Introduction

In November 2005, Colorado voters passed Referendum C, giving the state a five-year “time-out” from the revenue limits established by the Taxpayer’s Bill of Rights (TABOR). The current Colorado state budget (July 2007 through June 2008) is the third of five budgets to operate under that time-out, and the legislative Joint Budget Committee is working on the fourth. Many Coloradans are starting to ask what should happen next.

Where did Referendum C get us as a state? Where are we headed looking forward, and is that actually where we want to go?

We believe the best way forward is to first make sure we have good information so voters can make good decisions. The purpose of this report is to provide that information. Looking Forward projects state revenues and expenditures through 2013, a six-year period that includes the last three years of the Referendum C time-out and the first three years of the new Ref C revenue cap.

Specifically, this report attempts to answer the following questions:

• How much revenue will the state collect in each of the next six years with existing taxes?
• How much will the state need to spend in each of the next six years to maintain 2007 levels of service?1 
• Is there a gap between these projected revenues and projected expenditures? If so, how big is it?
• How do constitutional and statutory budgeting provisions affect the situation?

Our goal is to compile one reliable set of projections about future fiscal conditions as a common baseline from which to define challenges, inform public debate and guide decisions.

Key observations

Our findings drive four key observations about where we are headed as a state:

1. Colorado state services have only partially recovered from the economic downturn. Referendum C has allowed the state to retain more than $1 billion in revenues each year. Even so, most major state programs have not returned to the levels of service attained immediately prior to the 2001-03 downturn.
   
2. Nevertheless, 2007 is probably as good as it gets. There will be no further recovery of service levels under Referendum C. In fact, it will be a challenge for the state to maintain 2007 levels of service into the future, and we project there will not be enough left over to maintain the state’s roads, bridges and buildings in their current conditions.
   
3. It is the Arveschoug-Bird formula that will mostly determine how revenues are allocated in the future. This formula largely dictates how General Funds are allocated between the state’s operating budgets (e.g., Education, Medicaid, Corrections, etc.) and capital budgets (e.g., Transportation and Capital Construction), and it will continue to do so throughout the study period.
   
4. Budgets for the major areas of state government are interrelated. Because all General Fund revenues are fully allocated, any further increases in state services can come only through new revenues or at the expense of service cuts elsewhere. The departments of Education, Higher Education, Health Care Policy and Financing (largely for Medicaid), Human Services, Corrections and Transportation, which together account for more than 80 percent of total state spending,2 all depend on state General Fund revenues for significant portions of their funding.

Implications

Referendum C allowed the legislature to avoid additional cuts and restore some of the services it cut during the downturn early in the decade. But rather than restoring more services, Ref C’s main effect in the future will only be to help maintain the levels of service achieved during the first two years of the time-out.

In other words, Referendum C stopped the bleeding and stabilized the patient, but could do little else.

The question is whether that is good enough. Looking forward, will 2007 levels of service meet the needs of a growing state in the 21st Century?

Answering that question requires more than projecting revenues and expenditures. It requires a serious, informed, broad statewide discussion about the kind of state we want Colorado to be.

We use 2007 as our baseline in this report because it represents the status quo in Colorado. It is where we currently are as a state, although it does not necessarily represent where we want to be. Whether compared to other states or to historical trends, current General Fund revenues in Colorado are quite low. In 2005, the most recent year for which comparative data are available, Colorado state government ranked 44th of the 50 states in per capita spending, and 49th in spending as a percentage of total personal income.3 

In fact, as Figure 1 shows, when measured against total personal income statewide, General Fund revenues in FY 2007-08 are 11 percent below the average of the two decades prior to the 2001-03 economic downturn.

From 1982 through 2001, General Fund revenues averaged 4.5 percent of total personal income. During the 2001-03 downturn, revenues dropped to a low of 3.6 percent of personal income, 20 percent below the average of the previous two decades. After voters approved Ref C in 2005, revenues recovered somewhat, to 4 percent of personal income in FY 2006-07. That’s still more than 11 percent below the previous average.4 

Many of Colorado’s leaders point to the outcomes of state programs and suggest we should aspire for more.

