STAFF SUMMARY OF MEETING
INTERIM COMMISSION TO STUDY FISCAL STABILITY
|09:08 AM to 05:00 PM
|This Meeting was called to order by
|This Report was prepared by
X = Present, E = Excused, A = Absent, * = Present after roll call
|Presentation on the State Budget
Commission Discussion - What Have We Leaned?
Continued Discussion from AM Session
Discussion:What kind of state do the people want?
09:09 AM -- Presentation on the State Budget
Senator Heath, Chair, called the committee to order and explained that over the next couple of days the commission would be discussing what kind of a state the commission would like to have. He said the day would begin with a presentation from the Governor's Office of State Planning and Budgeting.
09:15 AM -- Todd Saliman, representing the Governor's Office of State Planning and Budgeting, presented an overview of the Governor's FY 2009-10 Budget Balancing Plan that was released on August 18, 2009. He explained that the latest round of budget cuts stemmed from the June 22 revenue forecast. Following the forecast, on July 20, each state department submitted a budget cut proposal to the Governor and from those, the budget plan was created. Mr. Saliman distributed a copy of his presentation entitled Governor Bill Ritter's FY 2009-10 Budget Balancing Plan (Attachment A).
Mr. Saliman talked about the revenue forecasts and job losses that have occurred in 2009. He pointed out that home values are holding steady in Colorado. Mr. Saliman continued to walk through the handout. He explained that during the 2009 legislative session, a shortfall of $1.454 billion was addressed, however, there is still a $318 million shortfall in FY 2009-10 that will need to be addressed (the shortfall is explained on page 9 of the handout). Mr. Saliman explained the General Fund reductions on page 12 of the handout. Mr. Coors asked for an explanation of the cuts to higher education. Mr. Saliman directed the committee to page 29 of the handout that explains that the higher education budget is being cut by $80.9 million that will be backfilled with federal stimulus funding and are contingent upon approval of Colorado's American Recovery and Reinvestment Act of 2009, State Fiscal Stabilization Fund, Maintenance-of-Effort Waiver for FY 2009-10. There was a discussion about the impact this will have on the FY 2010-11 budget.
Ms. Boigon asked Mr. Saliman to explain his earlier comment regarding property taxes and home values. She talked about a lag in property taxes because they are only calculated every two years. Mr. Saliman continued his presentation and discussed the reductions in cash funds on page 13. He talked about the programs that the Governor tried to protect when creating his proposal that are listed on pages 14 through 18.
Mr. Saliman began talking about the each departments' individual reductions that begin on page 20 of the handout, including the Departments of Agriculture, Corrections, Health Care Policy and Financing, Human Services, Local Affairs, Military and Veterans Affairs, Natural Resources, Personnel and Administration and Statewide Common Policies, Public Health and Environment, and Public Safety. There was a discussion about the Amendment 35 funds that come from tobacco taxes and Senate Bill 09-232 funds. Mr. Saliman concluded his presentation with an explanation of the FY 2010-11 balancing process provided on page 51 of the handout.
Ms. Lynne asked a question regarding the number of elderly that make up the Medicaid Caseload Growth chart on page 7. Mr. Saliman explained that the largest growth is from children and adults while the elderly and the disabled has stayed mostly stable. Mr. Saliman was asked to talk about the furloughs that are built in the budget. He said the state is taking four furlough days in FY 2009-10. However, additional budget measures (not necessarily more furloughs) will be needed to implement the remaining personal services reduction. Representative Gerou said she is concerned about the General Fund Components History chart on page five and the upswing in individual income taxes.
Natalie Mullis, Chief Economist, Legislative Council Staff, responded to her question and explained that Legislative Council does indicate that in FY 2010-11 and FY 2011-12 the individual tax will increase based on capital gains returning within that time period. Representative Gerou talked about the overall FTE changes and how many of them are permanent reductions versus a one-time change. Mr. Saliman stated that all of the changes to FTE are permanent. She also asked about the hiring freeze to which Mr. Saliman explained that they decided to do permanent removal of positions rather than just freezing them. Mr. Saliman explained that there are certain positions that need to be replaced due to public safety and other reasons. Representative Gerou asked about the reimbursement changes to the Colorado Indigent Care Program and whether hospitals will be taking care of that cost.
