DENVER — Friday, Nov. 1, 2013— Gov. John Hickenlooper today delivered a FY 2014-15 proposed budget to the Joint Budget Committee (JBC) that funds recovery efforts from wildfires and floods, cuts average wait times at drivers license offices, boosts the State’s budget reserve and continues government efficiency across state agencies.
The proposed budget also provides funding a new fugitive apprehension unit at the Department of Corrections and genetic testing by the Department of Public Safety of forensic medical evidence in connection with alleged sexual assaults.
“Colorado is still recovering from the most destructive flooding in the state’s history,” Hickenlooper said. “This budget frames what by necessity will have to be a collaborative effort that crosses party lines. We expect compromise from both sides that is based on common sense, which has no political affiliation.”
The FY 2014-15 proposed budget is $24.03 billion, of which $9 billion is from the General Fund. Relative to the expected FY 2013-14 appropriation, these amounts represent increases of $1.02 billion (4.4 percent) in total funds and $389 million (4.5 percent) in the General Fund.
Though most areas of the proposed budget will receive increases next year, there are many allocations for one-time expenditures. Priorities in the General Fund include:
Keeping pace with inflation and student growth for only the second year in the past six by funding K-12 education with an increase of $223 per pupil (3.4 percent);
Restoring higher education funding to levels that exceed the pre-Great Recession peak with an additional $101.8 million (15.5 percent), including a historic increase in financial aid and limiting tuition growth to 6 percent;
Requesting a comprehensive initiative to reduce average wait times at drivers license offices to 15 minutes (from 60 minutes today); and
Establishing a 6.5 percent reserve ($554 million) in the General Fund. Additionally, the budget proposal includes repaying $109.4 million in cash funds that were transferred to the General Fund as well as reversing the 2003 pay date shift ($94 million).
The Nov. 5, 2013, statewide election includes two potential tax policy changes. These are not reflected in the current request. Should either or both measures pass, the Office of State Planning and Budgeting (OSPB) will provide appropriate adjustments to the Joint Budget Committee.
It is important to note that extraordinary actions were needed to balance the State budget when times were not as good. As the State managed the impact of the Great Recession, reserves were drawn down in the General Fund to 2 percent. In addition to many budget cuts and unfunded priorities, other State fee sources were tapped to meet obligations.
“We believe it is time to use some of the flexibility we have now to acknowledge and restore some of those resources,” the governor wrote in a letter to the Joint Budget Committee.
Context for the General Fund budget relative to the Great Recession is appropriate. From FY 2007-08 to the forecast for FY 2014-15, inflation and population growth will have totaled 28 percent. If the FY 2007-08 total spending level in the General Fund were increased by 28 percent, it would be $1.1 billion higher than the total requested at this time.
As the proposed budget relates to disaster recovery, OSPB reports:
“We believe the General Fund support for disaster recovery will require the remainder of the excess funds this year ($144 million), but that number could rise in the current year. To date, we have already transferred $122.1 million in transfers to the Disaster Emergency Fund. This total includes the full balance of the Controlled Maintenance Trust Fund, which served as part of the TABOR emergency reserve. We believe it should be repaid this year. The balancing of $144 million of disaster funding comes as follows: $50 million added back to the Medicaid budget, $48 million replacement to the CMTF, and $46 million transferred to the Disaster Emergency Fund. Meanwhile, next year we are requesting to continue adding resources for water and wastewater issues with a $12 million General Fund request to support local efforts to meet nutrients standards or restore water systems as part of flood recovery. By taking these actions, we are confident that appropriate resources will be available for emergencies and recovery next fiscal year.”
Highlights of the proposed budget for FY 2014-15 include:
The proposed budget includes more than $258.4 million ($222.1 million from State sources) in new total program funding for K-12 education, reflecting enrollment growth of 1.3 percent (10,680 students) and 2.6 percent inflation. This equates to an increase of $223 per pupil. Because of the unanticipated expenditures for disaster recovery, and the substantial new resources into the State Education Fund, the budget includes approximately 57 percent of the increased funding to K-12 education be financed via the SEF. This policy allows the State to use the expected new General Fund revenue in FY 2014-15 (in addition to growth in local property taxes) for the remainder of our request. For FY 2014-15, the State is targeting an ending fund balance in the State Education Fund of $700 million, with a long-term goal of $400 million as a reasonable balance under current law. Based on current forecasts, a $400 million fund balance will be achievable if the additional FY 2015-16 General Fund appropriation to total program is $214 million.