• Many argue there will not be enough transportation funding to build and maintain the roads, bridges and transit systems we will need to compete economically.
  
• Some argue we still are far behind in funding our colleges and universities. At the same time, Gov. Ritter has set a goal of doubling the number of degrees and certificates awarded in the next decade.
  
• Some argue we lack the resources to meet state and federal standards in K-12 education, not to mention meeting the governor’s challenge to cut our high school dropout rate in half.
  
• The Blue Ribbon Commission for Health Care Reform is studying five options for increasing access to affordable health care. Most would require significant new state spending.These are important discussions about the critical public structures that underpin our prosperity. But the core questions are: How much would these changes cost? Where will we find the money to implement them?

It is clear from our findings that, at best, Colorado has only enough money to do what it already is doing. Without significant cuts to existing programs, increased revenues, changes in constitutional or statutory provisions, or a combination of all three, there can be no meaningful expansion of existing programs or services.

So where are we headed as a state? Is that where we want to go? This report answers the first question. With this information in hand, we can begin to answer the second.

Summary of findings 

In this study, we focus on revenues to and appropriations from the state General Fund through 2013. We do not project revenues or appropriations for cash or federal funds.

Specifically, we project revenues to the General Fund under current taxes and tax rates, assuming continued moderate economic growth. And we estimate the level of appropriations from the General Fund that would be needed to maintain current 2007 levels of service over the study period.

Our projections about the future of the state General Fund lead to the following major findings.

Finding 1.

Colorado’s schools, colleges and universities, health care safety net, human service programs, prisons, transportation system, and building maintenance all depend on General Fund revenues for much of their funding.

Appropriations from the General Fund make up significant portions of the total operating budgets for the five major state departments:

• Corrections: 90 percent from the General Fund
• Education: 75 percent from the General Fund 5
• Health Care Policy and Financing: 41 percent from the General Fund
• Higher Education: 40 percent from the General Fund 6
• Human Services: 32 percent from the General Fund

Other major departmental and program budgets are increasingly dependent on direct appropriations and spillover from the General Fund due to the Arveschoug-Bird formula (see Finding No. 3).

The state capital construction budget is almost wholly dependent on General Fund revenues, and transfers of General Fund revenues to the Department of Transportation will equal at least 27 percent of the department’s total appropriations in FY 2007-08.

Finding 2.

General Fund appropriations will need to grow by a compound average rate of 6.3 percent annually to maintain 2007 levels of service through 2013.

The compound average annual growth rates that we project will be needed to sustain 2007 levels of service in the major departments through 2013 range from more than 8.1 percent per year for the Department of Corrections down to 4.1 percent per year for the Department of Human Services. Taken together, these projections drive an overall compound average annual growth rate in appropriations from the General Fund of 6.3 percent through 2013. 7

This overall projection is based on the compound average annual compound growth rates of the projections for the five major departments. It assumes that appropriations to the other 15 agencies that account for the remaining 10 percent of the General Fund budget in 2007 will grow at the same average  rate.

The department-level calculations that drive our overall projections are detailed in the online appendices to this report and summarized in Table 1 and Figures 2 and 3. Table 1 lists the major growth factors for each of the five main agencies. Figure 2 shows the annual percentage growth in General Funds that would be needed in each major agency to maintain 2007 levels of service. Figure 3 shows what this means in total dollars.

See Table 1, Factors driving growth in General Fun appropriations.

It’s important to note that these projections are based largely on conservative assumptions. For example, we assume throughout that programs that get funding from the federal government will maintain their current share. But if, for example, the federal commitment to Medicaid decreases, the state would need to increase its commitment beyond what we have projected to maintain 2007 levels of service.

A similar assumption is made for the federal commitment to transportation spending, discussed in Finding 5.

However, we based our K-12 appropriations on a projected change in the relationship between the state and local share of the costs of K-12 education. After declining slightly, the portion of K-12 education costs paid for by the state is projected to increase over the study period.

