Ritter learning too slowly on budget

Grappling with declining state revenues makes for some very unpleasant budget choices, as Gov. Bill Ritter and the Democrat majorities in the state legislature learned over the past 12 months. It's fair to criticize those choices, including the governor last year denying for several months that a problem existed. Yet anyone who has shouldered the responsibility of balancing a budget during a recession understands that learning from your own mistakes is inevitable.

Learning, however, is essential - both to sound fiscal policy and to political credibility. That's why it was astonishing to hear Ritter and leading Democrats dismiss the need for a special session of the legislature on the very day they acknowledged that the state will start the new fiscal year nearly $400 million in the hole.

Anticipating further economic deterioration, legislators gave Ritter the authority to "borrow" up to $500 million from next year's budget to pay this year's bills. Based on new projections by Legislative Council economists, about half that amount will be needed.

Moreover, legislative economists forecast tax revenues for the new budget year, beginning July 1, to be $135 million less than budgeted and $874 million short over three years. Those economists prudently expect the recession to continue into 2010 in Colorado and foresee possible recovery "at least a year after that."

That's the point at which this scenario takes on an incredible aura of déjà vu.

Economists in the Governor's Office of State Planning and Budgeting (OSPB) paint a much brighter picture, forecasting a recovery later this year. That outlook enables OSPB to expect an additional $1.3 billion to spend over the same three-year period.

Last September, Legislative Council sounded the alarm early enough for the governor and legislature to call a special session just three months into the fiscal year - ample time to revise the budget and mitigate the shockwaves to affected programs and participants.

Instead, the governor boldly proclaimed, "One of (the forecasts) is pretty significantly wrong," and according to the Denver Post, he "made it clear" that the error wasn't in the projections from his office. Days later when the Wall Street financial crisis struck, Ritter ordered a "hiring freeze" which, it turns out, wasn't nearly as frigid as advertised.

In December, with half of the fiscal year passed, Legislative Council pegged the budget shortfall at $631 million. Ritter's OSPB forecast a mere $70 million deficit. Two weeks later, OSPB admitted it had used "outdated information" and issued a new estimate of $230 million in red ink.

By the time the legislature convened in January, the remaining choices were severe cuts, exacerbated by months of inaction, or accounting gimmicks that postponed the day of reckoning and made balancing the 2009-10 budget even more difficult.

Choosing to procrastinate, legislators tried yet another dodge by attempting to extort $500 million which employers had paid into the state's fund for injured workers. Then they wiped away budget caps that restrain spending in good years - as if that would somehow create more money amid a withering economy.

Finally, after raiding trust funds, re-imposing a property tax on senior citizens, and accepting a federal bailout, they proclaimed the budget balanced.

With prescience, Republican leader Sen. Josh Penry observed, "This budget will be out of balance on June 20."

And so it is.

Incredibly, Governor Ritter and Democrat legislators seem headed for another year of budgetary brinksmanship, placing all their bets on a quick economic recovery.

For five years, Democrats have controlled the legislature and for three years the governor's mansion. Colorado taxpayers are right to expect that, after blundering through a year of budgetary mayhem, Ritter and Company will learn from the past and make prudent choices this time.

First fix Medicare, Mr. President

America's health care system certainly has its share of problems, of which most emanate from politicians' tinkering. They keep tempting the frustrated consumer with promises of better benefits at someone else's expense. So the prospect of President Obama and Congress remaking American health care in their own image should scare the pants off anyone who looks not merely at the existing problems but at government's abysmal record as a problem-solver.

Since last November, Obama and Congress have operated in crisis mode. They hastily passed a stimulus bill that still hasn't stimulated - only to be subsequently embarrassed by provisions that no one, except select staffers and lobbyists, had actually read.

The President incessantly beats the drum for grandiose new programs in health care, "clean energy," and education, touting them as fundamental steps in a regimen of economic recovery and fiscal responsibility.

This, of course, is hogwash.

Even the Washington Post observed that "these pursuits have little to do with the economic crisis, and they are not the key to economic recovery."

Before overhauling what remains of a voluntary, market-based system of private-sector health care delivery, the President and Congress should focus instead on Medicare, the $462 billion-a-year boondoggle that is on course to devour the federal budget and ruin the U.S. economy.