The proposed budget includes a $101.8 million increase (15.5%) in the General Fund appropriation to the Department of Higher Education, which will restore funding levels that exceed the pre-Great Recession peak (although not accounting for inflation and student growth since then). Of this amount, the budget includes $60 million for institutional operating expenses, equating to an 11 percent General Fund increase for each institution. This request doubles the operating increase provided last year and is intended to control tuition increases. As such, tuition increases should not exceed 6 percent in FY 2014-15. In addition, the request includes $40 million in new resources for student financial aid. Of this sum, $30 million is for need-based aid, $5 million is for college work/study programs, and $5 million is to restore the merit scholarship program. This increase for financial aid represents a 42 percent increase, the largest in Colorado history, and will make college more affordable for thousands of Colorado students.
Health Care and Human Services
The request for the Departments of Health Care Policy and Financing, Human Services, and Public Health and Environment includes caseload growth and related increases in the Medicaid program, new resources for programs that serve the developmentally disabled, continuation and full-year funding for child welfare and mental health improvements that started this year, and a 1.5 percent provider rate increase.
In this particular request, comparison to the current year must account for the movement of the Developmental Disabilities program from Human Services to Health Care Policy and Financing. Relative to the current year appropriation, the combined total funds request for these departments is $9.37 billion, a 7.1 percent increase ($618 million). The combined General Fund request for the two departments is $2.95 billion, a 5.9 percent increase ($165.2 million).
Caseload growth in the Medicaid program reflects lower caseload increases than those experienced during the Great Recession, but also reflects that the economic recovery still has not reached all Coloradans. In addition, newly eligible clients under SB 13-200 are reflected in the growth rates. Relative to the current year, total Medicaid enrollment will grow by 154,431 clients to 967,681. Without the expansion populations, growth would have been 53,392. Medicaid enrollment increases are also in part the result of large drops in the Children’s Health Plan Plus program. Recent law changes made some CHP+ clients eligible for Medicaid.
Meanwhile, the Accountable Care Collaborative program is reporting substantial costs avoided and improved outcomes and the State is approaching 400,000 people enrolled. The program relies on systems of integrated care to lower costs. The most recent report indicates that the $36.4 million initiative resulted in costs avoided that in a range of $44 million to $64 million.
With respect to programs that serve people with developmental disabilities, the budget request includes $21.9 million total funds including $12.7 million General Fund for three initiatives. First, there is an additional $15.5 million total funds, including $7.7 million General Fund to address the current 1,526-person waiting list for the Home and Community Based Services Supported Living Services waiver. Second, there is $3.4 million General Fund to Family Support Services; these services are flexible to family needs and range from respite care to transportation to home/vehicle modifications. Third, there is $2.8 million total funds, including $1.4 million General Fund to add full program equivalents for 186 youths and adults needing transition to new programs, leaving institutions, or in emergency situations. (A small administrative item completes the totals.)
Other important features of the request in these areas include: $7.1 million from the existing fund balance in the Medical Marijuana Cash Fund for research on various illnesses and disorders; approximately $2.3 million for various initiatives at the Mental Health Institutes and $750,000 for access to mental health first aid training around the state.
State government can enhance Colorado’s economic vibrancy with targeted and accountable support for economic development initiatives. The request includes: $5 million for the Advanced Industries Accelerator Program as established by HB12-1001; $5.0 million for the Colorado Office of Film, Television and Media; $3 million for resources for the Economic Development Commission Strategic Fund; an additional $2 million for tourism promotion; and $400,000 for the Minority and Women Owned Business Office. Smaller requests include $220,000 for the procurement technical assistance center started in HB13-1301, $175,000 for the Aerospace Strategic Plan and $100,000 for the economic gardening project started in HB 13-1003.
Corrections and Public Safety
The Department of Corrections expects the incarcerated population will increase by 451 offenders (2.3 percent) over the prior forecast. This increase drives an incremental cost of $4.8 million General Fund. The DOC’s budget request also includes funding for increased medical costs ($2.8 million), sex offender treatment monitoring ($1.2 million), and several other smaller initiatives. For the Division of Parole, the budget includes $951,314 for a new fugitive apprehension unit along with a $10 million placeholder to implement upcoming recommendations from new leadership at the Department. In total the request for the DOC in the General Fund is for a $42.2 million increase (6.3 percent).
In the Department of Public Safety, the most notable budget allocation is for up to $14 million for the provisions of HB 13-1020, which required genetic testing of forensic medical evidence in connection with alleged sexual assaults. While the State is waiting for additional information regarding the scope of this endeavor, this funding is set aside and not reflected in the Department’s budget schedules.
