Unsustainable? Colorado's government keeps growing

Proponents of Colorado’s Taxpayer's Bill of Rights designed the constitutional amendment to curb government’s voracious appetite for more spending.

But the state’s most recognizable tax law, which turns 30 this year, hasn’t stopped the government from growing.

Not even close.

Consider this: Lawmakers propose to spend $36.4 billion in the next fiscal year, an amount that funds 63,349 full-time equivalent employees, nearly 1,250 more than current staffing levels.

In contrast, Colorado’s budget in the 2018-19 fiscal year stood at $28.4 billion, while the employee count hovered at 58,885.

Assuming lawmakers pass and Gov. Jared Polis approves the proposed spending plan, Colorado’s Democrat-dominated government would have added nearly 4,500 full-time employees and grown spending by nearly a third during the same time frame.

Indeed, despite a two-year pandemic and the recession that followed, lawmakers immediately unwound spending cuts they made as the health crisis failed to dampen policymakers’ propensity to expand government programs.

In the past three years, Colorado’s legislators and the governor have added more than a dozen new state offices, a new state department and other governmental structures — and, of course, new employees to run them.

Policymakers and advocates who are pushing for more investment argue that the spending is necessary to keep up with population growth, not to mention Colorado’s array of challenges that must be confronted, often with more money.

Critics, on the other hand, say government is not meant to solve all of Colorado’s problems, and every additional dollar spent only begets the clamor for more.

But the bigger question, and one that is growing in the minds of many within and outside of the state Capitol, is whether that growth is sustainable.

New kids on the block

The growth over the past couple of years started off with a bang.

Just 12 days after his inauguration, Polis issued an executive order creating the Office of Saving People Money on Health Care and assigned Lt. Gov. Dianne Primavera to run it. The Democrat-controlled General Assembly, in turn, authorized a bump in her salary.

After almost four years, that office has yet to show up as a line item in the governor’s budget. The office has also never reported what it’s been doing for the past four years to the General Assembly through the latter’s annual SMART Act hearings.

The governor created the Office of Future Work, housed in the Department of Labor and Employment, through another executive order. The state’s apprenticeship agency is located within that office. But the Office of Future Work, too, does not show up in the proposed budget, although a 2022 bill seeks to provide $2 million in general fund dollars to the office to set up a “digital navigator” program. The programs established under the measure are required to report through the SMART Act hearings in the future.

The growth in government has been accelerating in the past decade.

Data from the Common Sense Institute, which tracks government employment information, show that the state has added more than 10,000 employees from fiscal year 2013 to fiscal year 2022. The high point in the past 10 years occurred in fiscal year 2020, when Colorado’s government broke the 60,000-employee mark. In the previous year, the state funded 58,982 workers. A year later, that rose to 60,986.

Where that growth occurred has been uneven, with the Department of Health Care Policy and Financing leading the way. By contrast, the Department of Transportation’s staffing levels remained largely flat during the same period.

Growth in the government’s staffing levels traditionally lags behind the private sector, although in fiscal year 2020, the private-sector rate dipped to negative 5.7%, while government grew by 3.4%.

With the pandemic raging , the increases in the size of the government’s workforce slowed but didn’t stop, the data show. And with Colorado’s economy poised for a rebound, the expansion sits atop policymakers’ agenda.

In the upcoming year’s budget, the Governor’s Office is slated for its biggest increase ever in the number of employees, with 75.8 new positions. To fund that expansion, lawmakers are poised to increase the office’s budget from where it was in Polis’ first year, at $354 million, to more than $445 million .

Polis’ original request sought to create 76.5 positions, including new staffers to “manage the growth in appointment workload and address equity, diversity, and inclusion requirements” within the Office of Boards & Commissions, plus 28 more employees to implement the Office of Information Technology’s “new interagency service and billing model.”

In addition, the budget also converts contractors working in the Governor’s Office into full-time employees. And the proposed budget includes money to convert 10 contractors within the IT office to full-time employees. That conversion, Polis’ office said, would improve service delivery. In addition, 10 contractors, tied to the PEAK Call Center, would also become full-time.

The budget for the Department of Health Care Policy & Financing includes money to convert 23 contractors to full-time employees.

Converting contractors to full-time employees makes budget writers, such as Sen. Bob Rankin, R-Carbondale, nervous. That conversion removes flexibility that often becomes necessary in economic downturns, he said.