President Obama argues that health care change is necessary because 46 million people don't have insurance. Setting aside the questionable validity of that statistic, compare it instead to the 45 million people currently enrolled in Medicare.

Today, Medicare consumes 13 percent of the federal budget and 3.2 percent of the national economy. (Medicare and SCHIP push total federal government health care spending to more than one-fifth of all federal outlays - more than spending on national defense.)

According to the annual Trustees' report, in 2008 the Medicare Trust Fund began paying out more in benefits than it was collecting in payroll taxes and interest. By 2017, the fund will be completely exhausted and staring at a $37.6 trillion - with a "T" - deficit over the next 75 years.

Of all the reckless, irresponsible promises made by Washington politicians and charged against our children and grandchildren's future, Medicare is the largest and most costly. In 20 years, its costs will surpass Social Security and are forecast to more than triple unless politicians muster the courage control spending or allow private competition to control costs.

The rush to "do something" to reform health care is doubly dangerous and counterproductive because the numbers used by the President don't add up - not remotely.

The President and his budget office vow that the as-yet-incomplete plan will be "deficit neutral." Why then has it been exempted from the new "pay as you go" spending rules? Congressional Budget Office estimates the cost of the Senate's Kennedy-Dodd health care bill at $1.6 trillion over 10 years. And that's just for the portions that have been unveiled.

Get this: despite the embarrassment of voting for a non-stimulative stimulus bill that they couldn't take time to read, Democrats are now amending a health care bill even before a complete version has been introduced - a process Sen. John McCain aptly labeled "a joke."

CBO's estimate does not include the cost for Obama's "public option," under which a government insurance program would compete with private plans. An independent analysis by the Lewin Group suggest that up to 119 million people currently insured by their employers could be shifted to a public plan.

So Obama claims he can create a new health care program nearly three times the size of Medicare and that he can do it for free? Compared to that, loaves and fishes are child's play.

Given that 67 percent of Americans still rate their own health care coverage as excellent or good and that the federal government's existing health care programs are budget-busters, President Obama should take some divine advice: "Physician, heal thyself."

Obama Motors revs up

President Obama claims to "have no interest" in running General Motors. He does so with a straight face - and the same monotonous cadence that he employs whether condemning North Korea for nuclear explosions or joking with Jay Leno. But his actions, as well as his words, betray him. The significance of the bankruptcy and restructuring of General Motors isn't that it happened but the way it happened.

His protestations notwithstanding, this is Barack Obama's General Motors. Just read from his statement earlier this month:

** "Two months ago, I laid out what needed to be done to save two of America's most storied automakers."

** "I made it clear that I would not put any more tax dollars on the line if it meant perpetuating the bad business decisions that had led these companies to seek help in the first place."

** "I decided, then, that if GM and Chrysler and their stakeholders were willing to sacrifice, then the United States government would stand behind them."

Which is more absurd - his implication that he is the embodiment of the U.S. government or that a former community organizer, part-time lawyer, part-time lecturer, part-time author, and fulltime politician knows beans about running the nation's largest automaker?

Then again, Nancy Pelosi and Harry Reid scolded the auto execs last fall for flying - instead of crawling - to D.C. to ask for a government bailout and then arrogantly demanded that they come back when they have a "viable plan."

Not that it's ridiculous to demand a viable plan. What's ridiculous is the assumption that the Speaker, the Majority Leader and most other Beltway politicians could recognize a viable plan for a 25-cent lemonade stand - much less a multi-billion-dollar auto company.

Remember, the reason government is funded by taxes is because it produces almost nothing that people will pay for willingly.

It wasn't necessary for President Obama to interject himself into these proceedings. As Commentary magazine columnist Jennifer Rubin points out, GM and Chrysler have had bankruptcy attorneys working on those plans for months.

"Why make this all about the president throwing his weight around and personally firing the head of a major corporation?" she asks.

The simplest explanation is that Obama wants these details signed, sealed and delivered to prevent their scrutiny in a court of law where, for example, the United Auto Workers Union would not get preference over holders of secured corporate bonds.