The Joint Budget Committee (JBC) staff projects the state’s share of these costs will decline from 63.9 percent in FY 2006-07 to 62.6 percent in FY 2007-08. The reduction is due to the stabilization of local mill levies, which the legislature passed as part of the 2007 School Finance Act (SB 07-199). However, through FY 2012-13, the JBC staff projects the state share of K-12 costs will increase to 65.7 percent, because assessed property values in local school districts are not expected to grow as much as education expenditures. 8 

The increase in the portion of K-12 education paid for by the state will cause state expenditures to increase. Because the state portion varies each year, the growth rate in K-12 education expenditures will vary as well, as shown in Figure 2.

Finding 3.

The 6 percent Arveschoug-Bird General Fund growth formula could force some cuts in the projected appropriations needed to maintain 2007 levels of service through the six-year study period. It will certainly not allow any further increase in services.

Arveschoug-Bird, passed by the legislature in 1991, caps the annual growth in appropriations from the General Fund (other than for capital construction) to no more than 6 percent annually, regardless of revenues. But Arveschoug-Bird does not actually limit state spending, because revenues outside the 6 percent spending limit are fully allocated to other areas under current law. In essence, the Arveschoug-Bird “limit” is not a limit at all – it is a budget allocation formula.

All revenues from Referendum C are deposited in the “General Fund Exempt” account and distributed according to its provisions. However, because of Arveschoug-Bird, the higher-than-projected revenues in the first three years of Ref C displaced other funds, which have spilled over the 6 percent cap and flowed to non-operating expenses, including transportation. This is likely to continue, as the Arveschoug-Bird formula allows only modest growth in operating expenses.

Because state and federal gasoline tax revenues have not kept pace with the growing use of the state’s roads and bridges (See also Finding 5), the transportation budget has become increasingly dependent on this spillover of General Fund revenues created by the Arveschoug-Bird formula. So while a change to the formula could increase funding for General Fund departments such as Education, Higher Education or Human Services, it would do so only at the expense of transportation and capital construction.

Interestingly, because Arveschoug-Bird is an annual growth formula that is always based on the previous year’s General Fund appropriations, it permanently ratchets down services beginning in those years when the full 6 percent is not appropriated. This is similar to the mechanism that causes the ratchet effect of TABOR, which is explained in the Bell’s 2003 publication, Ten Years of TABOR.

Because of a decrease in revenue due to an economic downturn and a reduction in tax rates, appropriations did not grow by the full 6 percent in 2002 or 2003. In fact, in 2002 appropriations actually shrank.9 As a result, we estimate the Arveschoug-Bird limit in 2007 is $982 million lower than it would have been had appropriations actually grown by the full 6 percent in 2002 and 2003.

Figure 4 shows that our projection of appropriations needed to maintain 2007 service levels into the future could exceed the 6 percent Arveschoug-Bird limit (red line) by $23 million in FY 2009-10, growing to $122 million in FY 2012-13. This means the legislature might have to cut future appropriations below the amount we project is needed to maintain 2007 service levels in order to meet the 6 percent requirement.

Finding 4.

Assuming continued economic growth, state General Fund revenues are projected to grow by a compound average annual rate of 5.2 percent through 2013.

In FY 2007-08, the state will have approximately $8.25 billion in revenues for the General Fund. The personal income tax and the state sales tax are responsible for more than 80 percent of these funds, with the corporate income tax and a variety of excise and other taxes providing the rest. Of the $8.25 billion, nearly $1.1 billion are “General Fund Exempt,” meaning they can be retained and spent by the state only because of the passage of Referendum C.

Using estimates from the Legislative Council through FY 2011-12, and estimating one additional year of revenues beyond that, we project that General Fund revenues will increase to $10.6 billion in FY 2012-13. This constitutes a compound average annual  growth rate of 5.2 percent. That is lower than the 6.3 percent growth in appropriations that we project will be needed to sustain 2007 levels of service.

Still, because some of the appropriations outside the Arveschoug-Bird limit are likely to be reduced first, this level of growth should provide enough revenues to sustain 2007 service levels for the five major departments and other program budgets traditionally supported by the General Fund, at least through 2013.

