Academics and Research / News

DU center finds Colorado’s finances are unsustainable

The University of Denver 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 briefing to the state Legislature in advance of a preliminary report on Colorado state finances, the center reported that 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.

“There needs to be a different way of doing this,” said center Director Charlie Brown. “The overall financing system is structurally unbalanced and unsustainable.”

Senate Joint Resolution 10-002, approved in 2010 by the Colorado General Assembly, called on DU and the center to conduct a nonpartisan review of the state financial system. The resulting study examines budgeting needs 15 years into the future. No public money was 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.

State Sen. Rollie Heath, D-Boulder, was one of the lawmakers who asked for DU’s help in conducting a state finance review, the first of its kind since the 1950s. He thanked the University and Chancellor Robert Coombe for committing the resources to the study.

“Everybody knows we don’t have a lot of money to throw around, so we had to ask for donations,” he said. “The biggest donation, in addition to Charlie’s time and his team, was from the University of Denver.”

A preliminary report from the center 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, Brown said. 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 Text of the preliminary report will be available soon.

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