Governing on donations

Policymakers have added several new offices in the past four years using a step approach that initially masks the need for taxpayer spending.

The Office of New Americans, created through HB 21-1150 and housed within Department of Labor and Employment, is supposed to be funded with gifts, grants and donations. The bill’s original fiscal note said it would need 2.4 full-time equivalent employees to start with, plus 0.6 the following year. In the proposed 2022-23 budget, its first full year of funding, the office is getting 1.3 full-time equivalent employees.

To pay for those positions, the proposed budget provides $195,000 in general fund dollars. That budget shows zero from cash funds, which would have come from gifts, grants and donations, had the office gotten any.

That’s not an uncommon way to get a government program’s foot in the door, which then creates pressure on policymakers to sustain it, critics say.

Over the past eight years, the budget numbers kept growing, noted Rep. Patrick Neville, R-Castle Rock, who argued that’s by strategy and design.

Programs start off with funding from gifts, grants and donations, and then the money dries up, creating pressure on the legislature to fund them, he said.

“Look at the strategy differences when we budget,” he said on Thursday, as the House prepared to vote on the budget.

That’s what happened to the Office of Public Guardianship, which lawmakers created through 2017 legislation and lawmakers modified in 2019. The office didn't get off the ground until that 2019 bill, largely because the $1 million in gifts, grants and donations never materialized.

The General Assembly stepped in through the 2020-21 budget with $263,000 in general fund dollars to launch a one-judicial district pilot program, although the 2019 legislation actually authorized a three-district pilot. The 2019 legislation also placed fees on 11 different court proceedings, some that had nothing to do with the probate system. The office is now mostly funded through those fees.

But in a rare move, lawmakers decided to halt the Office of Public Guardianship’s expansion following a report by Colorado Politics last month that outlined the woes plaguing the young program. Democratic Reps. Meg Froelich of Greenwood Village and Adrienne Benavidez of Adams County, and Rep. Stephanie Luck, R-Penrose, persuaded their colleagues to support an amendment to eliminate $1.5 million in cash funds from the next fiscal year’s budget — money the office had sought to allow it to expand into two more judicial districts.

It’s unclear whether senators, who will consider the budget package next week, will stand by that decision.

The office, housed in Colorado’s Judicial Department, is under scrutiny from policymakers who created it following warehousing in hospitals of elderly or indigent people who had no one to look after them. Of the 86 clients assigned to state guardians in its first 14 months, 14 have died, and Denver Health, a program partner, has raised serious questions about the office’s efficacy. Alarmed by the deaths, Polis earlier indicated he would seek more oversight of the Office of Public Guardianship, which, as legislators noted, began with the best of intentions but is beset with problems, precisely because it is dealing with a population that faces grave socio-economic, and acute care and behavioral health challenges.

The office is scheduled to present a self-directed review in January next year, which would determine whether it should continue.

The step approach also applies to the Office of Just Transition. Launched in 2019, the office aims to help communities reliant on coal mining for their economy to find ways to diversify those economies. The 2019 bill that created the office said it would be funded with gifts, grants and donations.

No money materialized.

The office finally got its first funding through HB 21-1290 with $15 million in general fund dollars, giving the new program funds to operate for two years and hire three employees.

That led critics, notably Republicans, to claim the bill was little more than an effort by Democrats to “provide political cover for an overly aggressive attack on fossil fuel jobs.” That claim occurred during the 2019 session, when Democrats overhauled the Colorado Oil and Gas Conservation Commission and passed additional legislation on climate change.

Those who backed the funding bill in 2021 now say the need is at least $100 million.

The state budget also doesn’t mention the Office of Just Transition.

Unlike the government functions ostensibly funded with donated dollars, the new Department of Early Childhood, tasked with providing state-paid preschool and running a slew of programs that are being moved over from other state agencies, actually has its own funding source: revenue from increased or new taxes on tobacco and vaping products.

State analysts estimate the revenue stream will put $167 million into the department in the 2023-24 fiscal year. But as the department awaits revenue to roll in, lawmakers plan to allocate $290,084 as a bridge.

The department is being created through legislation this year. That bill budgets for six positions for “departmental leadership” and another 20.6 full-time equivalent employees in the coming year.

Of the dozen new offices and agencies added to the  government in the past couple of years only the Department of Early Childhood shows up as a line item in the budget. The rest disappear into other state agencies, along with how much taxpayers are paying for those offices. The only official sign of their existence can be found in the original bill authorizing their creation and in the fiscal note that identified their initial cost and FTE requirements.