As Hans Bader points out at OpenMarkets.org, "the UAW will receive at least ten times as much value as the bondholders even though the bondholders are owed more ($27 billion vs. $20 billion). This is neither legal nor fair."

Which brings us to President Obama's oft-repeated claim that his decisions are guided by the way they "affect the daily realities of people's lives."

Well, the ordinary folks whose retirement or savings were ravaged by automakers' plummeting stock prices are suffering doubly from Obama's devastating policy to force them to take pennies on the dollar if their portfolio also included GM bonds, which were once considered relatively safe.

By contrast, the very labor unions whose bloated benefits and anachronistic job protection schemes put GM at a competitive disadvantage are now rewarded with nearly $10 billion and 17.5 percent ownership in the company.

While Obama says UAW will be required to make "painful sacrifices," the union boasts that its members will see no reduction in 'base hourly pay, no reduction in health care, and no reduction in benefits."

Might the $13 million that UAW spent on last year's election have tipped the scales in its favor? Heavens, no!

So, GM hinges its recovery on the marketing genius of politicians who gave us Medicare, Social Security, Amtrak, a 3.4-million-word tax code, and $11.3 trillion in debt.

It's hard to imagine how a fire sale administered without Obama's oversight could have been more destructive or more expensive.

Mark Hillman served as senate majority leader and state treasurer. To read more or comment, go to www.MarkHillman.com

Dems' arrogant money grab worsens

If legislative Democrats in 2007 were devious for passing Gov. Ritter's infamous property tax hike without voter approval, the 2009 crop plunges to new depths. In an act of sheer arrogance, this year's Democrat majority poked taxpayers in the eye just for spite.

Recall that the aforementioned property tax hike increases the burden on local property owners while reducing the state's obligation to fund K-12 education.

Recall also that Colorado's constitution says that no "tax policy change directly causing a net revenue gain" can be enacted without a vote of the people and that this policy change increased property tax revenues by $117 million in the first year alone.

Finally, recall that crafty Democrats hinged permission for their tax hike on 174 separate, previous votes by taxpayers in all but four of the state's 178 school districts. Never mind that those voters were repeatedly assured by school and state officials that their taxes would not increase as a result.

Not satisfied that the Colorado Supreme Court slipped this nonsense through a previously undiscovered loophole in the state constitution, Democrats added arrogance to insult by swiftly passing bill to now prevent any of those 174 school districts from reconsidering.

That's arrogance, plain and simple.

For 13 years after voters adopted the Taxpayers Bill of Rights (TABOR), the Department of Education and local school districts reassured property owners that they could loosen revenue limits on their local schools without making themselves vulnerable to a tax increase by the legislature.

They took this position not because CDE or local school boards are staunch defenders of TABOR but because they were following state law.

Then in 2007, the legislature unilaterally decided to change the law, to impose an immediate tax increase on property owners - and to retroactively change the result of those 174 local elections, all the while arguing that it was precisely those elections that permitted the tax hike in the first place.

As a result, property owners in those districts are now paying higher taxes - not so their schools can receive more money, but so the state can take the money it previously spent on K-12 education and spend it on social welfare programs instead.

However, the four districts that never waived their school's revenue limits remain exempt from the legislature's shenanigans. In those districts, the growth of local property tax revenues is limited and the state must provide any additional money necessary to fully fund those schools.

A reasonable taxpayer - or school board member - in one of the school districts now being soaked by the state might see this disparity and decide that the local school district should reconsider its decision to waive all revenue limits. After all, it's one thing for property owners to permit local school to "keep the change" and quite another to permit the state to raise taxes, too.

Now thanks to Senate Bill 291, which was opposed by every Republican at the state capitol, districts that loosened the tax limits under the old law are forbidden from reinstituting those limits now that the law has changed. If they do, the state will punish their children by withholding funds from their school.

This from the party that claims to do everything "for the children." In reality, the Democrats do everything "for the government" and aren't above using your children as hostages in their extortion racket.

It's hard to imagine how the state's constitutional mandate to provide a "thorough and uniform system of free public schools" could be interpreted to allow one school to be penalized solely because of the way its residents vote.

