State faces its own cliff

Unlike feds, Colorado cannot print money to escape budget noose

In Washington, the nation’s leadership is working to resolve a destructive clash between required defense and nondefense program reductions and higher taxes that could turn the nation’s already painfully slow economic growth in the other direction.

In Colorado, the state is drifting toward the point that K-12 and Medicaid funding consume all of its budget, without a persuasive argument to correct the way residential property owners are favored over commercial property owners in their taxes.

As confrontational as people are in Washington, the deep clash at the national level must be substantially resolved by the end of the year. Both parties in Congress, and the president, structured it that way.

Colorado, which can predict the trajectory of its increasingly restricted budget, has no such deadline.

TBD Colorado, the governor’s initiative to involve Coloradans in reviewing the restraints on the state’s otherwise promising future, delivered no surprises in its report issued last week: Gallagher has so protected residential property from taxation that the state now is providing two-thirds of local school funding; Amendment 23, meanwhile, requires that school funding remain significantly high. And the Taxpayer’s Bill of Rights, which requires a vote to raise taxes, has eliminated representative government’s ability to reshape the tax environment. All three – Gallagher, Amendment 23 and TABOR – are in the state’s constitution, in concrete to a large degree.

Not significantly included in TBD Colorado’s findings is that Medicare costs to the state will take a jump under the Patient Protection and Affordable Health Care Act. Higher family income thresholds, plus some of the 40 million nationally to be newly insured, will add to every state’s Medicaid rolls. The federal government will pick up all of the first year or two of the increases, but after that the states will have to fully cover their share. Fifteen percent, for example, is a lot of money in Medicaid health care.

In Washington, representative government will shape the fiscal solutions; direct democracy has no role. In Colorado, it will be the voters who will have to agree to raise their residential property taxes and to decide the amount to be spent on public schools, which could be less than it might be. If Coloradans do not agree to provide more state tax revenue (in Colorado local taxes rather than state taxes are paramount), then everything else, including higher education and highways, will suffer.

We bet that Washington, even with its ability to print money, will be largely successful in resolving the year-end “fiscal cliff.” Americans of both parties have indicated their concern about the federal deficit and recognize how tenuous the economic recovery is proving to be. As to Colorado and its dilemma, we’re not so sure.

We would love to be proved wrong.