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Economic recovery will not cure Colorado’s budget woes

DU study finds that without structural fix, budget problems will plague the state for years

DENVER – The University of Denver’s (DU) Center for Colorado’s Economic Future finds that recent state budget shortfalls are not just a short term problem caused by a global economic downturn. In a Feb. 25, 2011 briefing in advance of a preliminary report on Colorado state finances, the Center finds the state’s budget problems are exacerbated by a structural imbalance underlying the workings of state government that will ensure budget problems persist for years, even as the wider economy improves.

Senate Joint Resolution 10-002, approved in 2010 by the General Assembly, called on DU and the Center to conduct a nonpartisan review of the state financial system. The study looks at budgeting needs 15 years into the future. No public money is being spent on the study. The work is funded by the University of Denver with additional support from the Boettcher Foundation, the Bonfils-Stanton Foundation, the Colorado Health Foundation, the Colorado Trust, the El Pomar Foundation, the Gates Family Foundation, Kaiser Permanente, the Piton Foundation and the Rose Community Foundation.

A preliminary report with additional findings will be released later this year.

The Center created models that projected General Fund revenues and costs for the largest budgetary areas: K-12 education, Medicaid and corrections. Forecasts show expenditures for Medicaid will nearly triple and state K-12 costs will more than double by 2025. Over the same period, General Fund tax revenues will increase by only 86 percent.

A healthy economic recovery cannot generate enough sustainable revenue to cover the widening gaps, the Center finds. And as demands for the largest budget items increase, the share of the General Fund left for other programs will be cut by 60 percent.

Looking forward, the Center suggests looking for structural solutions. For its full report, the Center will continue to study long-term planning approaches that would complement the annual budget process; budget rules that address Colorado’s uniquely volatile revenue stream; a redefinition of the state-local partnership for K-12 funding; and the development of stable and permanent funding sources for transportation, capital needs and controlled maintenance.

A summary of the advance briefing is available online at www.du.edu/economicfuture. Text of the preliminary report will be available soon.

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The University of Denver is committed to improving the human condition and engaging students and faculty in tackling the major issues of our day. DU ranks among the top 100 national universities in the U.S. For additional information, go to www.du.edu/newsroom.

Contact:  Chase Squires
Phone: (303) 871-2660
E-mail: Chase.Squires@du.edu

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