Budget Archives - Colorado-based Business and Economic Research

Have Budget Cuts Negatively Impacted the Public School System?

September 6, 2012September 6, 2012 horvath Leave a comment

A complete answer to this question requires more than a couple hundred words and two charts. On a positive note, K-12 jobs are still being added and assessment scores are above the national norm.

Are jobs being added fast enough, i.e. do the number of new teachers match the increase in students? Are teachers being replaced by teacher aides? Are key administrators being replaced by less experienced and knowledgeable staff? Are deserving professionals not receiving appropriate merit increases? Do the number of employees translate into quality education?

Colorado K-12 public education employment has fared better than the U.S. for the past three years. A review of the 12-month rolling average shows that Colorado employment dropped off from mid-2010 to mid-2011, but has added jobs since. On the other hand, U.S. K-12 public education employment has declined since mid-2009. Undoubtedly many Coloradans may feel the situation could be improved, but it appears to be better than the national trend.

Another area to look at is assessment scores, in particular the National Assessment of Educational Progress (NAEP). NAEP scores show that Colorado 4th grade scores are in the top 18 states for Reading, Math, and Science. Colorado’s eighth grade scores are in the top 10 states for these same subject areas.

Do strong NAEP scores correlate to high graduation rates? Do they mean students won’t need remedial classes if they take college classes? Are they an indicator that students are being educated to perform basic skills in the workplace?

Based on these two data sets, it appears that Colorado is making an effort to staff their K-12 programs as best as possible and that performance, based on NAEP, is better than the national norm. Arguably, other statistics may show the need for improvement, but data in these two areas suggest that Colorado leaders are taking positive steps in a challenging economic environment to educate our youth.

For additional information on the Colorado go to https://cber.co/CBEReconomy.html.

Colorado Legislative Council – Momentum Building

July 2, 2011May 31, 2014 horvath Leave a comment

In late June the Colorado Legislative Council (CLC) released its quarterly update of the state economy Focus Colorado: Economic and Revenue Forecast. The report included mixed economic news – most of it good.

Nationally, there was reduced optimism compared to the CLC March forecast, with output growth revised downward from 3.2% to 2.6%. The Conference Board and Kiplinger have recorded downgrades of similar magnitude for real GDP. Other revisions include stronger employment growth and improved wage and salary projections.

The analysis of General Fund Appropriation budgets for FY 2010-11, FY 2011-12, and FY 2012-13 illustrates the fiscal challenges facing the state legislature. While funds from various sources are projected to increase, general fund appropriations will remain in the range of $7.2 to $7.3 billion for each of these periods.

On a positive note, CLC has upgraded its 2011 employment outlook from 0.7% to 1.1% or 24,400 jobs. They expect just under 40,000 jobs to be added in 2012. The forecast also points to slightly improved retail trade sales, income growth, and construction activity. On the down side slightly higher inflation is on tap.

The risks to continued growth remain significant. Consumer confidence remains low, constrained by concerns about debt, inflation, monetary policy, and weakness in the housing and construction markets. Despite these concerns, it is generally believed that these are factors that will prevent the economy from growing at a faster rate in the near term. Finally the chances of a recession are thought to be slim, less than 1-in-5.

At last, the majority of indicators are pointing to gradual improvement for the remainder of the year and solid job growth in 2012.

Colorado Legislative Council – Outlook for the State Improving

March 23, 2011May 31, 2014 horvath Leave a comment

The Colorado Legislative Council (CLC) recently released its quarterly update of the state economy Focus Colorado: Economic and Revenue Forecast. The report was released in mid-March, at a time when it appears that Q1 2011 employment will be approximately 15,000 jobs higher than Q1 2010. It is great to hear that net employment is again trending upward; however, state employment remains below the peak 2001.

Increased employment is good news for the state coffers!

The Q4 2010 forecast pointed to a budget shortfall of $1,015 million. Because Colorado is required to have a balanced budget, it became necessary to significantly reduce spending for K-12 education and other programs.

Over the past year, there has been an increase in consumption and private sector employment that now appears to be sustainable, hence justification for adjusting the revenue forecast upward. Projections for FY 2010-11 were raised by $116 million, while revenues for the subsequent two years were upped by $99 million and $105 million respectively.

The combination of budget cuts and revenue increases point to a much lower projected shortfall, $450 million, for FY-2011-12. This is good news, but…

Nationally, CLC is calling for real GDP growth of 3.2%, similar to Q4 2010. After three years of net job losses, employment will increase by 0.4% to about 130.3 million jobs. Unfortunately, average annual unemployment for the year will be 8.7%.

At the state level, CLC projects population growth of 1.6% or about 78,000 people. This reflects a reduction in net in-migration to less than 40,000.

Wage and salary employment will post gains of 0.7%, or about 16,000 workers. While this growth is encouraging, it is not enough to significantly lower the rate of unemployment. Unemployment of 8.8% will be slightly higher than the national rate.

Retail sales are projected to record gains of 4.2%; however, inflation (2.3%), will account for more than half of that gain. Retailers will remain challenged to maintain profitability. Finally, single family building permits will be 15,300, slightly higher than in 2010.

The risks to continued growth remain significant. Consumer confidence is fragile and talk about a double-dip has resurfaced. Constraints facing Colorado include a painfully slow housing recovery, rising food and energy prices, and continued concerns about the banking system.

While the picture painted by CLC is certainly not a bright one, it is clearly much more encouraging.

The Colorado Budget Challenge 2011 – Where to Cut?

February 6, 2011May 31, 2014 horvath Leave a comment

For the next two months Colorado legislators will be dealing with the two-edged sword known as the balanced budget amendment.

During lean fiscal times, the amendment forces state senators and representatives to make difficult choices in this zero sum game. They have been faced with similar challenges since 2001 as growth in General Funds Revenue has not kept pace with increased demand for services.

For example, if you were a legislator, which of the following would you eliminate or reduce funding for?
• Social Service – Would you reduce or eliminate funding for single moms and lower income individuals to help them defer transportation costs so they can travel to work?
• Economic Development – Would you reduce or eliminate an incentive program that would retain or bring jobs to Colorado, foster growth in state output, and generate revenue for government entities?
• Health Care – Would you cut back or eliminate funding for a health-care program that would reduce services to elderly? The reduction in state funding would also decrease federal funding by a similar amount. It is a tough time to be a state legislator.

On a positive note, the balanced-budget amendment means that Colorado is not having to borrow money from the Federal government to continue basic operations.

The table below, highlights the source and magnitude of the challenges facing the state government as it is forced to deal with increased demand and reduced revenue. The table compares key data sets for 2001 and 2009. Highlights of the table are:
• The Colorado population increased by about 700,000 people.
• K-12 enrollment is up 76,000 students.
• Despite tuition increases, enrollment at the state’s colleges and universities has grown by more than 21,000 students.
• The prison population is up by about 6,000 inmates.
• The number of Medicaid recipients almost doubled, up 226,000.
• Employment levels were very volatile. The 2009 average was only slightly higher than the 2001 average.
• General fund revenues remained virtually flat (not inflation adjusted).
• Growth of general funds will be constrained by the severity of the Great Recession.

Clearly, the state does not have a stable fiscal model for being competitive in the global economy. The rough ride will continue well into the future.