However, Colorado Democrats have already proven that they will ignore the constitution when it's inconvenient and that the state supreme court can be counted on to back them up.

Mark Hillman served as senate majority leader and state treasurer. To read more or comment, go to www.MarkHillman.com

Pinnacol escapes, but lessons linger

Editor: The capitol gang's thieving intent toward Pinnacol shouldn't be forgotten, even though on April 15 (fittingly) they called off the heist. Mark Hillman draws exactly the right lesson. Stealing is wrong - even if government does it We allow government to tax and spend, recognizing that forcibly taking the fruits of someone else's labor would constitute theft if anyone else did it.

In turn, we expect our elected officials to remember that their responsibility is to represent taxpaying families and businesses - not to protect government at all costs.

Well, after three years of spending every available tax dollar, dismissing every opportunity to save for the next downturn, and surreptitiously raising taxes without voter approval, Colorado's Democrat lawmakers are now planning to steal - a term I don't use loosely - $500 million to balance this year's state budget.

Targets of the heist are Colorado businesses that protect their employees against workplace injuries by purchasing coverage from Pinnacol Assurance, a state-sanctioned insurance company.

Although created in state law, Pinnacol operates as a mutual insurance company for which the state assumes no liability. When Pinnacol suffers losses, Colorado employers pay higher premiums. If Pinnacol builds a surplus, employers receive rebates.

After years of financial distress, Pinnacol turned a $200 million deficit into a surplus reserve of some $700 million - from which Democrat leaders, Governor Ritter and (it gives me no pleasure to note) two Republican legislators now intend to beg, borrow or outright steal.

Inconveniently, Colorado law explicitly explains that state government "has no claim to nor any interest in (Pinnacol's) revenues, money, and assets and shall not borrow, appropriate, or direct payments . . . for any purpose."

If the constitution doesn't constrain these lawmakers, mere statutes won't either.

So this is what it's come to: lawmakers suggest that their only options are to steal money paid by Colorado employers to pay for workplace injuries or to cut $300 million from colleges and universities.

Perhaps if anytime in the past year those same lawmakers and Gov. Ritter had heeded warnings of a recession they wouldn't be in such a fix. Instead, they built a budget based on rosy economic projections, then ignored warnings from their own economists, then underestimated the magnitude of their earlier errors, and finally acted after their options were severely limited by their own intransigence.

Gov. Ritter conceded as much recently when he told listeners to KOA's Mike Rosen Show: "We already for next year's budget have cut $1.2 billion and have $300 million more to find."

Why is it necessary to cut so much from next year's budget when revenues fell far more in the current year ($1.1 billion) than from this year to next ($100 million)? Because statehouse leaders balanced this year's budget mostly with smoke and mirrors.

When business leaders objected to the proposed Pinnacol heist, lawmakers whined.

Sen. Suzanne Williams (D-Aurora) wanted car dealer John Medved, testifying at a committee hearing, to tell her how to balance the budget without stealing from the injured workers fund. Medved instead schooled Williams on budget balancing in the real world where theft is still illegal, explaining the tough choices he made to address a $500,000 a month shortfall.

Meanwhile, "enraged" college students rallied on the Capitol steps with clever signs - or so they thought - asking "WTF? Where's the funding?" As though they and their professors have an inherent right to taxpayer subsidies.

So long as colleges and universities offer a plethora of trivial degrees in professional victimology, rather than focusing scarce resources on genuine disciplines like medicine, engineering and physics, such pleas of poverty can't be taken seriously.

Unfortunately, Sen. Al White (R-Hayden) outrageously pandered to students, telling them Pinnacol has their funding. The obvious lesson is that a business that responsibly saves for hard times will be plundered by those that do not.

Gov. Ritter could have exhibited leadership by squelching the idea immediately. Instead, he needs the legislature's help to cover his dismal fiscal record and, therefore, can't afford confrontation.

"First, it's a legal question. Then it's a question of whether it's the right thing to do," he explained to a KOA caller.

Ritter has it backwards, forgetting a lesson his mother surely taught him: the first question is whether it's right or wrong. And stealing is wrong, even if a lawyer says it's legal.