Co Budget - is the shortfall a fiction?

From December to March, Colorado’s budget forecast for the general fund increased by over half a billion dollars, substantially shrinking that $1.2 billion budget shortfall we’ve all heard so much about. That’s good news. But here’s the dirty little secret: The budget shortfall is a fiction.

The budget for the current year (2010-11) is $7.1 billion. We’re told that the legislature closed a $350 million shortfall. Yet the budget for 2009-10 was $6.3 billion. That’s an increase of $800 million. The budget forecast for next year as of last December was $7.1 billion, the same as the current year. Does that sound like a $1.2 billion shortfall? And the updated forecast, released yesterday, predicts less than half of that shortfall. Total budget forecast: $7.1 billion, the same amount that predicted the $1.2 billion shortfall. Huh?

Let’s do the math. If the budget in the current year is $7.1 billion, and we anticipate a $600 million shortfall next year, what is the anticipated budget for next year? $6.5 billion, right? Not in the world of government budgetary mathematics.

Now it may be that I don’t understand the budget. As far as I can tell, neither do the legislators. They haven’t been able to explain how the shortfall number is calculated, and have only raised more questions when they tried. I’ve talked to Henry Sobanet, Governor Hickenlooper’s budget director and one of the foremost experts regarding the state budget. He provided far more insight than anyone I’ve talked to about the state budget. Yet he could not explain the budget shortfall in a way that mere mortals could comprehend.

And therein lies the danger. Despite the good news about the budget, the steady drumbeat about the shortfall will continue and get louder. And we’ll be asked to approve new taxes. What do you suppose are the chances that anyone will tell us how they arrived at that number? Don’t you think they should be able to prove the numbers before they ask us to satisfy the rapacious government appetite for that which does not belong to them?

Even if there are real numbers behind what appears to be fiction, shouldn’t we all be on the same page? If “shortfall” means something entirely different to you and me than it does to the general assembly, shouldn’t we reconcile terms before we hand over more money?

Unemployment is at a record high in Colorado. People are struggling to keep food on the table, heat their homes, and put gas in their cars. There are families that can’t afford to pay 30 cents a day to have schools feed breakfast to their children. Raising sales taxes will hurt those families the most.

Raising income taxes will hinder job creation by diverting more money from the productive private sector to the unproductive government sector.

Brian Vande Krol

CO Senate Republicans Budget principles

Senate Republicans believe the following eight budget principles provide a sound basis for a fiscally responsible FY 2011-12 state budget.

* Maintains a reserve of at least 4 percent as recommended by the Governor;
• Budgets to the most conservative General Fund revenue estimate available for FY 2011-12;
• Avoids suspending the $65 million vendor fee that has already cost thousands of jobs;
• Makes structural, long term changes to entitlements, which are increasingly crowding out needed funding for core functions of government such as K-12, higher education, and transportation;
• Consolidates prisons and increase utilization of cheaper private corrections facilities;
• Increases the amount that government workers pay for their retirement as recommended by the Governor;
• Avoids the use of one-time fund sources to prop up General Fund spending that will create a shortfall next year; and
• Is amenable to and supportive of additional structural changes and cuts in spending which will be offered by our caucus in floor amendments.

Good news/bad news on taxes - and a correction

The past Saturday, I spoke before the CO Republican State Central Committee and talked about several initiatives to hike taxes by the left-leaning Colorado Center on Law and Policy.

The information I reported was incorrect, as it was already four days old and things had changed. I had not updated my research. I am pleased to report that CCLP has decided not to pursue their tax increase petitions for November. Additionally, the Title Board denied CCLP's proposed initiative to place a sales tax on services.

CCLP's initiatives asked voters to change the current tax code to have an increased rate on individuals and corporations with specific directions for wealth re-distribution. The initiatives varied only slightly but would have raised taxes in Colorado between $1.07B to $1.512B - and mostly on the backs of people already paying in the higher brackets.

In the CCLP initiatives, approximately 60% of Coloradoans would have paid the same or less tax than they currently pay; the other 40% would have carried the burden.

As reported by Tim Hoover of the Denver Post, a CCLP executive said the group couldn't get enough support to pay for the campaign. But, as Hoover wrote, "Sen. Rollie Heath (D-Boulder) is still proposing a temporary tax-increase initiative that would ask voters to raise income and sales taxes to generate $1.63 billion over three years"....and "another version that would ask voters to make the tax increases permanent."

Christine Burtt
Chairman
CO Republican Business Coalition

Vande Krol: Hick's Bottom Up or Upside Down?

Bottom Up or Upside Down, It’s More Government
March 29, 2011

Yesterday I attended the Governor’s Bottom-Up Economic Development Initiative. I was disturbed that so many in attendance are "swallowing the kool-aid", believing that government can craft the right program to get the economy moving and put people back to work.

Any attempt by government to incentivize business is a burden that must be borne by taxpayers, and a comparative disadvantage to the businesses that doesn't qualify for the incentives.

The Mayor of Commerce City (Natale) boasted that they appoint a person to help any large business that's moving to their city. That person is the single point of contact between that business and the city, and facilitates their move. But what are the chances that a smaller business would get that same assistance?

