Interim Commission to Study Fiscal Stability (10/02/2009)

Final
STAFF SUMMARY OF MEETING

INTERIM COMMISSION TO STUDY FISCAL STABILITY

Date:	10/02/2009	ATTENDANCE

Time:	09:07 AM to 04:20 PM	Brophy	X
		Court	X
Place:	HCR 0112	Gerou	E
		Morse	*
This Meeting was called to order by		Boigon	*
	Senator Heath	Conway	E
		Cooke	X
This Report was prepared by		Coors	X
	Elizabeth Hanson	Fagan	X
		Hume	X
		Knox	X
		Lynne	E
		Neilson	X
		White	X
		Ferrandino	X
		Heath	X
		X = Present, E = Excused, A = Absent, * = Present after roll call

Bills Addressed:		Action Taken:
Call to Order Department of Corrections		- -

09:11 AM -- Call to Order and Opening Remarks

Senator Heath called the meeting to order.

A copy of the presentation prepared by the Colorado Department of Higher Education was distributed to commission members (Attachment A). Following opening remarks, Senator Heath introduced Mr. Bruce Benson, President of the University of Colorado.

09:12 AM -- Higher Education

President Bruce Benson began the conversation by explaining he would provide details, not just regarding the University of Colorado at Boulder (CU), but also to address the needs of higher education in general and to determine ways to fund it. Members also received two handouts, including one about the impact of budget cuts on CU's Appropriations (Attachment B) and one about undergraduates that receive financial aid (Attachment C). Mr. Benson discussed the decreasing budget trend for higher education, adding that the Governor is applying federal funds to help fund higher education, but noted federal funding will end in 2011. He suggested solutions needed to be found, especially if the economy does not rebound quickly. Mr. Benson added he does not believe that CU should be privatized. He discussed the measures that he has already taken due to the declining budget, including two budget cuts, and is anticipating more cuts. In addition, CU is sharing services with other campuses to reduce costs, and has evaluated other areas where costs can be reduced.

09:24 AM

Mr. Benson discussed other considerations that could work for CU and possibly other colleges, including implementing fewer state regulations (particularly related to purchasing land), setting tuition, and modifying the enrollment mix. He noted that while higher education is looking at affordable and flexible options for tuition, a study is being done to make tuition payment options available to all students. A question was asked about short term versus long term solutions. Mr. Benson suggested CU had already been working on long term solutions before the interim commission began, by looking at other possible programs and other states' programs. He added the solutions that CU is applying today are intended to make the system both more efficient in the short run as well as more effective in the long run.

09:34 AM

Mr. Benson elaborated on the idea of purchasing land more independently to reduce costs. He also explained that many choices that the state will have to make will have to go to the voters. Discussion ensued regarding how to get information to the public for support. Mr. Benson stated CU has worked on ballot initiatives in the past and believes it requires visiting areas around the state, making use of TV, radio and other avenues of public awareness. These discussions cover issues not only related to CU but also for higher education in general, noting educational programs could include courses at community colleges that can be combined with programs at other institutions. In terms of accountability, Mr. Benson suggested all avenues should be explored, which includes putting strict measures and standards in statute that help get students in college and keep them in. He noted that beyond student access to a higher education, administration accountability may be more difficult to increase efficiency.

09:50 AM

A panel that included Ms. Inta Morris, Acting Executive Director of the Colorado Department of Higher Education, and Mr. Jim Polsfut, Chairman of the Colorado Commission on Higher Education, discussed the details of what an ideal higher education system would be and what it would cost. Ms. Morris provided an overview of the Colorado Paradox, which is discussed in the presentation handout (Attachment A). Mr. Polsfut explained statistics regarding the number of students in attendance (160,000), and the graduation rate (58 percent). The paradox is that the state ranks high in per capita income but low, and in some cases the lowest, in student post-secondary attainment, state support per student, and the gap in achievement between the majority and minority ethnicities. Ms. Morris noted that the category where Colorado ranks the lowest (ethnic gap) is the part of the population that is growing the fastest.

