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Higher education shouldn't face $300M cut
So what's the problem if the budget balances?
The problem is that to get there, they are proposing to cut $300 million from higher education, or about half its general fund support. Our two largest universities might be able to survive such cuts because the general fund is only a small portion of their funding, but our smaller state schools and community colleges can't shift the loss to increases in tuition without losing students.
So why did the Joint Budget Committee make this recommendation?
The committee is desperate. The state has seen huge declines in projected revenues, and to balance the budget for the current year it already has had to use much of the state reserve, transfer most of the cash reserves and make the easiest cuts.
Taking the rest of the reserves and cash balances doesn't get us there. Cuts to programs don't get us there. Even eliminating most of the state agencies wouldn't save enough.
You may have heard about the proposal of the Joint Budget Committee to take a portion of the reserves from Pinnacol Assurance. This was proposed because it is large enough to plug the hole.
Pinnacol is a state-created insurance company whose purpose is to provide workers' compensation coverage for employers. Even though it was created to be an insurer of last resort, it has a majority of this type of coverage in Colorado.
Despite having the fourth lowest premiums in the country, Pinnacol has accumulated large reserves.
The Joint Budget Committee believes the reserves easily are $500 million more than is needed. Pinnacol, of course, will disagree.
Pinnacol also is arguing that the reserves belong to it and not the state. Given that the state created Pinnacol and the governor appoints its board, I tend to think the state can take its reserves. After all, Pinnacol's profits are tax-exempt, which is one of the reasons for its success and ability to accumulate reserves. One could argue the reserve is the equivalent of taxes they weren't required to pay.
Because the Pinnacol board has taken the position it won't willingly give the reserves to the state, the Joint Budget Committee could not use this to balance the budget and instead used the cut to higher education to accomplish that.
The committee will be introducing a bill to require Pinnacol to make the transfer, but even passing such a bill may not make the transfer happen if Pinnacol refuses.
That means that with only a month left in this legislative session, we probably won't have this resolved in time to help with this year's budget.
So what do we do this week when the budget comes to the Senate?
I won't support a $300 million cut to higher education and know many of my colleagues won't, either. Assuming no quick resolution of the Pinnacol issue, I would like to send the budget back to the committee so it can go back and look again at some of those measures that could help reduce the impact to higher education. It won't be easy and may not prevent some higher education cuts but would be more equitable.
In closing, there is one point I need to make. I occasionally hear from constituents who are upset and want to know when we are going to stop raising their taxes.
I think they forget that in Colorado only the voters can raise taxes. The Legislature can only cut taxes and did so in 1999 and 2000. The cuts should have been temporary, but weren't.
The current shortfall we are experiencing is close to the amount of revenues the tax cuts removed from the budget.
Jim Isgar, D-Hesperus, represents the 6th District, which includes Durango, in the state Senate. Reach him at the Capitol by phone (303) 866-4884; by fax (303) 866-4543;or by e-mail at isgarsenate@frontier.net.
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