DALLAS — Facing a budget deficit that could run as high as $257 million, the Colorado Legislature must cut spending by at least $189 million before the end of the fiscal year on June 30, according to state economists.
The state must make the cuts to meet legal requirements that it keep 4% of its budget in an emergency reserve, according to Natalie Mullis, chief economist for the nonpartisan Legislative Council.
Gov. Bill Ritter’s Office of State Planning and Budgeting anticipates a larger deficit — $256.9 million — despite signs of economic recovery.
Another deficit projection came from the Legislative Council, which said lower-than-expected tax revenue and growing Medicaid case loads have increased the budget deficit to $110 million. That figure does not include $60 million in cuts Ritter has already announced.
“Today’s forecasts mean we face even more difficult and unenviable decisions ahead to keep the budget balanced,” the Democratic governor said in a statement. “And we’ll be making those decisions from a list of options that has grown shorter and shorter since the recession hit.”
School officials in the state are bracing for another round of cuts after absorbing a round of 6% reductions already this year.
Those concerns could seem like a luxury, however, if voters in November approve three ballot measures that would sharply reduce Colorado’s tax base, ban all state borrowing, and limit local debt issues to 10-year maturities.
The proposed Amendment 60 would require school districts to cut property taxes. The state would then be forced to replace the lost revenue.
Amendment 61 would prevent Colorado from borrowing money and limit the borrowing power of local governments.
Proposition 101 would cut the state income tax rate from 4.63% to 4.5% in 2011 and to 3.5% over time.
It also would reduce or eliminate taxes and fees on vehicle purchases, registrations, leases, and rentals during the next four years.
On top of that, the proposition would do away with telecommunication fees and taxes.
The Legislature’s analysis found that if the three measures pass, Colorado would lose $2.1 billion in revenue and would be forced to increase school spending by $1.6 billion to make up the shortfall in local property taxes. The state would have to spend nearly its entire general fund budget on education. How it would finance highway construction and other projects is unclear.
Rating agencies have not indicated how passage of the three measures might affect the state’s issuer credit ratings of AA from Standard & Poor’s and Aa1 from Moody’s Investors Service.
Colorado has no general obligation debt and ranks 45th in net tax-supported debt per capita, according to Moody’s.
The state’s $1.67 billion of outstanding net tax-supported debt, made up mainly of transportation bonds issued from 2000 to 2004, amounts to only about 1% of state personal income.