10:00 AM

Mr. Polsfut discussed other slides in the presentation handout covering revenue and state and federal operating funds. He noted that the proportion of the state General Fund budget spent on higher education has decreased over the years. He also discussed state rankings on productivity and total funding per degree. While institutions of higher education have become efficient with the resources they have, the consequence can be seen in lower levels of productivity as class sizes reach capacity and facilities become less capable of accommodating all students. Dr. Nancy McCallin, President of the Colorado Community College System, discussed the overload in the community college system, noting there is unprecedented growth. Mr. Polsfut continued to discuss the growth of different types of grants and the volatility of capital construction.

The panel responded to commission questions. On the ethnic issue, it was noted there are communication and funding complications, some stemming from K-12 education. Some higher education facilities, such as Metropolitan State College of Denver (MSCD), have taken extra measures to accommodate ethnic differences in the student population. In terms of output and success, criteria measurements are changing to chart the number of students that successfully make it through each year. The community college system is the pipeline for specialized business degrees required for jobs in which demand is increasing the fastest.

10:19 AM

Discussion ensued on the ethnic gap and whether it includes those students that drop out of high school. Also discussed was the cost that parents have to pay and the debt students will have to pay when they graduate. In some cases, it costs significantly less to attend college in another state such as Kansas or Nebraska. Many states put more funding toward higher education and rely less on tuition, whereas CU and Colorado State University rely more on tuition.

10:31 AM

The commission discussed various grants. Funds for need-based grants are provided by the state, per the state legislature. The panel offered to provide more information on financial aid and fees and all other funding sources, noting additional data will be available in December. Projections show $3 to $4 million dollars will come from state gambling for the community college system. The community college system's budget, however, was cut 40 percent. Also discussed was the low number of merit-based grants, which have been eliminated. This was a decision made by the legislature in order to fund need-based grants.

10:43 AM

Commission discussion ensued about the possibility of public-private partnerships. The commission recessed.

10:54 AM

The commission reconvened.

10:57 AM

Discussion ensued regarding the amount of subsidies, the cost of education, and the availability of scholarships. Ms. Kay Norton, President of University of Northern Colorado (UNC) explained UNC develops their pricing strategies, which are commonly changed in order to accommodate the students they want or need to attract. She noted that tuition is the biggest funding source, and that UNC adjusts tuition upward in order to accommodate funding requirements for other students. In California, tuition is free but fees are in the tens of thousands, and due to budget issues they will raise tuition 30 percent. In Colorado, when state investments in higher education decrease, students pay more. Operating costs are a significant driver of tuition increases.

11:09 AM

Senator Heath summarized where Colorado is in terms of funding higher education, suggesting the state is funding it at a minimum. He asked whether the question, "Do we want a system of public higher education in the state?" is a fair question. The commission discussed the fact that Colorado relies on in-migration to provide labor to the state. Dr. Nancy McCallin posed the question, "Can we continue to rely on in-migration in the future with the population again and mobility decreasing?" She stated that currently the community college system pays full-time professors very low wages. Adjunct faculty are paid even less. She added that due to the drop in state funding, classes have to be cut. She further noted the nursing program is a high-cost program and, with no funding to expand the courses, there is a long waiting list just to get into nursing school.

Dr. Kirvin Knox, having prior academic background, noted Colorado has a system that is based on an old model which is not sustainable and that needs to be changed. Senator Brophy expressed his views about the tax burden on Colorado citizens and the allocation of tax revenue. He said the tax burden on citizens throughout the nation is approximately 9 percent (total state and local), but with Colorado's high income, tax revenue should be higher than in other states. But it is the case that Colorado is having a problem with funding higher education. He stated that Colorado is not allocating resources very well.

11:26 AM

Discussion ensued on allocating resources, noting the state needs to allocate resources better with the long-term in mind. Decisions need to be made, including whether or not the state wants to provide all programs to all possible students. Also, MSCD now offers a masters program, approved by the legislature in the last session. A question was asked whether this meant the state is duplicating services that University of Colorado at Denver can provide. MSCD does get federal funding to provide a masters degree for minority populations, and currently, colleges are doing anything they can to generate revenue, including offering the courses that attract federal funding. It was noted that currently, the state is funding its institutions $750 million short of the average across the nation. The American Recovery and Reinvestment Act (ARRA) money will be available for only two years, and then the funding will no longer be available. State funding typically goes to faculty wages, which at UNC is 55 percent of its operating costs. The commission discussed the question, "If the state wants to be better than average, what would the state have to pay, and what would it get back in return in terms of lower crime rates and healthier citizens?" Vermont is one such state that has a high quality higher educational system and lower crime rates and healthy citizens.