However, if these trends continue over the long term, spill-over funding for transportation and capital construction from above the Arveschoug-Bird line would eventually disappear. At that point, 2007 levels of service in the other major programs could no longer be maintained. Service cuts would occur earlier if the economy grows more slowly than these projections assume.

Details on General Fund expenditures that fall outside the 6 percent limit

• Rebates and expenditures
  • Transfers from the state to local governments to cover the value of local sales taxes not levied on cigarette sales
  • Appropriations to the Old Age Pension fund
  • Tax credits to offset heating costs and property taxes for low-income seniors
  • Appropriations to the firefighters and police pension accounts
  • Treasurer’s loans to school districts
• Tax credits to offset residential property taxes for senior citizens (regardless of income) were established by voter approval of Referendum A in 2000, and for disabled veterans under passage of Referendum E in 2006.
  
• Senate Bill 1 transfers to transportation: specifically, up to 10.355 percent of sales tax revenues in the General Fund are transferred to the Highway Users Tax Fund.
  
• The 4 percent reserve is the amount the legislature is required by law to set aside each year to cushion state spending against a downturn in revenues.
  
• Past year excess reserves are the amounts carried over from the previous fiscal year, counted as General Fund revenues and transferred to transportation and capital construction. These are also referred to as HB 1310 funds, for the law that shifts them to transportation and capital construction. (See discussion in Finding 5.)
  
• Current year excess reserves are the amounts projected for the current year that will be carried over to the next fiscal year’s budget. 
  
• Other transfers include funds to capital construction and sales taxes to the Older Coloradans Fund.

Finding 5.

Projected revenues will not be sufficient, even with the increased dependence on General Fund revenues, to maintaining the state’s buildings, roads and bridges in their current condition.

On top of the operating budgets discussed in previous sections, the state also depends on the General Fund to help support its capital budgets to build and maintain roads and bridges, college classrooms, state office buildings and prisons. But even with continued General Fund contributions, capital budgets will not be sufficient to maintain current conditions, let alone accommodate any new construction.

Transportation

Historically, the state has funded transportation primarily through the gasoline tax, which is based on a set amount per gallon of fuel. But as vehicles have become more fuel-efficient and the costs of construction have risen faster than consumer inflation, this tax has not produced enough revenue to keep pace with the cost of maintaining and expanding the state’s transportation system.

Prior to the passage of TABOR in 1992, the legislature would raise the gasoline tax every few years to keep pace. TABOR shifted that authority away from the legislature to the voters. Since then, the gasoline tax has remained at the level set in 1991: 22 cents per gallon for gasoline and 20.5 cents per gallon for diesel. The legislature has committed General Fund revenues to help close the gap. Yet even with these additional funds, there is not nearly enough money to meet the projected costs of maintaining the current transportation system, let alone expanding it to meet the needs of a growing state.

Specifically, Senate Bill 1, passed in 1997, commits a portion of state sales and use tax revenues to the Highway Users Tax Fund (HUTF) in years when General Fund revenues exceed the 6 percent Arveschoug-Bird limit. As Figure 5 indicates, these Senate Bill 1 funds account for a significant portion of the revenues we project will spill over the 6 percent limit during the study period.

In 2002, faced with a continued funding gap for the 20-year transportation plan, the legislature passed HB 1310. It transfers to the Highway Users Tax Fund two-thirds of the General Fund excess reserve that is available at the end of a budget year. The other one-third of the excess reserve is used for projects to build, repair and maintain state buildings, as explained in the Capital Construction section.

Under current projections, which assume no economic downturn, SB 1 and HB 1310 together will add $280 million to $360 million per year to state transportation funding through 2013. Added to the estimated $900 million per year from other sources ($420 million from traditional sources such as the state gasoline tax, $380 million in federal funds, and $103 million from other sources, such as interest on bond proceeds),10 total annual appropriations for transportation reach approximately $1.2 billion to $1.3 billion (in 2008 dollars).

