Education, pensions top priorities in Gov. Hickenlooper's proposed budget

DENVER (AP) — Increasing education funding, stabilizing state pensions and boosting reserves to prepare for the eventuality of an economic downturn are top priorities in a $30.5 billion budget for the next fiscal year that Gov. John Hickenlooper sent to lawmakers Wednesday.

Hickenlooper's proposal for fiscal year 2018-2019 is roughly $1.1 billion, or 3.7 percent, larger than the state budget for the fiscal year that ends June 30. It's a drastic change from this time last year, when the state faced — and eliminated during the 2017 legislative session — a $500 million shortfall. Sustained if moderate economic growth and, most importantly, changes under a new transportation funding law that allow the state to keep millions of dollars more in annual revenue contributed to the healthier budget outlook.

"By building up reserves and shoring our pension plan, this proposal meets the needs of today and provides a buffer for tomorrow," Hickenlooper said in a prepared statement.

The budget seeks nearly $145 million to raise the state's rainy-day reserve fund to the equivalent of 7 percent of total spending. Henry Sobanet, the governor's budget director, said the move is prudent at a time when Colorado's economy is growing.

In recent years, state reserves have been hit by flooding in 2013 and a court decision that forced the state to reimburse energy companies the court found had been overtaxed. To balance the budget, lawmakers had to draw from severance taxes that municipalities typically rely on to compensate for costs related to mineral extraction.

No dipping into severance taxes by the state is anticipated in 2018-2019, Sobanet said.

Hickenlooper also wants to help address unfunded liabilities in the Public Employees' Retirement Association pension plan by increasing employee contributions and the state salaries they depend on. PERA has $32 billion in unfunded obligations, according to its most recent report.

The budget proposal calls for a 3 percent salary hike for most state employees starting in July, and an accelerated 2 percent increase in public employee contributions that would begin in January 2019. A proposed salary hike was gutted in legislative budget negotiations earlier this year.

Hickenlooper isn't seeking any increase in public employer contributions to the plan, which his proposal says already accounts for more than 20 percent of payroll costs. The plan says adoption of these proposals by the Legislature could fully fund the pension plan's obligations in about 30 years.

Other highlights of the budget proposal:

—$6.9 billion for K-12 schools, up 5 percent, producing $343 more in per-pupil funding.

—$4.5 billion for higher education, with the goal of keeping tuition increases next year to an average 3 percent.

—$7.4 million for new prison beds.

—$10 million in marijuana taxes to address a teacher shortage in rural schools.

—$1.2 million in marijuana taxes for a Colorado Bureau of Investigation unit that would target illegal pot operations.

—An 11 percent hike in Department of Transportation funding, to more than $1.7 billion; the hike stems from proceeds from the first of a series of transportation bonds to be issued by the state in the next fiscal year.

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