11:46 AM

Ms. Morris provided a description of the difference between the Colorado Department of Higher Education and the Colorado Commission on Higher Education. Ms. Norton described how pay is established for attracting and keeping talented professors, and that pay for UNC professors is low. It was noted that the University of Wyoming has high salaries as an incentive to get professors. Dr. McCallin stated that salaries for faculty at community colleges is $42,000 and the national average for community college systems is $55,000.

11:55 AM

Senator Heath summarized the amount of funding shortfall the state is facing just to continue providing an average higher education system, not taking into consideration growth in enrollment. He posed the questions: "What are we spending now?"; "What will we have to pay in 2 years when ARRA funds end?"; and, "What kind of educational system do we want?"

12:01 PM

The commission recessed.

01:39 PM -- Department of Corrections

The commission reconvened.

Senator Heath introduced Mr. Aristedes Zavaras, the Executive Director of the Colorado Department of Corrections, who began the presentation before the commission. Mr. Zavaras introduced several staff members of the department that have expertise in corrections, its budget, and its operations, including Mr. Karl Spiecker, the Chief Financial Officer, Mr. Tim Hand, the Deputy Director of Operations for parole activities, Mr. Fred Sabus, the department's budget officer, and Ms. Joanie Shoemaker, the Director of Clinical Services.

01:45 PM

Mr. Zavaras began with an overview of the budget of the Department of Corrections. He explained that the annual budget of the department is approximately $750 million. The department has 23,000 inmates, 22 state facilities, and 5 private facilities. Mr. Zavaras said that the budget of the Department of Corrections is primarily driven by caseload. Likewise, the department does not control when inmates are removed from the correctional system, as these decisions are driven by parole policies and other considerations.

Mr. Zavaras explained that the department has an ongoing pilot project that is evaluating the individuals being released from parole. He continued, describing several parole guidelines and detailing certain requirements. The project, he stated, is in its preliminary stages, and the Colorado Parole Board will make the final determination about this program.

The second pilot program being undertaken by the department is a 180-day expedited release to parole, and it is evidenced-based. Mr. Zavaras stated the program allows the agency to put more money in re-entry programs and services. The goal, he said, is to reduce the recidivism of repeat offenders.

01:53 PM

Mr. Zavaras continued, stating that the agency will not know the overall impact of the two programs for some time. The primary focus of the Department of Corrections is always public safety, and he said that nothing should be done to compromise it. He explained that the recidivism rate is still important, and the rate of growth of inmate population has been decreasing over the past several years. He closed his opening remarks by explaining it is the goal of the department to allocate the right services with the right offender, which can reduce recidivism. These efforts can also reduce the department's budget and translates into less crime in the state.

01:59 PM

Representative Court asked Mr. Zavaras what percent of the current inmate population will be released from a correctional facility and return to society. He stated that 97 percent of these individuals exit the prison system and return to society. Representative Court stated that this emphasizes the importance of how the inmates are treated while in the correctional system. Mr. Zavaras further expressed that if the system does not address the behavior of these individuals while they are in prison, these individuals will likely repeat their criminal behavior.

02:03 PM

Mr. Zavaras continued responding to questions from the commission about the growth in caseload of the department and the inmate population. Mr Zavaras stated that approximately 10,000 inmates were released, and the net growth was about 15 inmates per month.

Mr. Spiecker, the Chief Financial Officer, also addressed commission questions about inmate growth in comparison to Colorado's population. The average length of stay for inmates, he said, was about 3.2 years, which equates to about 2.3 years for the female population and 4.3 years for the male population. The male population has increased and the female population has decreased, he stated. Mr. Zavaras explained that these numbers resemble the national average of the length of inmate incarceration.

