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Dems seek end to general-fund limit
Budget-reform plan would tie cap to 5 percent of Coloradans' income
Herald Denver Bureau
Gov. Bill Ritter announced the idea Wednesday afternoon, and the House Transportation Committee approved it Thursday evening on a 6-5 vote.
The new version of Senate Bill 228 removes the law that confines the state general fund to 6 percent growth per year and replaces it with a budget limit tied to the personal income of all Coloradans.
"What we've come up with in this amendment is a 21st-century way to budget in the state of Colorado," said the sponsor, Loveland Rep. Don Marostica, who has stood alone among Republicans supporting the plan.
Other Republicans are fighting it because currently, any money over the 6 percent cap goes to highways.
"We're gutting the long-term commitment we have for transportation," said Highlands Ranch Rep. Frank McNulty, who took the lead for the Republican opposition Thursday.
Democrats want the flexibility to spend more on colleges and human services.
The new plan:•Puts on a new general-fund cap equal to 5 percent of Colorado personal income.
•Builds up the state's rainy-day fund to 6.5 percent of its budget by 2016. Currently, the rainy-day fund is 4 percent.
•Sends 2 percent of the state budget to highways and 0.5 percent to 1 percent to building construction.
However, the transfers to highways and building construction won't happen if personal income grows too slowly, or if the state has to refund more than 3 percent of its budget to taxpayers under the Taxpayer's Bill of Rights.
The 6 percent limit ratchets down the budget in bad years like this one. When the recession ends, the budget will grow based on the last year's total, not on the pace of the economy.
That will be a disaster if inflation spikes high, Marostica said.
"Inflation is coming. It's coming, believe me. When you're limited to 6 percent, and inflation is 12 percent ... you're going to have a problem you can't imagine," Marostica said.
The proposed 5 percent income cap is, in essence, not a cap at all. If it were in place this year, it would limit the general fund to more than $10 billion. But the recession will hold the state budget much lower than that. The 2009 budget has a $7.5 billion general fund.
Economists don't think the state will have enough money to worry about the 6 percent cap until 2011, meaning there won't be transfers available for highways next year.
Given that, Republicans questioned why SB 228's sponsors want to finish the bill this year. But Marostica and his allies think it's the perfect year to end the 17-year-old cap.
"Now's the time to deal with it, when people can really see what the recession does to us," he said.
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