Ms. Boigon asked about the reductions to the Child Welfare Block on page 31 of the handout. Mr. Saliman explained that in general they attempted to cut programs that were not federally matched so the programs would not lose twice as much money as they would if they were to just cut the general funded programs.
Senator Brophy stated that the commission is charged with the long term fiscal stability of the state and asked what Mr. Saliman thinks should be looked at in regards to long term stability. Mr. Saliman stated that he believes a key is to look at:
- programs that attract new and cutting edge businesses to the state;
- TABOR, since the Referendum C suspension ends in FY 2009-10; and
- overall, what the commission wants the state to look like and what would be needed to achieve that vision.
Senator Brophy expanded on his point regarding TABOR returning and asked if Mr. Saliman saw a way to balance spending limits while keeping the budget balanced. There was a discussion about the balanced budget requirement and the fact that the state cannot incur debt. Ms. Cooke asked what the projected total budget for FY 2009-10 is after the cuts. Mr. Saliman stated that the total budget is about $18.7 billion, of which $6.9 billion are general funds.
Representative Court pointed out the one time money provided by the federal government that will not be there in the long run. She also talked about the Amendment 35 funds that were talked about earlier. Representative Court asked at what point providers will stop offering services to Medicaid patients due to the cuts in provider fees.
10:54 AM -- Commission Discussion - What Have We Leaned?
Senator Heath announced a break and explained that he would like to continue until 12:15 p.m. and take a shorter lunch.
Senator Heath called the commission back to order. He said he would like the commission to talk about what they learned from all the presentations in the first four days of the commission. Senator Heath asked each commissioner to explain what they have learned and started with Mr. Coors. Mr. Coors stated that the big things he heard was everyone wants a reoccurring steady stream of income and most groups say that they are under funded, but at the same time those groups seem to be doing well with the resources they are given.
Representative Court agreed with Mr. Coors, except that she did not feel those groups are doing well. She added that the budget is complex and there are a wide variety of services provided by the government. Representative Court said the main challenge is balancing the needs and expectations of the public with the amount of state revenue available.
Mr. Fagan stated that he has observed that the budget is created using formulas rather than basing it on need. He also observed that when the sentences were doubled in 1985, the prison population increased dramatically, and the balance of the share between the local governments and the state relating to school funding has reversed over time. Lastly, he talked about different ways of providing services, including public/ private partnerships and nonprofits.
Senator Brophy said he talked about the fact that Colorado's revenue stream increases faster than the economy during good times and decreases faster than the economy in bad times as presented by Charlie Brown from the University of Denver in an earlier meeting. He said he feels there needs to be a rainy day fund in the good times to cover the down times. He also talked about the Amendment 23 mandates and said the commission should look at a temporary time out from the amendment. Senator Brophy said the state should also look at long term planning rather than yearly budgeting.
Ms. Lynne talked about the complexity of Colorado's budget and how disaggregated the budget process is in Colorado. She suggested looking at other state services outside of the general fund also. Ms. Lynne talked about having a yearly budget in conjunction with a four-year finance plan. Another observation Ms. Lynne had is that outcomes are not linked with spending very well in Colorado. She talked about creating an entity in state government that looks at outcomes. Ms. Lynne said she also agrees with Mr. Fagan regarding public/ private partnerships.
Ms. Cooke said she has learned that there is a limit on how the budget can be allocated. She also talked about creating a rainy day fund because it is hard to have a stable revenue source. Ms. Cooke suggested using priority-based budgeting rather than zero based budgeting.
Senator Morse agrees the state should be outcome based, but feels there is no money to fund that. Senator Morse said the more the government is held accountable, the more bureaucratic government becomes.
Mr. Conway said he looked for suggestions that would allow the commission to address issues that have put the state in the position it is in. He mentioned that a comprehensive tax study has not been done in Colorado since the 1950s. He talked about the small amount of money the state gives to the state's research universities. Mr. Conway said that the universities should be allowed to have more freedoms to try new things. Mr. Conway agreed with the fact that there are many restrictions on the use of money in Colorado. Mr. Conway said the most disturbing thing he heard was that every group, in order to protect their piece of the pie, will go to the ballot and receive constitutionally-mandated funds, which undermines the representative form of government. He also said he agrees with having a rainy day fund and tapping into public private partnerships.
