Colorado faces a $630 million budget shortfall and stark options now that half of the fiscal year is past and so much money is already spent.
Balancing a budget during a recession is a difficult, thankless job. But balancing this year’s budget didn’t need to be this hard if only the leaders at the Capitol had learned from the last recession — or listened to those who experienced it.
Last spring as the economic storm clouds gathered, Gov. Bill Ritter and legislative leaders had opportunities to take precautions.
One worthwhile precaution was proposed by Treasurer Cary Kennedy, my erstwhile political foe, and then-Rep. Bernie Buescher. At a time when revenues under Referendum C were surging, their proposal reasonably sought to double the state’s reserve fund by saving, rather than spending, some $250 million.
After all, everyone who experienced the austere budgets of 2001-2003 agreed that the state needed a “rainy day fund.”
Unfortunately, that proposal died on the altar of the spending lobby.
Then as lawmakers debated the state budget, headlines warned of a looming recession forecast by Federal Reserve chairman Ben Bernanke. Again, prudence dictated that leaders put the brakes on spending money that might never materialize.
Unfortunately, legislators passed and Gov. Ritter signed a budget that spent every “available” dime, making promises that now cannot be kept.
Even more remarkable than the legislature’s habitual failure to save is the day-late-and-dollar-short response of Gov. Ritter and his budget office.
Upon signing the full-throttle state budget, Ritter said: “This is a budget we should celebrate. This is a budget that is smart, fiscally responsible and effective.”
In September, when the legislature’s economists sounded warnings about an economic downturn and a budget deficit, Ritter’s Office of State Planning and Budget kept whistling a happy tune.
“One of (the forecasts) is pretty significantly wrong,” Ritter told the Denver Post, which noted that Ritter “made it clear” that his forecast wasn’t wrong.
Ironically, President Bush apparently changed Ritter’s mind a few days later by remarking in a televised speech, “the entire economy is in danger.” Ritter responded by putting a partial freeze on hiring and new construction and asking his department heads to “identify other money-saving ideas and strategies.”
In November, the governor unveiled his budget for the fiscal year starting next July. He called for growing the budget at only 5 percent and setting aside “an unprecedented $77 million” in a new reserve fund.
Again, this was too little, too late.
His “unprecedented” proposal was just one-fourth the size of the earlier Kennedy-Buescher plan — which received no support from Ritter.
The hypocrisy, as surely even Ritter knows, is that the time to save is when revenues are growing — not when they’re already in retreat. That’s because when revenues are increasing, saving requires simply setting aside a portion of the increase. But when revenues are declining, every dollar saved must be cut from existing programs.
In December, the legislature’s economists sounded a full-throated alarm, projecting a $631 million deficit for 2008-09 and revenue growth at less than 1% for next year. This time, Ritter & Co. issued mixed messages.
Ritter said, “We’re experiencing a historic and a global economic crisis.” But his budget office forecast a mere $70 million deficit.
Two weeks later, Ritter’s budget office asked for a mulligan, telling the Post it had “used outdated information” and now forecast a $230 million deficit — still barely one-third that projected by the legislature’s economists.
Ritter’s budget data isn’t the only thing that’s outdated. His fiscal strategies amount to closing the barn door after the horses have already left.
It’s not as if Ritter is the first governor to experience these challenges. Just seven years ago in the wake of 9/11 and the tech bubble burst, Colorado lawmakers faced similar challenges.
Unfortunately, it seems the only lesson learned by Ritter is to ask taxpayers for more money to spend — but never to save for the next rainy day.
Don’t look now, Governor, but it’s raining again.