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 47^th 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 41^st 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.

V.  CONCLUSION

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.

Editor’s Note: This is the first part of a two-part article on the Colorado Reform Roundtable and the proposed Statement of Agreement. Part 2 can be read here.

I. INTRODUCTION

The Colorado Bar Association in February 2010 appointed a representative to the Colorado Reform Roundtable (CRR).  As described in a Denver Post article in October 2009, CRR is a “loose alliance founded by 10 organizations representing business, labor and nonprofit groups, [which] resembles the coalition that helped pass Referendum C in 2005.”  The ten founding “conveners” of CRR were the Denver Metro Chamber of Commerce, Colorado Forum, Club 20, Bell Policy Center, Colorado Concern, Colorado’s Future, the Colorado Fiscal Policy Institute, the Colorado Education Association, Colorado WINS, and the Service Employees International Union.  CRR was formed to address the fiscal and constitutional challenges facing Colorado government.

The conveners of CRR are requesting that the members of the alliance respond to a proposed Statement of Agreement.  The Statement addresses the sources of the worsening imbalance between revenues and costs for essential public systems, which includes our judicial system.

This article will summarize why the CBA became involved with CRR, beginning with the CBA’s involvement in similar endeavors in the last few years; describe some of CRR’s activities to date; provide an overview of the status of Colorado’s current and worsening fiscal crisis, with a focus on our Colorado judicial system; and conclude with a discussion of the current CRR request to its members.

II. CBA INVOLVEMENT IN COLORADO’S FISCAL AND CONSTITUTIONAL CHALLENGES

As stated in the CBA bylaws, the objects of the CBA include securing the more efficient administration of justice and encouraging the adoption of proper legislation.  At the meeting of the Board of Governors in February 2004, the funding crisis in Colorado government was a topic of concern because of the impact on our state courts.  Wade Buchanan, President of the Bell Policy Center, presented information about initiatives that were being drafted to address some of the unanticipated problems created by TABOR, the so-called Taxpayers’ Bill of Rights.

Following that meeting, the CBA Executive Council adopted a resolution in support of the proposed Economic Recovery Act.  The proposed ballot initiative would amend TABOR and allow more revenues to be generated and retained.  For political reasons the campaign did not go forward at that time.

The following year, however, a bipartisan coalition was formed to campaign for the passage of Referenda C and D.  Referendum C would suspend the TABOR revenue limits through 2010 and end its downward ratchet effect on the budgets.  The CBA supported the campaign on the basis that, even though the proposed amendment of TABOR would direct the additional funds to government functions other than the courts, the remaining funds would be freed up to assist in part with the judicial funding crisis.  In the 2005 election Referendum D was defeated, but Referendum C passed.  As expected, in the next fiscal year more funds were made available for funding the courts.

Over the next few years, however, an economic downturn worsened the state funding crisis, including funding for the courts.  In addition, the relief from the TABOR revenue limits provided by Referendum C was to expire at the end of fiscal year 2009-2010.  Without further action, the revenue limits would again cap any additional funds that an economic recovery might generate.  As a result, the CBA in 2008 supported Amendment 59, known as “SAFE.”  Amendment 59 would have provided permanent relief from the TABOR revenue limits by permitting Colorado to use funds which would otherwise have been refunded to taxpayers to fund a savings account for education.  The expected result again was that the use of the excess funds for education would relieve pressure to cut funding for other purposes, including the Colorado courts.  Amendment 59 did not pass.

During the same time, tension among several of the ballot initiated constitutional provisions, such as TABOR, Gallagher, and Amendment 23, was contributing to the fiscal crisis.  It was becoming apparent that any long term solution to the fiscal crisis needed to include a revision to the state constitution to make it more difficult to amend the constitution with ballot initiatives requiring only a simple majority vote.   In 2008 the Executive Council therefore also voted to support Referendum O, a ballot initiative to make it more difficult to amend the state constitution while making it easier to enact statutes.  Referendum O likewise did not pass.  Similar legislative referenda died on the last day of the next two legislative sessions.

The economic downturn continued.  In addition, three new ballot initiatives, commonly known as Amendments 60 and 61 and Proposition 101, were submitted for the 2010 election.  If passed by a simple majority vote, their combined impact would have been debilitating on the functioning of state government, including the judiciary.  Because the purpose of CRR is to seek nonpartisan solutions to these continuing fiscal and constitutional challenges, the CBA authorized a representative to participate with CRR, but not to take any action without CBA approval.  With the help of an expensive educational campaign, which the CBA supported, those three initiatives were defeated.  In the meantime, however, the five-year timeout from the TABOR limit provided by Referendum C expired.