Meanwhile, other requests in the Department include new resources for acquisition of new portable radios for the State Patrol ($1.3 million HUTF), for continued operations at the State Fusion Center ($656,134), and to investigate and prosecute cyber attacks against the State through the Colorado Cyber Crime initiative ($489,074).
The request includes resources to increase compensation to the State’s workforce with a 1.5 percent across the board salary increase and an average performance-based merit increase of 1.5 percent. This policy has a total funds cost of $52 million, $26.8 million of which is from the General Fund.
Other common policies accounted for in the various departments include: the existing and statutorily planned increases for the amortization equalization disbursements for the Public Employees Retirement Association ($23.0 million TF, $11.0 million GF); increases in health, life, and dental insurance rates to match prevailing rates ($14.2 million TF, $6.5 million GF); and State fleet vehicle replacements ($2.3 million TF, $0.3 million GF) including funding for 777 new vehicles, 295 of which will be able to run on compressed natural gas.
Capital Construction and Controlled Maintenance
The request includes significant new resources to maintain State buildings, to complete existing projects, and to make required payments on various certificates of participation. A transfer of $199.3 million from the General Fund to the Capital Construction Fund is necessary to complete the requested list, which includes place holders for 2 projects that will be submitted as budget amendments (the State has set aside sufficient funds to increase the requested transfer). Notable requests include:
$44.5 million for three certificates of participation (Anschutz Medical Campus, Federal Mineral Lease, and Centennial Correctional Facility);
$25 million for Level 1 controlled maintenance projects around the state and in the Department of Higher Education (these projects will be determined by the Office of the State Architect);
$22.8 million for completion of the library renovation on the Auraria Campus;
$13.3 million for the Visual and Performing Arts Center at CU-Colorado Springs;
$4.9 million to deliver recommended changes to the Youth Offender System that resulted from the Prison Utilization Study in HB 12-1336;
$4.6 million for the Veterans Memorial Cemetery Expansion in Grand Junction;
$4.5 million for suicide prevention projects at the Mental Health Institutes in Pueblo and at Fort Logan.
The State has taken many steps to modernize information technology assets in recent years, but there is more work to do. First, the State has completed a comprehensive assessment of what it would take to get the average wait time at a typical Division of Motor Vehicles office down to 15 minutes from the 60 minute average now. In addition to staffing increases in the Department of Revenue operating budget, a new computer system to replace the current system is necessary. Major components of the system date back more than 30 years. After three decades, outages are frequent and the system is becoming unstable. The new system is projected to cost $93.4 million over two years. The budget request includes approximately half of this amount for FY 2014-15. Second, the way State employees manage and track their time needs to be standardized. A complete and consistent system that performs timekeeping, scheduling, and leave tracking will create efficiencies in personnel management, improve financial accountability, and reduce waste and mistakes compared with the current process. The new system is expected to cost $16.1 million.
Cash Fund and Other Repayments
To balance the budget during the last two recessions, the State used many cash fee sources and accounting changes to balance the budget. First, in 2003, the State shifted the June 30, 2003 pay date to July 1, 2003. This allowed the State to avoid serious operational impacts as it managed a revenue downturn that rivaled that of the Great Recession. Second, during the most recent downturn, some insurance trust accounts (the Workers Compensation, Subsequent Injury, and the Major Medical Insurance funds) in addition to others were swept into the General Fund. In just the last recession, several hundred million in cash fund transfers were made to the General Fund.
The budget includes a reverse the pay date shift and repayment $109.4 million to selected cash funds. Over time, the customer fees needed to repay these accounts will be lower because of this action. Many cash funds are meritorious for repayment and the State prioritized the repayments based on an assessment of the number of people affected and the amount of money transferred. In addition, some cash funds represented balances that were inconsequential or were in defunct programs.
Meanwhile, recent natural disasters have demonstrated the value of being financially prepared for unanticipated events. As noted earlier, just a few years ago, the General Fund reserve dropped to 2 percent. The State has worked hard together to achieve the current 5 percent level. For perspective, in the last two recessions, General Fund revenue declined approximately 15 percent each time. The State has planned next year’s budget around ending the year with a 6.5 percent reserve. This represents about 24 days of operating, compared with just seven at the 2 percent level. Also, achieving the new reserve level will fulfill the vision anticipated in Senate Bill 09-228 and make any eventual transfers to construction and transportation under the law easier to accommodate. The Governor’s Office is requesting the Joint Budget Committee sponsor legislation for this proposal.
The entire letter from the governor to the Joint Budget Committee about the FY 2014-15 proposed budget can be found online at OSPB.