The businesses that drive the economy and offer the most employment are the small, less glamorous businesses. One thousand sole proprietors that each hire one person creates more jobs than a relocated company with 500 employees. And the sole proprietor doesn't show up in any statistics. Making it easy for people to start small businesses by removing barriers can have a far greater impact on employment and the creation of wealth.

Natale also wanted protection (tariffs?) for the concrete pipe companies in Commerce City. Apparently there's a move afoot to change regulations to specify plastic pipe instead of concrete in public works projects. This is foolishness all the way around. Protectionism always harms the consumer (the taxpayer in this case). And regulations that specify a particular product (rather than performance criteria) invites more governmental favoritism and corruption.

There were lots of ideas about government programs to educate businesses. Really? Perhaps the people who run the post office, medicaid, medicare, social security, etc. can teach us what they know.

Someone wanted to raise the gas tax to fund transportation. I'm always amazed at the people who believe that if you come up with a new way to tax, it will somehow create new money to be taxed. It's as if the consumers are saving money under their cushions until someone comes up with the right way to pry it out. I like the idea that gas taxes are the best way to ensure that the users of roads are the ones who pay for the roads. But if gas taxes are raised, there must be a commensurate decrease in other taxes, or it will further dampen economic growth.

Someone trotted out the old and common belief that the key to prosperity is to fund higher education. Adams County apparently doesn't have enough college graduates. The belief is that if we have more college graduates sitting around waiting for jobs, companies will relocate here. I would contend that companies will relocate here if they see a comparative business advantage, meaning less government intrusion and taxation and more stability in regulations. Then those businesses will attract the people they need to staff the company. The main reason to improve higher education in Colorado is so that parents don't have to ship their kids out of state to get a good education. That's not a bad thing, but let's be honest about it.

One gentleman thought we should have a government agency that businesses could contact to keep abreast of government changes that might affect them. I said it's a sad day when our business environment is so volatile because of government that we have to have an agency to help us track the changes.

Someone suggested that the Governor should personally know the CEOs of the top 100 Colorado employers. Can you imagine that weekly phone call from Hick to Mr. Big? Do you think either will care that Hick generally cannot help Mr. Big’s company without taking from the taxpayers, or putting competing companies at a comparative disadvantage?

This whole fiasco is a classic example of the grand deceit of those who think they can plan our economy. A room mostly full of government representatives trying to decide how best to "create jobs". Business people attend because "if you aren't at the table, you're on the menu". TIFs, programs, agencies, enterprise zones, tariffs, incentives, and on and on.

It all adds up to favoritism for the businesses that government approves, and taxpayers foot the bill. Although everyone acknowledged the need to cut red tape, very few specific ideas came up. It's such a huge task that few know where to begin. Perhaps it’s also because the government representatives in attendance don't experience the red tape problem. Remember that the first red tape Hick cut was for brewers, a problem of which he has first hand knowledge.

Remember what happens when you bend over and grab your ankles - you are Bottom Up. Brian Vande Krol

CRBC opposes HB1255 CO Alternative Energy Park Act

March 17, 2011 The Honorable State Representatives State Capitol Building 200 E. Colfax Ave Denver, Colorado 80203 Re: HB 1255, Colorado Alternative Energy Park Act Dear Representative, The Colorado Republican Business Coalition Opposes HB 1255. The wealth of Colorado (or the United States, or individuals) derives from the goods and services we create. To expand that wealth requires more efficient production of those goods and services. Capital and labor that is diverted to less efficient production reduces that wealth. If a particular product is more efficient to produce, entrepreneurs will invest the capital and labor to produce it. (See "Economics in One Lesson" by Henry Hazlitt for a more complete discussion.) We know that most forms of alternative energy are less efficient because they cost more than traditional forms of energy, and there would be little demand for it without subsidies and incentives. If it needs a subsidy, it probably doesn't deserve it. There can not be a tax incentive to one industry or company that doesn't cost an equivalent amount to a different industry, company, or taxpayers. The Tax Increment Financing incentives envisioned by this bill will be a relative disadvantage to every business that doesn’t receive similar advantages. Further, but for the tax incentives, tax rates overall could be reduced and citizens would be far better at spending their own money to create economic development than government. Spending tax money in hopes of creating more tax revenue is faulty economics. This government distortion of the free market for energy production diverts labor and capital to inefficient projects, and creates an industry that will be forever dependent on government subsidies. If an alternative energy park is developed and cannot run economically, taxpayers will foot the bill. If it creates more environmental damage than it prevents, Colorado suffers the consequences. If it quickly becomes obsolete when more efficient forms of energy are developed, taxpayers have funded that obsolescent technology. If rail transportation falls into disuse, taxpayers have paid for the improvements to rail systems to accommodate the parks. And the bill depends on the wisdom of government officials to determine the economic and environmental viability of the project. These officials have very little risk, because they are using taxpayer money for these experiments. This is a system that is ripe for political favoritism and abuse. We do not oppose alternative energy. However, as liberty minded business owners and free market advocates, we know that entrepreneurs will develop more alternative energy without government assistance when it becomes efficient to do so. Christine Burtt Chairman CO Republican Business Coalition Brian Vande Krol CRBC Issues Committee www.smallbizgop.com