However, the 2030 Statewide Transportation Plan estimates that just to maintain the state’s existing roads and bridges in their current condition — a mix of 60 percent “good” and 40 percent “poor” — will require $2.6 billion a year in current 2008 dollars over the next 25 years. That’s $1.3 billion more than will be available in good economic years, and almost $1.7 billion more than will be available if an economic downturn eliminates any spill-over of General Fund revenues.

Capital Construction

There is no consistent, reliable source of revenues for the Capital Construction Fund. When the money is available, the state has transferred one-third of the General Fund excess reserve to capital construction under HB 1310. As mentioned above, the General Fund excess reserve is what is left over after:

1. Operating expenses are funded up to the 6 percent Arveschoug-Bird limit.
2. The 4 percent statutory reserve is funded.
3. Transfers are made to Transportation under SB 1.

Capital construction revenues are the last dollars in the door in good years and the first to disappear in bad years, placing repairs and maintenance of state buildings at the back of the General Fund line.

In 2006, state agencies estimated a need for $683 million in capital projects in FY 2008-09 and a long-term need of $2.7 billion through FY 2011-12.11 Because we cannot predict whether and when the legislature will approve a new facility, for purposes of this report we focus only on what it will cost to maintain existing facilities. To the extent the state needs to acquire or construct new facilities, our estimates will be low.

According to the Colorado Director of State Buildings, industry standards dictate an annual investment of 3 to 4 percent of the replacement value of total building inventory to maintain current conditions. The replacement value of state buildings is estimated at $6.77 billion, so a 3 percent maintenance investment would cost $203 million a year to maintain current conditions.

In five of the last six fiscal years, the state appropriated less than 1 percent of replacement value for capital maintenance. In FY 2006-07, it appropriated 2.4 percent. If appropriations continue to fall below the industry standard, the condition of state buildings and facilities will deteriorate.

Finding 6.

The new state revenue limit imposed by Referendum C, which takes effect in FY 2010-11, is not likely to limit spending during the study period.

Referendum C imposes a new state revenue limit beginning in FY 2010-11. This new limit, known as the “excess state revenues cap,” will use as its base the year during the TABOR time-out when revenues were highest. Based on current projections, that new base year should be FY 2009-10, the last year of the time-out. From then on, the limit will be determined by adding cumulative growth in population plus cumulative growth in consumer price inflation from that base year. (See sidebar, “How Referendum C works,” page 2.)

Projections from the Legislative Council and the Governor’s Office of Planning and Budgeting differ slightly, but neither shows the state exceeding the new excess state revenues cap within its first few years of taking effect.

However, revenues are projected to be close to the new limit, so even minor variations in the rate of population growth, inflation or revenue growth could result in revenues exceeding the cap earlier than we project.

We also know from previous analysis that in most years, the new limit (reached by adding growth in population plus inflation) will grow more slowly than the overall economy. Over time, we can expect the excess revenues cap to grow more slowly than state revenues, which largely are tied to overall economic activity.12 As a result, the amount by which revenues exceed the limit will increase over time, making the new excess state revenues cap an increasingly important factor in the future.

Finding 7.

Projected revenues will not be sufficient to accommodate new or expanded services.

Since the passage of Referendum C in 2005, a variety of official task forces and unofficial coalitions have formed to discuss specific state services and issue areas, including whether additional funding will be needed to achieve the desired results. However, our projections show that, at best, the state will barely be able to sustain services at 2007 levels for the remainder of the six-year study period. In fact, the Arveschoug-Bird limit may force some cuts in our projected appropriations needed to maintain these service levels in fiscal years 2008-09 through 2012-13.

Given current statutory and constitutional restrictions, Colorado can significantly increase spending only if it can generate additional revenues or cut other services. While important, cost-saving programs alone, such as the governor’s initiative aimed at lowering prison recidivism or the Government Efficiency and Management (GEM) performance review, will not achieve the magnitude of savings needed to offset the increased need.

