Just when it seemed Colorado’s economy was improving, tax collections are backsliding and there are new worries the state budget will be $150 million to $300 million deeper in the hole than expected, a top lawmaker warned Thursday.
As a result, colleges and universities — spared from cuts during the legislative session — might take a hit next year, said Sen. Moe Keller, D-Wheat Ridge, chairwoman of the Joint Budget Committee.
Other cuts could hit state prisons and K-12 funding. Budget cutting “will be brutal” next year, Keller said.
The prospect of renewed budget woes also has added fuel to discussions about long-term fiscal solutions that could include tax hikes or changes to the Taxpayer’s Bill of Rights in the state constitution.
State tax collections for May were $77 million below projections, Keller said, and economists believe income-tax payments that are still being collected may come up as much as $80 million less than expected.
Legislative leaders say that probably means the state will be short in the current budget year that ends June 30, a prospect that could require an emergency withdrawal of cash funds slated for the next year’s budget, which begins July 1.
“We will be $150 million short of what we budgeted at a minimum,” Keller said. “It could be double that.”
That’s disappointing news compared with last month, when tax collections were actually $14 million higher than economists had projected. Lawmakers hoped that state revenues were starting to stabilize.
May revenue figures show that sales- and excise-tax collections were down 18.7 percent from the same month a year earlier and 7.3 percent lower for the year to date over 2008.
Natalie Mullis, chief legislative economist, said that whether the state is $150 million or more short by the end of June depends on how all revenue sources perform, not just sales and income taxes.
She said a shortfall in the current year “is a possibility.”
Next revenue forecast
Legislative economists are slated to release another revenue forecast June 22 before the Joint Budget Committee.
Keller said lawmakers already had given state officials the authority to transfer as much as $500 million that was to be used for next year’s budget. The transfer would occur June 30, and it would mean that lawmakers would have to fill a budget hole for the same amount in the fiscal year that begins the next day.
Keller said that probably means more cuts to prisons as well as cuts to colleges and universities, which had avoided cuts. The cuts to corrections resulted in the closure of a women’s prison in Cañon City and a delay in the opening of a new penitentiary, also in Cañon City.
Meanwhile, the $110 million increase approved for next year for public schools also could be in jeopardy, she said.
“Do we close some community colleges?” Keller pondered during a meeting of Senate Democrats at the Capitol on Thursday.
Rep. Don Marostica, R-Loveland, another member of the JBC, agreed that cuts to higher education and corrections could be on the table.
“That’s the only place you can take it from,” he said. “You try to go after all the little stuff, and you’re only going to produce $30 million. You have to go after the big stuff, and that’s higher ed and corrections.”
Long-term changes
Lawmakers already had filled a budget hole over the current fiscal year and the next one that grew to a total of $1.4 billion. As the hole grew, so did discussions about potential long-term changes to the state budget.
The Long-Term Fiscal Stability Commission, a 16-member panel of lawmakers and citizens, is scheduled to hold meetings this summer to examine how the state can get itself out of budget problems. Solutions could include tax-hike proposals or amendments to the Taxpayer’s Bill of Rights.
Referendum C, which voters passed in 2005, gives the state a five-year timeout from revenue-collection limits imposed under TABOR.
But since Referendum C expires at the end of 2010, lawmakers are considering an extension of the measure.
Legislators avoided submitting any such proposals to voters this year, saying there was no support to make major changes until after the 2010 elections.
But some say the state can’t wait that long.
“This whole notion of waiting until 2011 to fix this is sitting wrong with me,” Sen. Chris Romer, D-Denver, told fellow Democrats on Thursday.
Tim Hoover: 303-954-1626 or thoover@denverpost.com