Ms. Boigon said she agreed with looking at the issue of the initiative process and representative government. She talked about incurring debt, which she said allows Denver to fund projects that can stimulate the economy. Ms. Boigon said in addition to TABOR reserves, Denver holds a 10 to 15 percent reserve. She also talked about the city versus state revenue structure, indicating that 50 percent of Denver's budget is spent on safety whereas 50 percent of the state's budget is spent on education. Ms. Boigon talked about the importance of retooling for the future. She said outcomes are an investment that allows your outcomes to improve and gave the example of data-driven policing. She also talked about Colorado being a disaggregated state and the importance of local control, but that it does come with a cost.
Mr. Hume said one thing that is agreed on is that the current path is not sustainable and that there needs to be change. He said there is going to be a struggle convincing the general public that change is necessary. Mr. Hume talked about the need for a rainy day fund and a fiscally responsible state government.
Representative Gerou said she feels it is important to look at the government's philosophy when the constitution was created and where it is now and said she is a strong believer in states' rights and a limited government. Representative Gerou agreed with Senator Brophy's comments regarding Mr. Brown's presentation. She said that she also believes the state does not always need to accept federal dollars. Representative Gerou said they need to look at what necessary government functions are. Lastly, she pointed out to the commission that it is important to realize that all the information they have received comes with an agenda.
Ms. Neilson stated that the government does not have control over where it spends its money. She says she agrees that there needs to be a rainy day fund and that there should be more cost/benefit analysis done in the government. Ms. Neilson said budgeting needs to be prioritized and also agrees with privatizing some areas. She thinks Amendment 23 does need to be addressed. Ms. Neilson said the government cannot be all things to all people and the commission needs to look at what the core functions of government should be.
12:20 PM -- Lunch
01:30 PM -- Continued Discussion from AM Session: What are the Common Themes?
Sen Heath called the commission back to order. The commission discussed the common themes from the morning session. Carole Boigon mentioned representative government. Sean Conway mentioned rainy day funds. Donna Lynne mentioned long term financial planning. Representative Court mentioned the need to avoid strict formulas. Finally, Renny Fagan mentioned public/private partnerships, leveraging private funding, and using outcome based measurements.
Amy Oliver Cooke commented that if there is consensus, the initiative process may need to be addressed first, before getting to the specifics of formulas.
Representative Gerou questioned whether there was a consensus concerning formulas and possibly also concerning representative government.
Jonathan Coors clarified that we have not properly defined these terms and the commission may be getting ahead of itself.
Donna Lynne remarked that there is a lack of citizen information and an inability on the part of the public to understand or know some of these budget issues.
Senator Brophy commented that we need to recognize that we have a volatile revenue stream that swings wildly based on the economic fortunes of the state.
Senator Heath and Sean Conway engaged in a brief conversation about Higher Education. Mr. Conway reiterated his idea that the boards of the research institutions could request flexibility for innovative approaches to funding and budgeting in light of reduced support from the General Assembly.
Senator Morse remarked that there is consensus that there is a problem to solve. We have heard from some members of the public that there is no problem; however, this commission has concluded that a problem does exist and requires solutions. The exact nature of the problem is still yet to be discussed by this group.
Mr. Conway and Ms. Boigon reminded the commission that both the local and state governments must share a role in any long term fiscal solutions.
Representative Gerou and Sen Morse discussed the efficacy of defining the role of government.
Donna Lynne remarked that administrative efforts and bureaucracy are important. We must not ignore the importance of having planners (administrators) that are able to allow government to act like a business, conduct business analysis and cost benefit studies, and invest in strategies that give us the best return.
Mr Fagan remarked that good administration happens currently within government but often collides against formulas and strict spending mandates. Ms. Lynne spoke to isolating money for a reserve fund where departments might have to justify access to that reserve. Senator Morse reminded the commission that the values to consider in public policy are different than the values used in business, such as efficiency. Such a value may be elevated for private enterprises and profit endeavors but may not be the primary criteria for evaluating public efforts.