Efforts to evaluate funding needs, new funding mechanisms and options to restructure state programs include:

• Transportation: Current revenues will not be sufficient to maintain Colorado’s roads and bridges in their current condition or to expand the system to keep pace with growth. The Department of Transportation estimates the state needs up to $3.7 billion each year to maintain the system and accommodate growth, $2.6 billion more than its current annual budget of approximately $1.1 billion. The Blue Ribbon Transportation Finance and Implementation Panel, established by Gov Ritter, has been studying the state’s transportation needs and has issued recommendations to increase funding options.13 
  
• Health Care: Current revenues are likely to be sufficient to sustain 2007 levels of service, including Medicaid and other health programs in the Department of Health Care Policy and Financing. But at 2007 levels of service, nearly 800,000 Coloradans lack health insurance, including 150,000 children.14 The Blue Ribbon Commission on Health Care Reform, formed by the legislature in 2006, is evaluating health care reform models to expand coverage, “especially for the underinsured and uninsured, and to lower health care costs for Colorado residents.” The commission identified five reform options for in-depth evaluation, and is to report its findings to legislators in January 2008. Each proposal would entail a significant restructuring of state health programs and funding streams. According to an independent actuarial review, the fiscal impact of these options would vary widely, but could range from $389 million to well over $1 billion a year.15 
  
• Higher Education: The state’s colleges and universities suffered disproportionately large cuts during the 2001-03 economic downturn compared to other state agencies. Even with Referendum C starting in 2005, and without considering subsequent inflation and enrollment growth, funding for the Department of Higher Education is still below where it was in 2002. As with all other General Fund programs, our analysis suggests projected revenues will not allow services to recover beyond their 2007 level. Compared to a representative group of peer institutions in other states, Colorado’s colleges and universities as a whole receive 64 percent of average funding, according to an independent study done for the Colorado Commission on Higher Education. Providing Colorado institutions with the same level of support as the average of these peers would cost an additional $832 million in total funding each year.16 
  
• K-12 Education: State funding for K-12 education did not suffer the magnitude of cuts that other programs did during the downturn, in large part due to the funding requirements of Amendment 23. Still, Colorado lags behind other states in education funding and, more importantly, in critical achievement outcomes. Gov. Ritter wants Colorado to cut the dropout rate in half in a decade, and he established the P-20 Education Coordinating Council to look at ways to better structure our education system to meet the needs of the new century. Among other challenges, the federal No Child Left Behind mandate that students in all states achieve 100 percent proficiency by 2013-14 is likely to require all states to focus much more on achievement gap issues and low-performing schools in the next few years. An analysis by the Colorado School Finance Project projects that to adequately fund Colorado public schools, not including facilities, will require an additional $2.9 billion annually.17
  
• Other agencies: Colorado also lags behind other states in funding many smaller but equally important programs, such as state courts, environmental regulation, services for the developmentally disabled, public safety, and services for veterans. Compounding the problem, federal funding for Medicaid, human services and transportation are likely to slow in the coming years, requiring state government to restructure programs or backfill with its own resources.

In summary, the Looking Forward research tells us:

• Our major state government services all depend on the General Fund for much of their funding.
• General Fund appropriations will need to grow by a 6.3 percent compound average annual rate to maintain 2007 levels of service through 2013.
• The 6 percent Arveschoug-Bird General Fund growth formula may force some cuts in our projected appropriations needed to maintain 2007 levels of service in FY 2009-10 through FY 2012-13.
• Assuming continued growth in the economy, General Fund revenues will grow by a compound average annual rate of 5.2 percent through 2013.
• Projected revenues will not be enough to maintain state buildings, roads and bridges in their current condition.
• The new state revenue limit imposed by Referendum C, which takes effect in FY 2010-11,
• is not likely to limit spending during the study period.
• Projected revenues will not be sufficient to accommodate new or expanded services.

In other words, 2007 is as good as it gets.
The question for all Colorado is whether that is good enough.

End notes

1  2007 levels of service represent the services provided by state government through General Fund appropriations in the FY 2007-08 state budget. We estimate future state appropriations based on projected future changes in the factors that drive the budgets. We assumed no changes to current programs, including reductions, expansions or additions, other than those caused by increases in the number of people served or the costs of providing services.