Hide and seek

What the public often doesn’t see  with new offices is their effect on related state agencies.

Early Childhood is tasked with running programs that will move from other departments such as Education and Human Services.

What happens to the employees in those departments who ran the programs Early Childhood will now assume?

That’s a question that Rankin asks — and has gotten no answers.

Rankin said that when government moves a function from one department to another, the new agency adds employees to run those programs, but the department that loses programs doesn’t always eliminate staff.

He said he asks about this every time an organizational shift occurs.

“It’s almost a joke. Why double the overhead because we moved the function?” he said, adding decisions as such as these fuel growth in government.

Consider this: The Department of Personnel and Administration has, for years, handled hiring processes and other human resources functions, but agencies are now clamoring for their own HR personnel. The Office of Information Technology, housed within the Governor’s Office, handles IT but agencies are also now seeking their own IT personnel.

Indeed, a growing number of state departments are setting up their own overhead structure, a change reflected in the upcoming budget, according to Rankin.

Early Childhood plans to hire two staffers for human resources in the coming year, while the Department of Local Affairs, which has 205 employees in the current fiscal year, seeks money to add another human resources employee in the next fiscal year.

Under the proposed spending plan, the Department of Personnel and Administration will also add four more employees to its human resources section, including one who will manage tuition reimbursement under the collective bargaining agreement with the state employee union.

Growth in government doesn’t only arise out of new programs. Existing programs and departments are expanding, too.

Polis’ Nov. 1 budget request sought major increases in funding to add employees in six state agencies, most of which found its way into the proposed 2022-23 budget.

The Department of Public Health and Environment asked for 103 more employees. That includes 75 in the upcoming budget for the Air Quality Control Commission and up to 138 in the year after. The Department of Public Safety, which seeks funds to improve and increase services at the Colorado Bureau of Investigation, wants 120 more employees over several years. The Department of Human Services plans to add another 100, and Health Care Policy & Financing seeks 71.8 more positions.

The budget, as Joint Budget Committee members explained to their House caucuses Tuesday, doesn’t actually authorize additional employees. Instead, it authorizes spending the money for new hires. It’s up to the agencies to spend within their appropriations, including how much and how many staffers they’ll add.

But there’s a much larger problem, Rankin said, and that’s the issue of sustainability.

And it goes back to the Taxpayer’s Bill of Rights.

Forever programs

Narrowly approved by voters in 1992, most remember the TABOR requirement that the public must approve any tax increase.

There is much more to it, however. At its core, TABOR seeks to limit the growth of government to population increases, plus whatever the annual Denver-Boulder Consumer Price Index, a measure of inflation, has been for the previous year.

What that means in practical terms is the government could only grow by inflation and population, basically covering expenses for big-ticket items, such as schools, Medicaid, corrections and higher education, year after year with modest increases.

TABOR aims to keep government from adding new programs and new employees to handle those programs. It never intended to address issues, such as the switch in how K-12 education is paid for, a growing behavioral health crisis, exploding rates of uninsured Coloradans, high crime and drug abuse, poverty, lack of affordable housing or any of the other challenges on gubernatorial or legislative agendas over the past 30 years.

But TABOR’s original intent means, Rankin said, that the government cannot add people or programs without a new source of revenue. And if the state adds programs, “you can’t pay for them if you’re just growing government at the rate of inflation,” he said.

And this growth of government is about to run into a cliff, known as the structural deficit.

It’s an alarm that Lauren Larson, director of the Governor’s Office of State Budgeting and Planning, has been sounding for the past couple of years.

What it means, Larson has told the JBC several times, is that, at some point in the near future, the state won’t have enough general-fund money to pay for ongoing services.

Larson pegs that deficit at $1 billion to $2 billion.

That deficit showed up most recently in the March revenue forecast, which projected general fund growth at 11% in both 2020-21 and 2021-22.

For 2022-23, however, the general fund is expected to drop to 0.6% and just 1.9% the following year. That’s not enough growth to cover even the basics.

Rankin says government should not be growing when there’s the potential for a major shortfall in just a couple of years.

“We’ve started up so many things because they sound good,” he said, noting new programs, such as the Office of Saving People Money on Health Care. But when government starts something, it grows, he said.

More money, more problems

The temptation to keep growing government is amplified by the availability of billions of one-time federal dollars from the American Rescue Plan Act.

