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  Home Page » News » State Cuts Keep Coming Now Its Schools Candy

State cuts keep coming: Now it's schools, candy

by Joe Hanel
Herald Denver Bureau You know it's serious when they start taxing Snickers bars.

Gov. Bill Ritter turned to the repeal of $132 million in tax credits and a first-in-a-decade cut to K-12 schools to help balance the 2010-11 budget, which he unveiled late Friday.

Ritter had stayed away from both options throughout the current recession, but he said Friday the depth of the economic crisis left him with no choice but to spread the pain.

Even though the Taxpayer's Bill of Rights requires a vote to increase taxes, a state Supreme Court decision this spring seems to give the Legislature the power to repeal tax exemptions.

Ritter said he and his staff chose to end the tax credits that would have the smallest effect on the economy.

"We've done this in a very surgical way that does not impede our ability to come out of this downturn," he said.

He can expect a fight over the tax credits from Republicans.

"It's my understanding that this is a violation of the constitution, unless they go to voters," said Rep. Kent Lambert, R-Colorado Springs, a member of the Joint Budget Committee.

The governor's budget office predicts a $1 billion shortfall in the state's $7.2 billion general fund, which covers many of the regular functions of government like schools, prisons and welfare.

Ritter and the Legislature already have closed $2 billion in budget gaps spread over the last two years. However, they balanced the budget mostly by using one-time sources of money, which carried the shortfall forward into the 2010-11 budget.

Using one-time sources of money is a bit like a family draining its savings account to make a house payment. The mortgage will be paid, but another payment will come due next month, and this time the savings account won't be available.

With many of the state's savings accounts drawn low, Ritter turned to the tax credits to balance next year's budget.

The governor proposed changing or temporarily ending 13 different tax credits or exemptions. The biggest change would raise $48 million by suspending the tax credit for energy used in manufacturing.

In addition, the state would raise nearly $18 million by levying sales taxes on candy and soft drinks. The list of suspended tax exemptions also includes $1.5 million from bull semen, $5 million from goods bought online, $2.9 million from pesticides, $13 million from conservation easements and $15 million from software.

Friday's package also includes a $260 million cut to K-12 schools, or 4.5 percent off from this year's funding.

The voter-approved Amendment 23 requires yearly increases in school spending. However, the governor's staff is proposing cuts to one part of the formula that drives up spending, something it had treated as protected by Amendment 23 in previous years.

Ritter and his deputies consulted with Amendment 23 defenders before making the cut, he said.

"We talked to a lot of people who are very supportive of Amendment 23," he said. "They are mindful of the very difficult place we have gotten to with this budget." Cody Belzley of the Colorado Children's Campaign said the group could not comment on the legality of the cut or whether it was considering a lawsuit. But she empathized with others who have suffered cuts in their state funding.

"The cuts to K-12 funding are going to be painful," Belzley said. "But we understand there's got to be shared sacrifice."

Other major changes announced Friday:

- By delaying Medicaid payments for one month next summer until the 2011-12 budget year, the state will temporarily save $94 million. The shift means the state will be on the hook for 13 months of payments in the 2011 budget year.

- State support for colleges is staying flat, but Ritter would allow up to 9 percent tuition increases at state colleges for in-state undergraduates.

- The state work force will take what amounts to a $20 million one-year pay cut, by forcing employees to increase their retirement contributions by 2.5 percent so the state can reduce its own contributions. This is on top of the 2 percent increase the Public Employees Retirement Association wants to phase in to help the pension fund regain solvency.

- The equivalent of 75 employees will be cut after moving computer technology for most state departments into a central office.

The Legislature will debate, modify and adopt Ritter's budget next year. More cuts might be needed if forecasts of tax revenue come back low in December and March, or if Medicaid experts in February predict more people will sign up for government health care.

Ritter will formally present the budget to the Joint Budget Committee on Tuesday.

jhanel@durangoherald.com