Excerpted from “Rethinking Colorado’s Government: Principles and Policies for Fiscal Sustainability,” a report by the University of Denver 2010-2011 Strategic Issues Panel on State Government
Regardless of your political leanings, it is hard to argue that the past several years have been economically challenging, both locally and globally. It is in this environment that a nonpartisan panel, comprised of accomplished citizens from various segments of the Colorado community — state government, business, education and nonprofit—listened to presentations by experts, reviewed a wide range of materials and held extensive discussions on key issues facing Colorado and other states.
In the broadest sense, the panel faced the question “How can Colorado create a strong and sustainable fiscal future?” Their response suggests a new approach to state government: shift the perspective of government from itself—the institution of government—to citizens; focus intently on creating citizen value; build citizen support by making value visible; change the fiscal structure of state government; and leverage the forces of competition and markets to maximize the effective use of resources.
The report reflects the consensus of the panel and contains the panel’s assessment of the issues along with conclusions and recommendations for Colorado’s state government. Their report is organized into four sections: Fiscal Fault Lines, Principles for Progress, Frameworks for Policy and Constitutional Impediments. A summary of each section’s findings and recommendations follows.
Between fiscal 2008 and fiscal 2010, Colorado’s general fund revenue declined by $1.3 billion, a reduction of 16.6 percent. Those declining revenues, along with rising expenditures, produced extraordinary budget shortfall projections: $1.2 billion in fiscal year 2009, $1.7 billion in fiscal 2011 and an estimated $1 billion in 2012. As required by law, legislators ultimately produced a balanced budget each year.
The panel concludes that achieving a strong, sustainable fiscal environment in Colorado requires rethinking traditional practices and considering new principles to help guide the development of state policies in the 21st century.
As the panel moved from an analysis of Colorado’s financial challenges to a broad discussion of state government, a number of principles emerged. The panel believes these principles can help the state become more flexible, adaptable and responsive to support Colorado’s progress toward a strong and sustainable fiscal future.
Taxpayer Value – government affirms that the purpose of Colorado state government is the creation of measurable value for its citizens;
Taxpayer Value Council – an independent council to provide information that allows citizens to judge the value of state services;
Accountability Centers – link dedicated revenue sources with a specified area of service;
Public Subsidies – extent of subsidies are identified and disclosed to the public by the accountability centers;
Government as Enabler – role of state government in Colorado is to enable public services, using private contractors when appropriate and allow other organizations to offer public services in competition with the state unless public policy clearly necessitates a monopoly status;
Using Markets to Allocate Resources – use the market to focus resources on supporting individuals rather than operating institutions;
Funding Intergovernmental Programs – adopt a full-funding approach for all state/local programs, prohibit unfunded mandates and encourage federal government to do the same; and
Funding State Programs – fund all current programs and annual payments on multiyear obligations, using conservative estimates when calculating the state’s long-term liabilities.
The panel examined the challenges facing the state with a significant impact on state finances. The goal was to produce not detailed recommendations, but rather a series of policy frameworks in each of the key areas based on the principles discussed in the report. The areas explored include:
K-12 Education — the state’s role should be limited to defining and assessing outcomes and fully funding the K-12 program;
Higher education — let competition and market forces freely operate, and support higher ed through a system of stipends building upon the existing College Opportunity Fund;
Transportation — the Colorado Department of Transportation should use an accountability center structure to link defined revenue sources to specific service areas, and identify how tax subsidies and fees are used;
Medicaid — consider the best practices of other states and take full advantage of federal waivers to create an effective program while managing financial risk;
PERA (Public Employee Retirement System) — minimize risk by employing a conservative discount rate when calculating future investment earnings and long-term liabilities. The annual contribution should be fully funded, and retiree benefits expanded only if the plan is 100 percent funded and after careful study of long-term implications;
Internal Services — state agencies should be able to select internal or external suppliers of support services except in cases requiring otherwise; and
Employee Compensation — use independent information on value creation from the Taxpayer Value Council to guide the state’s performance review and compensation system for managerial employees and departmental teams.
Colorado is burdened with conflicting constitutional provisions that impede the state’s fiscal stability.
The most significant of these are Amendment 23 and the Taxpayer Bill of Rights (TABOR). The panel recommends revisiting these amendments as an important step in restoring Colorado’s fiscal sustainability.
Amendment 23 – repeal because it mandates expenditures with little regard for availability of revenues; and
TABOR – sections that require a vote of the people for new or increased taxes should be retained and the remaining provisions repealed.
To receive a copy of this report, contact the University of Denver or you can download the full report here.
