Presentation by Colorado Strategies
INTERIM COMMISSION TO STUDY FISCAL STABILITY
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11:06 AM -- Colorado Strategies - Henry Sobanet
The commission reconvened.
Mr. Henry Sobanet, representing Colorado Strategies, began his discussion about the economy. Members of the commission received a copy of his presentation (Attachment E). The presentation began with Colorado statistics showing that rapid growth in the 1990s was followed with much slower growth this decade. Mr. Sobanet explained personal income has not slowed, while the annual change in general fund revenue growth has been almost flat, while K-12 and Medicaid (the bulk of state spending) is growing. He further explained that, relative to revenues, these programs have grown nine times faster than revenue growth. Mr. Sobanet suggested a fair, broad-based tax structure should be implemented, and advised that the state should focus on the schools, and in doing so, other problems would be addressed. He suggested the state's tax base should cover more services.
The presentation continued by focusing on state stability. Mr. Sobanet noted that the state should be able to keep the revenue it has, and that a potential fix would be to extend Referendum C. He explained for the recovery to be beneficial, the state needs to keep the money it currently collects and limit or avoid fee increases. He further suggested K-12 spending be reduced. Mr. Sobanet concluded the state needs to increase reserves to prepare for the next downturn. He suggested the state review its tax policy and determine if the state has a tax base that is efficient, fair and, broad-based. He further explained the state should determine how to fund K-12 and transportation expansion. Mr. Sobanet suggested the state needs to review taxes that can be redirected and determine otherwise how to be more competitive.
Mr. Sobanet concluded with suggestions to end "auto-pilot" spending. He stated the current fiscal structure is not very flexible, but long term changes can be addressed. He noted Medicaid costs and baby-boomers will be increasing throughout the long term. The commission asked about the level of spending that would be required to maintain reserves. Also, a member of the commission asked about the level of spending in Medicaid and K-12 spending. Mr. Sobanet suggested looking at the big picture, and compare Colorado's rankings to other states and question whether or not the rankings will change. Discussion ensued regarding the potential fix for the state. Mr. Sobanet stated the problem is not a matter of limiting or reducing government, rather, the fix is an issue of regaining control of revenues. The commission also discussed the Medicaid hospital provider fee that recently became law.