02:09 PM

Representative Court stated that mandatory sentencing laws passed in the 1990s may have impacted the growth of the inmate population. Commission discussion ensued about inmate growth. Mr. Zavaras stated that the focus the department has placed on recidivism is having an impact. He also said it is hard to identify a particular factor driving population increases without examining a longer time frame. Colorado could experience periods in which population increases, and he said that crime typically increases during economic downturns.

02:11 PM

Mr. Karl Spiecker, the Chief Financial Officer, began an overview of the agency's budget. In the 1980s, the Department of Correction's budget was approximately 2 percent of General Fund appropriations and it now represents about 9 percent. Mr. Spiecker explained one driver of the budget is staffing needs. At present, the department's payroll is $1 million per day. He explained that in the last downturn, the Department of Corrections experienced cuts in personnel that have not been restored. The department lost about 588 individuals, including correctional staff, medical and drug rehabilitation counselors, and other professionals. This reduction represented about 10 percent of its staff.

The department, he said, does not have adequate staff to cover the posts and shifts for the department's correctional facilities. The department needs about 5.2 full-time equivalents (FTEs) for each post and tower. Likewise, every state prison bed is currently full. He also explained that new prisons have not been constructed since the late 1990s, and the department acquired a federal facility since that period. This has not been adequate to address the growth in the prison population during this period. The department's contracts with private correctional facilities, he said, have been helpful in reducing the need to request additional funding for Capital Construction, but these contracts do not meet all of the department's needs.

Mr. Spiecker also provided background information about the construction of a new prison that was authorized by the General Assembly in 2003. The facility is a high-custody prison but a lawsuit delayed its construction. While construction is now underway and is expected to be completed early next year, the current fiscal situation will affect the department's ability to utilize these prison beds. He explained the department will not have the $40 million dollars necessary to staff this facility.

02:18 PM

Mr. Spiecker continued by discussing the challenges the department faces in allocating the right resources and services for prison inmates. He stated that while the recidivism rate is 50 percent, he is surprised that the rate is this successful. The Colorado correctional system receives individuals that have failed in every other public system, including the school system and the juvenile justice system. To do the right thing for the state's citizens, the department must match the correct resources to the correct prisoners. The goal is to place a better individual before the parole board so that when these inmates are released, the public benefits. When prisoners are in correctional facilities, the public is safe. He said the department released about 10,000 prisoners in FY 2007-08.

Mr. Spiecker stated prison inmates need treatment for substance abuse and mental health. About 80 percent of prison inmates have drug issues, and 13 percent have mental health issues. He also explained that offenders have educational needs and require different types of therapy. He continued providing the commission members with treatments that are needed by the inmate population.

The department's needs are driven by caseload growth, he explained, over which it has no control. Likewise, if there is a smarter way to prevent people from entering the correctional system, allocating resources to effective approaches is good public policy. He explained that inmates need additional resources when they return to society, including employment skills, housing, and other community resources. He closed by discussing prison beds, stating that there are instances in the correctional system in which beds remain empty because the department does not have staff to operate the prison facility.

02:27 PM

Ms. Boigon raised questions about the prison population statistics and Denver's prison population. Mr. Zavaras explained that about 21 percent of the male population and 18 percent of the female population are from Denver County. Discussion continued about this and the rehabilitation of inmates. Mr. Zavaras also explained that there are 3 companies that incarcerate inmates for the department and provided background information about these companies. He explained that the private prisons are reimbursed $52.69 per day per inmate. Mr. Zavaras also discussed the age of the prison population.

02:36 PM

Senator Morse expressed his concerns about paroling prisoners with medical needs. Mr. Zavaras said that some inmates have insurance and other resources, but in addition, many qualify for Medicaid, Medicare, or other benefits. The department faces challenges in helping these individuals and they must exit prison on their release date. Senator Morse also asked the panel about cost savings the department is pursuing and whether private prison contracts give the agency additional flexibility. Mr. Zavaras stated that none of the contracts have any bed guarantees because the department does not want to pay for beds not in use. In addition, he stated that the department screens every out-of-state prisoner that comes into the correctional system.

Senator Morse also asked about the aging of the prison population and Mr. Zavaras explained that it is aging. With older inmates, the department has additional health care needs, he stated.