2  90 percent of General Fund operating appropriations, 79 percent of total General Fund revenues and 81 percent of total state spending (including cash funds and federal funds). Sources: Colorado Joint Budget Committee, Fiscal Year 2007-08 Appropriations Report, and Colorado Legislative Council Staff, Focus Colorado: Economic and Revenue Forecast, 2007-2012, Sept. 20, 2007.

3  Carol Hedges, “Aiming for the Middle,” Colorado Fiscal Policy Institute, June 2007. Executive summary • Full report

4  Bell Policy Center calculations. Sources: Gross General Fund revenues reported in Legislative Council documents, and state annual personal income data reported by the U.S. Department of Commerce, Bureau of Economic Analysis. The percentage was reached by dividing General Fund numbers for a fiscal year by personal income numbers for the calendar year ending in that fiscal year. For example, the percentage for 2007 was reached by dividing General Fund for FY 2006-07 by personal income for calendar year 2006.

5  This percentage represents only the appropriations to the Colorado Department of Education.

6  General Fund moneys are typically reported to make up 30 percent of the Department of Higher Education’s total appropriation in official budget and appropriations documents. However, this reporting method includes a double count of College Opportunity Fund (COF) Program appropriations—both as General Fund under the department’s COF Program section, and as Cash Funds Exempt under the department’s Governing Boards section. To better reflect the actual amount of total funds appropriated to the department, our analysis counts COF Program funding only once, as General Fund in the COF Program section. With this single count of COF, General Fund moneys make up 40 percent of the department’s total appropriation.

7  Compound average annual growth rate measures how much revenue or appropriations need to grow each year to reach a total. It smoothes out variations and shows how much the revenues or appropriations must increase, on average, to maintain a steady rate of increase over a specific time frame.

8  E-mail from Carolyn Kampman, Chief Legislative Analyst, Colorado Joint Budget Committee, Nov. 15, 2007.

9  Focus Colorado: Economic and Revenue Forecast 2004-2009, March 2004, Table 1, and Focus Colorado: Economic and Revenue Forecast 2003-2008, June 2003, Table 1, Colorado Legislative Council Staff.

10  These data are based on Legislative Council staff’s estimated S.B. 1 and HB 1310 transfers and estimated transportation revenues, taken from Colorado Department of Transportation, 2035 Revenue Forecast and Resource Allocation, Appendix D, page 71, Dec. 14, 2006.

11  Capital Construction Funding For FY 2007-08, Colorado Legislative Council Staff, Issue Brief No. 07-08, July 31, 2007.

12  Ten Years of TABOR, The Bell Policy Center, 2003.

13  Blue Ribbon Panel on Transportation Finance and Implementation web site

14  Colorado Blue Ribbon Commission on Health Care Reform, Characteristics of the Uninsured in Colorado, (Preliminary Draft) June 12, 2007, The Lewin Group.

15 Colorado Blue Ribbon Commission on Health Care Reform, Technical Assessment of Health Care Reform Proposals, Aug. 20. 2007, The Lewin Group;
A Matrix for Comparing the Five Proposals Under Consideration by the Colorado Commission on Health Care Reform, Robin Baker, The Bell Policy Center, Nov. 21, 2007;
Colorado Blue Ribbon Commission on Health Care Reform press release, $167 Million in Cost Savings Possible with Health Reform, Nov. 15, 2007.

16  National Center for Higher Education Management Systems, Executive Briefing: Colorado Higher Education Financing Study, prepared for the Colorado Commission on Higher Education, 2007.

17 The adequacy study assumes the following programs and class configurations are in place to support academic accountability expectations: 

• Preschool for special needs student
• Universal full day kindergarten for all students
• On-going staff development
• Additional instruction time for students not on track to meet academic expectations
• Student-teacher ratios of 15:1 at P-3 and 25:1 at grades 4-12
• Increased computer technology for students and staff

The $2.9 billion does not include an estimate for facilities.  The Adequacy/Costing Out Analysis was completed by the Colorado School Finance Project and supported by Colorado Association of School Boards, Colorado Association of School Executives and the Colorado Education Association. More information online at www.cosfp.org.