DALLAS - Colorado is facing a growing fiscal crisis that will require a structural change in how the state matches revenue with expenditures, according to a report yesterday from the Center for Colorado's Economic Future at the University of Denver.
"The problem is mathematical - there is simply not enough money to pay for the government we have created and the services many of us have come to expect," the report stated. "Barring a quick and dramatic turnaround in the economy, it appears that the current fiscal system cannot be sustained much longer."
The report, entitled "Colorado's State Budget Tsunami," calls for a major review of the state's allocation of resources along the lines of one conducted in 1957-58.
"Similar previous studies were conducted at pivotal points in Colorado's history, and they provided useful gauges for policy makers," the report said. "The Center for Colorado's Economic Future believes it is time for another comprehensive study."
The report noted how lawmakers used federal stimulus funds - a one-time solution - to close a $1.8 billion budget gap in the current fiscal near.
"Next year's financial troubles likely will be as bad or worse," the report warned, pointing to an underlying structural issue.
"The largest departments of state government are growing more than twice as fast as tax dollars are coming in, leaving a lot less money for other needs," the report said.
"It is a math problem exacerbated by constitutional constraints on revenue, tax cuts, and spending mandates for certain programs. All of these factors have helped to create a state government fiscal system that is on the verge of becoming unworkable."
Researchers Jeffrey A. Roberts and Charles S. Brown pointed out that "education, prisons, and health care consumed about 54 cents of every general fund dollar a decade ago. They now eat up nearly 76 cents of every general fund dollar, and that figure will jump to 91 cents in five years if the average growth rate continues. Eventually, at this rate, there would be no money for other programs."
While Colorado leaders consider the financial straits to be serious from an historical perspective, the state is in far better shape than neighboring Arizona, whose deficit rose to nearly half of its entire $8.4 billion budget.
In a rating report issued last week, Standard & Poor's affirmed its AA-minus on Colorado's certificates of participation as well as its AA issuer rating.
"Echoing national trends, the Colorado economy has slowed in 2009 with increased job losses, declining retail sales, and housing market softness," analyst Matthew Reining wrote.
"However, the state has stayed on the positive side of most of these trends, and unemployment was well below the national average (7.6% for state versus 9.4% for the nation in May 2009). [Gross domestic product] growth in 2008 was the fourth fastest in the U.S. (2.9%). The state continues to attract net in-migration."