02:45 PM

Discussion continued about the medical needs and age of the inmate population. The average age of an inmate is 35 years old, Mr. Spiecker explained.

02:47 PM

Mr. Coors asked about the costs of the department's programs. Mr. Spiecker began by discussing the staffing levels of the department. He estimates the department needs about 344 additional staff (FTEs) and $17.2 million to meet their staffing needs. This does not include staff for prisons scheduled to be opened, but only for existing facilities. He explained that the department needs $40 million dollars to staff the new facility discussed earlier.

The commission also discussed the Denver Reception and Diagnostic Center (DRDC). Ms. Joanie Schoemaker provided background information about the expansion of this facility. The department expanded three areas, including the facilities for receiving inmates when they first enter the correctional system. In addition, the department expanded the number of infirmary beds and the number of housing beds, she explained.

02:55 PM

Mr. Spiecker continued the presentation by discussing the educational needs of inmates. He explained that 5,200 inmates need a General Equivalency Diploma (GED), which would cost $31 million and about 48 FTEs. The department also needs $1.9 million and 21 FTEs for vocational education. He also said that the department has organized their current budget documents by program to make them more transparent. Mr. Coors asked whether these programs are voluntary or mandatory. Ms. Shoemaker explained that the agency's first priority is to ensure inmates have a GED, and that participation in the programs is voluntary.

02:59 PM

The commission recessed.

03:10 PM

The commission reconvened.

03:11 PM

Mr. Spiecker continued discussing the Department of Corrections staff and budgetary needs. He stated the department needs approximately $4 million for educational needs. Senator Health asked about the recidivism rate in Colorado and how it compares to other states. Mr. Spiecker explained that different states measure this rate differently. In Colorado, the recidivism rate is measured by the number of prisoners who return to prison within a three-year period, he said. Senator Heath expressed his views about this issue and stated the reasons to invest in education are to increase the chances that these individuals will not return to prison. Mr. Spiecker explained that the agency also needs to keep the inmate population busy while they are incarcerated. Commission discussion ensued about the return on investment for educational spending.

Mr. Tim Hand, Operations Director, explained that educational programs have an impact because employability is increased when inmates return to society. Discussion continued about recidivism rates. Mr. Spiecker also provided the commission with background information about therapeutic communities. He stated that the department does not have adequate data on many of its programs.

03:22 PM

The commission discussed substance abuse treatment and programs for women. Ms. Boigon expressed her thoughts about the importance of these programs.

03:24 PM

Mr. Spiecker continued the presentation by discussing the substance abuse treatment for offenders. A total of 4,000 offenders need this treatment, and about 800 receive it, he explained. Approximately 3,157 inmates need these services. The cost is about $15.7 million and 277.5 FTEs. Likewise, about 6,200 individuals are waiting for out-patient treatment.

03:29 PM

Mr. Spiecker continued his presentation by discussing sentencing. He outlined several considerations, including the decisions of the judicial system and sentencing reform. If there are significant policy changes in these areas, they can have the effect of reducing or increasing the department's costs and budget.

Mr. Spiecker stated that additional programs needed by the Department of Corrections includes treatment for sex offenders. About 25 percent of the inmate population are sex offenders, and 7 percent have been sentenced under the Lifetime Sex Offender Supervision Act. The current level of funding for sex offender treatment is $2.9 million. Based on the offenders currently in the system that need this treatment, the department would need about $3.1 million and 51.4 FTEs to meet this need.

Discussion ensued about the success of sex offender treatment. Ms. Boigon asked about the successes of this treatment on changing behavior. Ms. Shoemaker returned to the table and explained there have been several studies done, and that the longer the treatment the more successful it is. Ms. Shoemaker explained that a study conducted in 2003 in Colorado has good data about the results of this type of treatment.

03:37 PM

The discussion moved to mental health services needed for prison inmates. Mr. Spiecker explained that approximately 18 percent of inmates have severe mental health issues. A capital construction project costing $753 million, which would add 250 beds, would assist in meeting this need. The net operating cost is about $8 million in cost and 196 FTEs.