While the money is temporary — the $3 billion that came from ARPA must be spent by the end of 2026 — the bills that have been submitted during the 2022 legislative session point to programs that won’t end when the money runs out.

Take, for example, HB 1303, which will fund the creation of 125 new beds in residential mental-health treatment facilities. It will cost $65 million in 2022-23, money that funds 12.1 full-time equivalency employees that grow to 86.3 positions the following year. In addition, the bill allocates another $24 million, a mix of general fund and federal Medicaid money to pay expenses that aren’t covered by ARPA money.

The bill funds renovations at some facilities and seeks to license other ones to increase the number of mental health beds.

“We’re building structure around one-time government spending,” Rankin said, referring to some of the programs funded by ARPA funds.

It’s not that the state doesn’t need these programs, Rankin said, acknowledging the state needs the new Behavioral Health Administration, for example. But he wondered whether such a need should be paid for with revenue growth as envisioned, and limited by, TABOR.

Rankin said what’s scary could be the solutions to the money running out — more fees to fund programs or major cuts to existing ones.

And that could put lawmakers back on the path to cutting from its two biggest go-tos: K-12 and higher education, which took major hits during the pandemic recession.

When asked if he has a plan to rein in government spending or address the structural deficit his budget director identified, Polis appears confident the state would have sufficient money to cover its priorities.

The governor, through a spokesperson, also doesn’t appear to be contemplating significant cuts to major programs.

“By reducing government-owned and leased space by over 1 million square feet and increasing the efficiency of services, the Polis administration is freeing up resources to meet other critical needs,” said gubernatorial spokesman Conor Cahill.

Cahill said the “responsible and comprehensive budget proposal” the governor submitted on Nov. 1 would invest in the future, as well as save Coloradans money. He added that the administration, in partnership with the legislature, is working “to streamline services and build more efficiencies in state government while meeting the demands of a rapidly growing and thriving state that increases demand on government services.”

The Governor’s Office also claimed that, during Polis' administration, “government is becoming more efficient, more effective, and there are many places in the budget that have received significant reductions over the past 3½ years.”

Adding full-time employees to handle the programs that will be funded with ARPA funds is needed in order to get services to Coloradans as quickly and efficiently as possible, Cahill added.

“In a growing state, demands on state government services increase, and thus the JBC’s adoption of the Governor’s proposed General Fund prepays (estimated at $1.2 billion) is a significant step forward for addressing challenges posed by the state’s structural deficit in the next couple years,” Cahill said. He added that each permanent position is carefully reviewed for necessity, and short-term hires, those less than three years, are based on the availability of either federal stimulus funds or from one-time state investments.

Solutions?

Some lawmakers have begun scrutinizing programs to ensure they’re accomplishing what they were created for.

Rankin and Sen. Chris Hansen, D-Denver, sponsored last year’s SB 21-284, which created a set of evidence-based definitions to be used when analyzing a program or practice. Under the law, state agencies must provide research to support the program or practice or to back a proposal to decrease its funding, along with how the evidence was used to develop the budget request.

The request then goes to the JBC staff to analyze that evidence. That statute also came with an additional employee for the JBC.

Rankin said his motivation for pushing SB 284 is the lack of hard evidence on what works in government. It will take a couple of years for that new requirement to take hold, he said.

JBC Chair Rep. Julie McCluskie, D-Dillon, said the idea of deciding budgets based on evidence “is not only smart, but responsible.” In the first year, lawmakers are figuring out whether they’re collecting the right evidence, such as comparing hard data to other states with similar programs, she said.

“It’s the right tool moving forward. We’re still figuring out how to do it correctly,” she said.

Hansen, on the other hand, said he’s already seeing signs that evidence-based budgeting is starting to work.

“I think we’ve had the first version of it,” Hansen said, referring to the 2022-23 budget proposal. He said that JBC staff used the criteria from SB 284 on each decision item. The JBC is also getting information from the governor’s budget office, with JBC staff independently looking at the information and determining whether it is a theory- or evidence-informed budget request.

“This will pay dividends for years to come,” he said.

Will that lead to programs being ended or cut back if they can’t prove the programs work?

Hansen believes so, and cited a cut to a marijuana education campaign in the Department of Public Health and Environment in the proposed budget for next year. There wasn’t adequate data to show it was effective, he said, adding that, as a result, the agency asked for $4 million, but it will get base funding of only $900,000.