Colorado Faces Medicaid Induced Budget Cliff

by PerlStalker | 8:04 pm, July 31, 2010 | Comments Off

First, the good news. According to the Denver Post Colorado tax revenues have increased enough that no additional budget cuts will need to be made this fiscal year. The bad news is that Colorado is facing a potential $211 million budget cliff.

The shortfall is due to Federal subsidies of state Medicaid costs ending in December. Colorado legislators wrote the budget expecting Congress to extend that subsidy through June. The Senate is expect to vote on that on Monday.

This is another example of the Stimulus delaying the inevitable. It's also another example of Colorado lawmakers begging for money from a Federal government that is rapidly going bankrupt rather than putting their own house in order. That's especially true as Democrats are joining Republicans in, at least, paying lip service to fiscal restraint.

In truth, I expect Congress to pass the extension on a party-line vote since Democrats seem to think they have an endless supply of money. If they don't, however, Colorado's in a world of hurt.

I don't expect the Colorado Assembly to be able to pull the same trick next year that they did this year with K-12 funding. That leaves higher ed as the last pool of "easy" cuts. With an expected change in party control of at least one chamber there could be real cuts proposed. Unfortunately, I expect John Hickenlooper to be the governor thanks to the GOP implosion. He will, most likely, veto anything that makes real cuts.

Even more fun is the fact that TABOR prevents the Assembly from raising taxes without voter approval which is unlikely to happen. They could try the "fee bypass" like they did this year but if Republicans do that, it would be electoral suicide.

There is a rather extreme solution. The Assembly could withdraw Colorado from the Medicaid program. Doing that could also insulate Colorado from some of the budget busting provisions of ObamaCare as well. In the extremely unlikely event that they do withdraw from Medicaid, expect the Assembly to setup some Colorado-only equivalent.

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