The costs of a private prison bed is about $52 per inmate per day, while the cost of a state bed is $77.98 per inmate per day. Commission discussion ensued about this issue and how to realize potential savings. Mr. Spiecker stated that the department has closed two correctional facilities in the past year to save costs. One facility was both aging and high-cost. It was strategically a good decision, he said, and the facility was closed without laying off any state employees.

03:48 PM

Senator Brophy continued asking the panel about how the state could reduce the state's $77 dollar per day cost. Arizona, he said, is cheaper, and there may be an opportunity to save additional costs. Senator Morse expressed his thoughts about increasing the number of private prisons and marginal costs.

Mr. Coors also discussed results from the 2003 study on sex offenders, treatment, and the success of these programs.

03:55 PM

Representative Court raised questions about the definition of a sexual offender in the Department of Corrections. Ms. Shoemaker explained the ratings system for these offenders and state law.

03:56 PM

Mr. Spiecker discussed the number of parole officers and caseload demands in this area. Because of the budget shortfall, correctional officers currently have higher caseloads than they have managed historically. To restore the caseload to historical averages, the department would need $6.1 million and 89.5 FTEs. Parole officers handle about 60 offenders each on average, and 20 offenders each for inmates with intensive needs. Senator Heath asked whether this increase has had negative consequences, and Mr. Hand answered that it has.

Mr. Spiecker also explained that the department has 6.5 million square feet in facilities to maintain existing prisons. This underscores the need for controlled maintenance funding for these facilities, he said. The department spends about $24.4 million annually on the routine maintenance of these buildings, and has requested $7.2 million for controlled maintenance to maintain existing prisons. Ms. Oliver Cooke asked whether this includes de-commissioned prisons, and Mr. Spiecker answered that it does. Discussion ensued about these facilities and the income-generating opportunities they bring to the state. The commission members also discussed the $7.2 million request for controlled maintenance.

Mr. Spiecker testified that the department needs to be able to compensate its employees. In addition, the department needs to be able to compensate private prisons at a competitive rate. This is an important part of the department's future.

The ideal level of funding, Senator Heath pointed out, would increase the department's funding by $118.7 million, for a total of $788.7 million. Discussion ensued as to whether there is a middle number. Mr. Spiecker explained that there are multiple ways to arrive at this point. Senator Heath thanked the corrections panel for their time.

04:09 PM -- Discussion on Proposing Bills and Closing Comments

Senator Heath discussed the upcoming meetings on October 14 and 15 and the agendas for these meetings. Senator Heath also discussed recommending legislation as a commission.

04:11 PM

Ms. Esther van Mourik, Office of Legislative Legal Services (OLLS), came to the table to discuss the process for recommending legislation. In order for a bill to have the Fiscal Stability Commission's name on its front, it must be approved by the Legislative Council at its November 10 meeting. The mail date to the Legislative Council members is November 6. The commission will need to approve such final bills on November 4 or 5.

She explained that the time frame makes it difficult to make changes to final bills before recommending them to the Legislative Council. She suggested that if bill requests are made by October 15, the commission could have an up or down vote on November 4 or 5. Bills must be approved by a majority vote of the legislative commission members. The other possibility is for legislative members of the commission to individually make bill requests as soon as possible. This would count toward the five bill limit for legislators unless the legislative leadership grants a waiver of this rule. However, in order for legislation to be a commission bill, it needs to be voted on by November 5.

04:16 PM

Mr. Coors asked whether nonvoting members could do a nonbinding consensus vote on the bills, and Senator Heath answered yes. In order for it to be passed by the commission, however, it has to be passed by majority of the legislative members. Interim commission bills do not count against any individual legislative member's five bill limit.

04:17 PM

Ms. van Mourik also said that the commission could be included in potential drafts. This must be approved by the individual member, and it takes away confidentiality of bill requests, she explained. Mr. Knox asked about the final report, and Senator Heath explained the process. There could be recommendations in the final report and not in the legislation, Senator Heath explained.

Representative Court requested that Legislative Council Staff make a document showing the funding levels for the major areas of General Fund appropriations, including the current level of funding, a middle number, and the best or ideal number.

04:20 PM

The commission adjourned.