14 themes were identified by the commission for continued discussion:
- Representative Government
- Rainy Day Fund
- Long Term Financial Planning
- Constitutional and Statutory Formulas
- Public/Private Partnerships
- Outcome-based Measurement
- Lack of Citizen Information
- Volatile Revenue Stream
- Higher Education Funding
- Agreement: There is a Problem to Solve
- Role of State and Local Governments is Changing
- The Proper Role of Government
- Tax Study
- Strategic Investing
Senator Heath asked if the group could agree that these are core concepts and themes the commission should address. The commission discussed the concepts of representative government, and the right of the citizens to petition the government for a redress of grievances. Representative Court remarked that there is a balancing act between the requirements of representative government and the efforts to change public policy through direct democracy. The question was posed: "Can representatives in the legislature do the job they are elected to do, in balance with preserving the public's right to change policy through the initiative process"?
Ms. Boigon asked Mr. Fagan how the two could be balanced. Mr. Fagan reiterated that both can exist. We can have representative democracy and preserve the direct say of the people. We can have a small, restricted government without the tight adherence to formulas, even though these formulas were placed in the constitution via the initiative process. Mr. Fagan continued that the process for accountability is to make the seats for representation as competitive as possible, so that the public will feel that the electoral process serves the same accountability and public policy purposes as the direct initiative process.
Mr. Conway felt that the legislature could deal with some of these issues with statutes. If the legislators want to reassert themselves with regard to representative government, the General Assembly could address some of these issues with the assistance of staff and the attorney general's office through special legislation. The General Assembly could take a leadership role and examine the options available. He concluded that it is unlikely that the voters would voluntarily rescind TABOR.
Senator Heath summarized the list of common themes and the commission discussed the way topics are worded as a possible way of achieving consensus and understanding where there is dissent.
03:00 PM BREAK
03:16 PM RECONVENE
03:18 PM -- Discussion:What kind of state do the people want?
The commission discussed different ways to think about our vision for the state. The group then suggested possible vision statements including: a commitment to a republican form of government, social justice, increased opportunity, growing a diversified economy, maintaining existing resources, work force development, etc.
Mr Coors made the point that our desire to provide certain services is disconnected from the availability of the necessary resources to meet those needs. He remarked that we must begin to define and discuss the core functions of government as a better place to begin. We need to understand our revenue stream and the ability to meet our needs (vs. our wants) against this revenue stream. It is therefore difficult to really define what we want for the state other than to require that the state live within its means and create incentives for the public to take part in solving problems. Mr. Coors made the following three points:
We need to be good stewards of the core functions of government;
We must develop a strategy for increasing reserves in good times to prepare ourselves for lean times; and
We must ensure that our expenses are less than our revenues.
Ms. Boigon reminded the commission that we must look to the future and create investments today so that our infrastructure is ready to satisfy future structural needs.
Senator Brophy remarked that there is agreement that even if we cannot define what kind of state we want, we can and should identify what the core services are that the state can provide. If we can't figure out what everyone wants, we better be able to identify what everyone needs. Senator Brophy concluded that the core functions for government are security and liberty. Beyond these, the state also has responsibility for education and increasing economic opportunity.
Representative Gerou remarked that we are changing our discussion. Instead of asking what we want government to do, the commission has been discussing what we need government to do. What are government's core functions? She concluded that this is a positive thing and should be the focus for the commission.
Mr. Conway reiterated these similar sentiments: we should be discussing what the core functions of government should be. He listed prisons, the judiciary, transportation and highways, education, and health care.
Ms. Cooke came to similar conclusions as the other commissioners. She remarked that core functions are the proper place for the commission's focus: public safety, infrastructure, and education. The second piece of the conversation is figuring out how to pay for these.
Mr. Hume envisions a state that is conducive to business and also to fostering good, affordable higher education options. Mr Hume remarked that the state does share a responsibility to take care of those citizens who cannot take care of themselves.
Representative Court wants a robust Preschool through grade 12 system that ensures all kids are educated for a 21st century world. We need a properly-funded higher education system to develop these intellectual resources within the state. Higher education should be public and affordable for the state's citizens. Caring for people is a core function of government. Caring for the least among us makes us a civil society. Sentencing for corrections is a crucial place for revision and reform. Transportation must be addressed, especially our failing infrastructure.
The commission engaged in a lengthy dialogue around the meaning of the core functions of government
The commission ended up their conversation with some closing remarks and adjourned until Thursday, August 20.
Ms. Lynne asked about the products this commission might produce. Senator Heath indicated that this would occur during the last 2 - 3 days of scheduled meetings.