The Haxtun-Fleming Herald - What can we reason but from what we know? -Alexander Pope

By Marianne Goodland

Legislative reporter

The legislature’s Joint Budget Committee wrapped up its efforts to balance the 2020-21 budget in the face of a $3.3 billion shortfall on May 22, with the last cut the largest of all: $577 million from K-12 education.

The committee’s members said they held off on making cuts to education until the bitter end and it was a bitter pill to swallow.

Said Senator Bob Rankin, a Carbondale Republican and the committee’s senior member, that both parties’ priority during the budget-cutting process has been to maintain funding “for our kids.”

The cut comes in the form of a funding recommendation for K-12 in the School Finance Act, which will be sponsored by the chairs of the House and Senate education committees.

What is yet to be decided: whether that amount gets added to the budget stabilization factor, the debt to K-12 that has been on the books since 2010.

That debt, currently at $572.4 million, is a remainder from the Great Recession, when lawmakers concluded that they could not afford to fully fund education as required by Amendment 23. That is the 2000 voter-approved initiative that requires the State to fund education at the rate of inflation.

Should lawmakers decide to add the $577 million to the BS factor, that would put it at $1.149 billion, just $1 million less than its peak in 2012.

The second problem that worries lawmakers: property taxes. Because of the pandemic, the State Property Tax Administrator, JoAnn Groff, recently told lawmakers that the State may have to pick up more of the cost of education. That’s due to an expected decline in property taxes for both residential and commercial properties in the coming year, and tied to the Gallagher Amendment, a 1982-voter approved amendment designed to provide relief from rising home property taxes.

Under Gallagher, 55 percent of the State’s property tax base must come from commercial properties and 45 percent from residential properties. Over the years, rising home values have caused the property tax rates for homes to drop to maintain that ratio. It’s a statewide ratio, but has been especially hard on rural Colorado, where lower taxes on homes have meant less revenue for schools and other services paid for by those taxes.

Groff told the JBC on May 12 that schools districts that rely on property taxes, including those that are fully funded by those taxes, will see a decline in their revenues, both from lower residential property tax rates and lower values of commercial and oil and gas properties.

And when property taxes go down, the State must pick up the difference.

“I don’t love this budget. If we were in any other position, we would not make the decisions we made. This isn’t a budget I’m proudest of, but this is a team I’m proudest of,” said Sen. Dominick Moreno, a Commerce City Democrat and the JBC vice-chair.

That was a tribute both to his fellow committee members as well as for the JBC staff, who spent weeks looking everywhere for places to shore up the budget.

The $3.3 billion shortfall is in the State’s general fund, the one-third portion of the overall budget that cover discretionary spending on things like education, higher ed and Medicaid. Education makes up 40 percent of the general fund, which is made up of corporate and individual income taxes and sales and use taxes.

It’s the largest shortfall in State history and may extend into the next fiscal year as well, economists have predicted.

The reaction from education advocates has been shock.

Michelle Murphy of the Rural Schools Alliance said rural schools are not in any position to absorb any more cuts.

Murphy and representatives of nine other organizations sent letters on May 22 to Governor Jared Polis, the JBC and legislative leaders, pleading for a $70 million stimulus for rural schools, health care and small businesses.

The economic gap between urban and rural areas of Colorado has continued to widen since the Great Recession and things are only getting worse, the letters said. Couple that with “critical workforce shortages in rural schools and hospitals” and that’s resulted in limited access to critical health/mental health support services.

Budget cuts due to the pandemic will make those shortages worse at a time when more people need those services, the letter continued. The JBC has already cut funding for school counselors, bullying prevention and teacher recruitment programs so vital to rural Colorado.

The letter pointed out that 18 out of the State’s 42 rural hospitals were already operating in the red in 2019. Hospitals are reporting a 50 percent loss of revenue due to decreases in patient volume and at the same time expenses are up due to the need for pandemic supplies. “Some facilities report paying as much at triple the usual cost for PPE and other supplies,” according to the letter.

The group called for immediate access to “forgivable funding with reasonable terms and conditions,” as well as reimbursement for telehealth — telephone only visits — which are a significant source for seniors in rural Colorado.

Hospitals and clinics are preparing to cut staff, services or even close, the letter warned.

Rural businesses have been severely impacted by the pandemic and the federal stimulus dollars have fallen far short of meeting this need, the letter said. “Without an immediate infusion of economic relief and enhanced programs to encourage private investment, too many rural businesses will be forced to close their doors, further exacerbating the already significant rural-urban divide.”

The letter called for a new State program to leverage federal assistance once those programs go into effect.

The letter writers include Pro 15, the advocacy group for northeastern Colorado; Colorado Farm Bureau, the Colorado BOCES Association, the Colorado Rural Health Center and the Colorado Oil and Gas Association.

The General Assembly will be back in session this week and for the next two to three weeks, with their agenda focused on passing the 2020-21 budget, the School Finance Act, bills that reauthorize certain programs and killing off bills leftover from the session’s first two months and which have costs the State can no longer bear.

That’s likely to include Senate Bill 135, the conservation easement reparations bill, which carries a cost of around $147 million. While the bill called for those reparations to be paid with tax credits from the Department of Revenue, those credits are unlikely to be available.

Another bill facing lawmakers: a TABOR emergency tax increase favored by Democrats. One proposal, backed by the left-leaning Colorado Fiscal Institute, would restructure the Dtate’s income tax rates so that those earning above $250,000 annually would pay a higher tax rate; those who earn less would pay a lower tax rate.

But such a measure would require a two-thirds vote in both the state House and Senate. Assuming all 41 House Democrats voted for it, three Republicans would have to vote in favor to meet the 44-vote minimum. That’s a tall order, but a much taller order is the State Senate. The measure would need 24 votes, and with the chamber’s 19 Democrats, that means five Republican senators would have to vote for it. That’s very unlikely, according to state Senator Jerry Sonnenberg of Sterling, who has said he does not believe any Republican senator would support it.