Deficit Deja Vu: Ritter learning too slowly on budget

Grappling with declining state revenues makes for some very unpleasant budget choices, as Gov. Bill Ritter and the Democrat majorities in the state legislature learned over the past 12 months.

It’s fair to criticize those choices, including the governor last year denying for several months that a problem existed. Yet anyone who has shouldered the responsibility of balancing a budget during a recession understands that learning from your own mistakes is inevitable.

Learning, however, is essential – both to sound fiscal policy and to political credibility. That’s why it was astonishing to hear Governor Ritter and leading Democrats dismiss the need for a special session of the legislature on the very day they acknowledged that the state will start the new fiscal year nearly $400 million in the hole.

Anticipating further economic deterioration, legislators gave Ritter the authority to “borrow” up to $500 million from next year’s budget to pay this year’s bills. Based on new projections by Legislative Council economists, about half that amount will be needed.

Moreover, legislative economists forecast tax revenues for the new budget year, beginning July 1, to be $135 million less than budgeted and $874 million short over three years. Those economists prudently expect the recession to continue into 2010 in Colorado and foresee possible recovery “at least a year after that.”

That’s the point at which this scenario takes on an incredible aura of déjà vu.

Economists in the Governor’s Office of State Planning and Budgeting (OSPB) paint a much brighter picture, forecasting a recovery later this year. That outlook enables OSPB to expect an additional $1.3 billion to spend over the same three-year period.

Last September, Legislative Council sounded the alarm early enough for the governor and legislature to call a special session just three months into the fiscal year – ample time to revise the budget and mitigate the shockwaves to affected programs and participants.

Instead, the governor boldly proclaimed, “One of (the forecasts) is pretty significantly wrong,” and according to the Denver Post, he “made it clear” that the error wasn’t in the projections from his office. Days later when the Wall Street financial crisis struck, Ritter ordered a “hiring freeze” which, it turns out, wasn’t nearly as frigid as advertised.

In December, with half of the fiscal year passed, Legislative Council pegged the budget shortfall at $631 million. Ritter’s OSPB forecast a mere $70 million deficit. Two weeks later, OSPB admitted it had used “outdated information” and issued a new estimate of $230 million in red ink.

By the time the legislature convened in January, the remaining choices were severe cuts, exacerbated by months of inaction, or accounting gimmicks that postponed the day of reckoning and made balancing the 2009-10 budget even more difficult.

Choosing to procrastinate, legislators tried yet another dodge by attempting to extort $500 million which employers had paid into the state’s fund for injured workers. Then they wiped away budget caps that restrain spending in good years – as if that would somehow create more money amid a withering economy.

Finally, after raiding trust funds, re-imposing a property tax on senior citizens, and accepting a federal bailout, they proclaimed the budget balanced.

With prescience, Republican leader Sen. Josh Penry observed, “This budget will be out of balance on June 20.”

And so it is.

Incredibly, Governor Ritter and Democrat legislators seem headed for another year of budgetary brinksmanship, placing all their bets on a quick economic recovery.

For five years, Democrats have controlled the legislature and for three years the governor’s mansion. Colorado taxpayers are right to expect that, after blundering through a year of budgetary mayhem, Ritter and Company will learn from the past and make prudent choices this time.

One thought on “Deficit Deja Vu: Ritter learning too slowly on budget

  1. Dan Lanotte

    Presidents Kennedy and Reagan both proved that when taxes are reduced it results in an increase of tax revenue. This is true of all personal taxes and business taxes. When a state makes the business climate so onerous that large companies leave the state for more friendly climes and small, family owned business close down, that puts people out of work thereby lowering the tax revenues. This is economics 101. It is unfortunite that Governor Ritter and his Democrat side-kicks flunked this course

    Reply

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