1. Looking Forward Colorado’s fiscal prospects after Ref C Preliminary findings • August 2007

2. Looking Forward | Colorado’s fiscal prospects after Ref C Four goals for our fiscal work • Inform and help shape the debate over Colorado’s fiscal prospects after Ref C. • Conduct research to identify where current fiscal trends will take us. • Share these preliminary findings with community leaders throughout Colorado. • Gather feedback and input to produce a final report.

3. How we got here Looking Forward | Colorado’s fiscal prospects after Ref C 1982: Voters pass Gallagher Amendment to protect residential property tax payers 1991: Legislature passes Arveschoug-Bird 6 percent annual growth limit on the General Fund 1992: Voters pass TABOR Amendment - requires voter approval of tax increases - sets tight revenue limits that shrink government and limit its ability to rebound after economic downturns 1997: Legislature passes Senate Bill 1,for the first time committing General Fund revenues to transportation 2000: Voters passAmendment 23 to mandate a minimum level of funding for public schools 2002: Legislature passes House Bill 1310, committing excess general fund revenues at the of a year to transportation and capital construction

4. Looking Forward | Colorado’s fiscal prospects after Ref C More of how we got here Late 1990s: TABOR surpluses grow to more than $1 billion per year. Legislature cuts income and sales taxes to avoid collecting future surpluses 2001-03: Economic recession and historic drop in state revenues. Surpluses vanish. Legislature cuts state services by $1 billion annually and uses one-time stop-gap measures (including moving payday for workers and borrowing from cash funds) to balance budget 2004-05: Economy and revenues rebound, but TABOR’s “ratchet effect” prevents critical state services from joining in recovery 2005: Voters pass Referendum C to take a five-year time-out from the TABOR revenue limit. Legislature able to avoid future cuts, partially restore services

5. Looking Forward | Colorado’s fiscal prospects after Ref C Preliminary findings • Projected General Fund revenues exceed estimated current services General Fund appropriations over the study period by an average of $466 million a year. • However, estimated current services General Fund appropriations exceed the 6 percent spending limit in each fiscal year studied. • This means Legislature will have to cut estimated current services General Fund appropriations between $275 - $350 million annually (including K-12, higher ed and health care) to stay within the 6 percent spending limit. • Total TABOR revenue will be slightly below the TABOR limit (as amended by Ref C) when it is reset in FY 2010-11 through FY 2011-12 and slightly over it in FY 2012-13. • However, projected revenue will likely result in TABOR rebates starting in FY 2012-13 and beyond.

6. Looking Forward | Colorado’s fiscal prospects after Ref C

7. Looking Forward | Colorado’s fiscal prospects after Ref C

8. Looking Forward | Colorado’s fiscal prospects after Ref C

9. Looking Forward | Colorado’s fiscal prospects after Ref C Observations • Maintaining the status quo current services budget will be a challenge. • Is this where we want to be? • Does this provide sufficient funding for important investments in K-12 education, higher education, early childhood education and transportation? • The 6 percent spending limit will be an impediment to funding our estimated current services General Fund appropriations, even though there are sufficient revenues to do so.

10. Looking Forward | Colorado’s fiscal prospects after Ref C Observations • Our estimates do not include funding for: • Initiatives to reduce drop-out rates • Proposals from 208 Commission for Health Care Reform • Proposals from P-20 Council. • Raising higher education to level of peer states • Maintaining highways at current levels • Increased rainy day fund (8-10 % of General Fund • Increased support for veterans • New capital construction projects • Likely slower growth in federal funding

11. Looking Forward | Colorado’s fiscal prospects after Ref C COLORADO COMPARED Total Expenditures per $1000 of income 49 per capita 44 K-12 education per $1000 of income 49 per capita 34 Medicaid per $1000 of income 49 per capita 47 CHP per $1000 of income 49 per capita 47 Higher Education per $1000 of income 49 per capita 47 Highways per $1000 of income 49 per capita 47 Source: Carol Hedges, “Aiming for the middle”, COFPI.

12. Looking Forward | Colorado’s fiscal prospects after Ref C Observations • We are all in this together. We cannot address one area in isolation from the others. • Our revenue estimates also do not include an economic downturn. If that happens, revenues are likely to be lower.

13. Looking Forward | Colorado’s fiscal prospects after Ref C We want your feedback: • Questions • Comments • Observations Send your comments to: Laurie Hirschfeld Zeller at: Zeller@thebell.org

14. Looking Forward | Colorado’s fiscal prospects after Ref C Contact information: Rich Jones, Robin Baker and Frank Waterous The Bell Policy Center 303.297.0456 jones@thebell.orgbaker@thebell.orgwaterous@thebell.org Alex Medler and Scott Groginsky Colorado Children’s Campaign 303.839.1580 ext. 244 and 275 alex@coloradokids.org or scott@coloradokids.org Carol Hedges Colorado Fiscal Policy Institute 303.573.5669 ext. 309 chedges@cclponline.org