Colorado lawmakers bracing for coronavirus budget hit of up to $3 billion

A daunting task awaits the Colorado legislature.

Whenever it resumes its session — the tentative plan is to come back May 18 — the General Assembly must, per its constitutional obligation, pass a balanced state budget. And they’ll be doing so with dramatically less money than they’d counted on even one month ago, before the extent of the pandemic’s started to become clear.

Members of the bipartisan Joint Budget Committee, which writes and then refers the budget to the broader legislature, are now planning for a shortfall of up to about $3 billion.

“I’ve seen anywhere from $1 billion to $3 billion,” said state Sen. Dominick Moreno, D-Commerce City, who’s vice chair of the committee.

That’s a dramatically worse situation than what was forecast in mid-March, when state analysts projected $27 million in available revenue for fiscal year 2020-21 above what was available for this fiscal year.

Another state forecast is coming in mid-May, but already lawmakers believe the mid-March forecast is significantly outdated and that the conversation is now one of billions, not millions.

“It means that our job just got a lot harder,” Moreno said. “We’re going to have to take a critical look not just at bills that create new programs — those are almost certainly off the table — but we’ll have to take a critical eye also toward what the state is currently spending money on.”

In other words, they may well be cutting into bone.

The past few weeks have reminded lawmakers and economic forecasters that things can always get worse. But, at least for this moment, the assumed worst-case scenario for 2020-21 is a roughly $3 billion reduction, accounting for the hit the state is taking in the remainder of this fiscal year, which ends June 30. That could mean cuts in the new budget approaching 10% of the $34.5 billion budget Gov. Jared Polis proposed in December.

That’s the kind of cut the average citizen would feel, in one way or another.

“I hope they don’t feel it to the extent that it compromises public safety or vital safety net programs,” said Sen. Bob Rankin, R-Carbondale, who also sits on the Joint Budget Committee. “But I’m certainly concerned about education, how well we support our schools. I don’t see additional general fund money going to transportation. Maybe we’ll have a slowdown on new road construction.”

He added: “And just about anything that’s new spending, whether it’s the governor’s request or new bills, I just don’t see how we can do.”

In what was a vastly better economic climate, Polis in January made a lot of asks for next fiscal year: $27.6 million for pre-K education, $3.5 million for new school safety measures and $550 million in transportation funding, among many others.

Now new spending proposals may have to be put off for years.

But the news isn’t all bad for budget writers. Colorado’s expecting to get close to $2 billion in federal stimulus money, which will help offset the reduction in revenue.

What remains to be seen, though, is the degree to which the state can flexibly spend that stimulus money. It’s unclear to lawmakers and analysts how much can be used to plug a variety of budget holes, and how much will be earmarked for specific purposes.

“If those monies can’t be used to backfill, to tide the state over, the budget situation becomes more challenging,” Moreno said.

He added that preliminary guidance he received indicated the money would not be very flexible. Others are more hopeful. The state expects to learn more next week.

Amid the last recession, in 2008, the state received about $1.6 billion in federal money over a three-year period, said Todd Saliman, who was then-Gov. Bill Ritter’s budget director.

“The state used the vast majority of the federal funds to plug the budget gap,” said Saliman, who’s now chief financial officer for the University of Colorado System.

Saliman recalled having to balance and then rebalance the state budget more than 10 times during the previous recession — work he called “absolutely grueling.”

“It’s hard and it’s emotional and it’s complicated and it’s emotionally draining,” he said. “And it requires collaboration between the legislative branch, the executive branch and all the stakeholders who rely on state funds. Everybody rose to the challenge last time, and all indications are everyone is rising to it now.”

What he and many others want to know this time — beyond the question of federal aid flexibility — is how much steeper the current challenge could be.

“It was really bad last time,” Saliman said. “We just don’t know now. The big question is how long this is going to last, and nobody knows.”

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