Department of Higher Education
David Skaggs, Executive Director of the Department of Higher Education, discussed a document distributed to commissioners providing a summary of statistics regarding the state's higher education system (Attachment Q). He summarized the funding for Higher Education which he state is funded at a ratio of two to one between higher education funding through tuition and state funding. He reported on statistics of how Colorado compares to other states in post-secondary graduation rates, achievement in education, and the productivity of higher education institutions. He indicated that Colorado's colleges are highly productive but state contributions for funding colleges are very low compared to other states. He also described the correlation between higher education and economic opportunity.
Mr. Skaggs indicated that state funding for higher education will decline by 30 percent from FY 2007-08 levels over the next few years. Mr. Skaggs addressed the budget for higher education, noting that one-time funds are being used to fill part of the budget shortfalls for the next two budget years. He also discussed future budget shortfalls and the steps colleges are taking to prepare for the shortfalls including program cuts and tuition increases.
Dennis Jones, President of the National Center for Higher Education Management Systems, discussed the role and needs of higher education institutions in Colorado and in other states. Charlie Lenth, Vice President of the State Higher Education Executive Officers, described the relationship between education, income, economic strength, and societal outcomes. He also discussed how the Colorado experience compares to other states. He discussed the purpose of state spending as sustaining institutions and investing in state priorities. A copy of Mr. Jones and Mr. Lenth's presentation is provided as Attachment R.
Mr. Jones and Mr. Lenth continued by discussing state and local funding sources for higher education and metrics for measuring investment in education over time. Mr. Lenth also reported on metrics comparing the United States to other countries and discussed metrics as they relate to importing talent into Colorado from other states.
Mr. Jones discussed demographic trends in Colorado as they relate to education and the economy, citing declines in the white cohort and increases in the Hispanic cohort. He stated that Colorado will be increasingly dependant on importing talent. Mr. Lenth discussed what other states are doing to address higher education funding. He noted the use of Lottery revenue, special earmarks, leveraging more federal dollars, combining local and state revenue to support community colleges, and utilizing business investments.
Mr. Skaggs discussed the relationship between student enrollment and tuition assistance, noting that Colorado could have a more supportive financial aid program. Mr. Lenth discussed the importance of early intervention in improving enrollment rates. Responding to commission member Kirvin Knox's question regarding increased efficiency through consolidating higher education institutions, Mr. Lenth discussed the actions of others states including Louisiana and noted that colleges serve certain regional populations and that changing governance should be the last option. Responding to Ms. Cooke's question regarding cost drivers of college tuition, Mr. Lenth replied that the cost of delivering education has not changed much, but that students are paying a larger share of the cost.
Mr. Skaggs responded to additional questions of commissioners clarifying metrics reported in the presentation.
The commission adjourned.