Editor’s Note: This is the second part of a two-part article on the Colorado Reform Roundtable and the proposed Statement of Agreement. Part 1 can be read here.
III. THE SPIRALING FINANCIAL CRISIS
To put the status of the current fiscal crisis in perspective, it is helpful to compare Colorado’s funding of various government services with the funding provided in other states. According to census data compiled by the nonprofit Colorado Fiscal Policy Institute, as of 2008, the most recent data available, Colorado ranked 47th out of 50 states in total state spending per $1,000 of income. Colorado was approximately $4.89 billion behind what it would take to move to the U.S. average in terms of investment in critical public services. More specifically, measured again per $1,000 of income, Colorado in 2008 ranked 48th for investment in public education; 49th in covering families under Medicaid; 48th for higher education; and 48th for transportation and highways.
The CBA is of course more focused on funding for our state courts. Colorado has fared little better, ranking 41st out of the 50 states per $1,000 of income in funding for its judiciary.
Funding must of course be viewed in the context of demand for services. Looking back over the last decade, total district court filings have increased 55%, but district court civil filings have increased 221%. Adjusted for inflation, judicial funding from the General Fund during this time has increased 29%. The funding gap has been addressed in part by increasing the cost of access to justice. Adjusted for inflation, cash funding, such as filing fees and attorney license fees, has increased 114%. In other words, the cost of access to justice is being placed more and more on those in need of that access.
The Interim Long-Term Fiscal Stability Commission in 2009 issued a Final Report to the General Assembly. It included a brief discussion of the judiciary. It noted that the judicial branch needed $46 million additional dollars over its current funding to restore the cuts that had been made to the department and address the current backlog in cases.
The bigger concern, however, is not the past, or even the present, but the future. Federal stimulus funds have ended. As noted in an editorial in the Denver Post on October 16, 2011: “Changes that would unravel incompatible fiscal directives in the state constitution are desperately needed, as are long-term stable revenue sources that would support core state missions . . .”
More recently, the CRR conveners have been analyzing the work of the DU Center for Colorado’s Economic Future. The Center was created as part of the recommendations of the Colorado Economic Futures Panel. The Panel in turn had been created by the University of Denver to examine the fiscal health of Colorado’s state and local governments and their ability to sustain fundamental public investments appropriate to Colorado’s long-term economic vitality. The DU Center provides nonpartisan information and analysis of issues impacting the economic future of Colorado.
The Colorado legislature, pursuant to Senate Concurrent Resolution 10-002, had asked the DU Center to conduct a comprehensive review of the state government’s revenue system. The review was conducted in two phases. The Phase 1 Report, issued in April 2011, noted that although the state’s short-term budget problems continue to be daunting, the study was focused on Colorado’s long-term fiscal situation – the forces that will drive both revenue productivity and state government out to the year 2025 and beyond. The objective was to “determine whether the state’s financial problems are simply a reflection of a contracting economy (a cyclical problem), a harbinger of longer-term imbalances (a structural problem), or both.”
The Phase I report concluded that the state’s budgetary woes are both cyclical and structural. When the economy improves, tax collections will pick up. Absent major changes in policy, however, a structural imbalance underlying the fiscal workings of state government will ensure that Colorado’s budget problems persist for many years to come. “Even a strong recovery and sustained job growth over the next decade and a half will not produce enough income and sales tax revenue to afford Colorado’s share of Medicaid funding and the state’s payment for public schools under current constitutional and statutory provisions. Together with the rising (although more stable than in the past) cost of the state’s prison system, the two biggest programs in the state General Fund will continue to crowd out higher education and other programs competing for the same tax dollars.” The report concluded: “We find that our current General Fund financing system is in persistent, long-term structural imbalance. The sooner structural changes are undertaken, the less drastic these changes need be.”
In September 2011 The Center released its Phase 2 report. It lays out options for addressing “a long-term structural imbalance between General Fund revenues and expenditures.” A Summary of Phase 2 Findings begins as follows: “Twelve years from now, Colorado will generate only enough sales, income and other general-purpose tax revenue to pay for the three largest programs in the General Fund – public schools, health care and prisons. There will be no tax revenue for public colleges and universities, no money for the state court system, nothing for child-protection services, nothing for youth corrections, nothing for state crime labs and nothing for other core services of state government.” (Emphasis added.)
The DU Center’s conclusion: “The enormity of this gap suggests that Coloradans consider both tax increases and spending cuts to fill it. Cutting programs to match revenues, without changing the structure of the current tax system, is unrealistic. While this study did not specifically examine how expenditures for each department could be trimmed, the degree of cuts necessary to rectify the structural imbalance likely prohibits an all-cuts solution.”
IV. THE CRR STATEMENT OF AGREEMENT
Having considered the Phase 1 and 2 reports and other similar information developed by groups like the Colorado Fiscal Policy Institute and the Bell Policy Center, the representatives of the conveners of CRR have drafted a “Statement of Agreement.” They are requesting that the representatives of the CRR members present the Statement to their governing bodies for consideration and, if deemed appropriate, for approval. The conveners’ purpose is to determine if there is a consensus among CRR members about the structural nature of the state’s fiscal crisis and, if not, why not.
The Statement provides in pertinent part, consistent with the conclusions in the DU Center Reports, that the imbalance between revenues and costs of services is in part structural and that additional revenue is needed to provide adequate and stable support for our essential public systems in the future. The Statement recognizes the continuing need to scrutinize expenditures, assess priorities, explore new strategies, and insist on frugal and efficient government.
The Statement of Agreement does not endorse any particular approach to addressing the structural imbalance in revenues and costs. Some have questioned why the Statement, unlike the DU Center Reports, suggests no blue print for the future. The answer is that the modest goal for the Statement is merely to recognize that a structural problem exists and to commit to work together to build consensus around a solution. It is early in the process, but several members of the alliance have already signed the Statement, including Colorado League of Women Voters, Colorado Nonprofit Association, Bell Policy Center, CAPE Retirees, Colorado Children’s Campaign, Great Education Colorado, Colorado Association of School Executives, Colorado Center on Law and Policy, and Colorado Community Health Network.
As demonstrated by the DU Center study, in twelve years not only will there be insufficient funding for our courts, there will be no funding available from our General Fund. Adequate financial support for our state courts is an essential component of providing our citizens their constitutional right of access to justice. The Colorado Bar Association has been a leader in understanding and responding to the need for an adequately funded, independent judiciary. The Colorado Reform Roundtable’s Statement of Agreement provides a small but critical next step on that path of leadership.