State Budget Practice Report Cards and Budget Resource Guide
Though Colorado lacks an official rainy day fund, it still earned a B average in the reserve fund category for 2017 through 2019. That’s because it maintains a statutorily required general fund balance that operates much like a rainy day fund, with policies for using and replenishing budgetary reserves.
The state increased its reserve balance to 7.25 percent of the general fund in fiscal 2019 from 6.5 percent the year before. The move raised the reserve 20 percent in fiscal 2019, to $813.3 million.
Colorado also posted a B average in budget maneuvers, up from C in the previous three-year period, as it cut back on one-time measures to balance budgets. In fiscal 2019, for example, the state avoided a practice it had followed in the previous two years: transferring cash to the general fund from special funds to pay for recurring expenditures. Colorado’s reduced use of such budgetary measures, which can threaten a state’s fiscal sustainability, resulted in a rise in its annual grade in the category, from C for fiscal 2017 to B in 2018 and a top A in 2019.
While Colorado performed well in budget maneuvers and reserve funds, it received a D average, the second-worst mark possible, in legacy costs, which cover public worker pensions and other postemployment benefits (OPEB), principally health care. Colorado’s annual pension funding has been below actuarial requirements for over fifteen years.
But substantial reforms made in 2018, including raising the retirement age and reducing cost of living increases, have already improved that picture. The state pension funding level rose to 59 percent in fiscal 2018 from 47 percent in fiscal 2017, 11 percentage points below the fifty-state total.
To emphasize the need for clear and comprehensible budgets to inform citizens, promote responsible policymaking, and improve fiscal stability, the Volcker Alliance in 2016 began a study of budgetary and financial reporting practices of all fifty states. The Volcker Alliance’s mission is to improve the effectiveness of the administration of government at all levels. Making state budgeting more transparent and accountable is an important part of that goal.
The report cards found here contain grades of the state's budgetary practices during the fiscal years of 2017 through 2019. Each state received marks in five critical categories, based on their adherence to best practices in several key budgeting indicators. The five categories covered methods used to achieve budgetary balance as well as how budgets and other financial information are disclosed to the public.
States received grades of A to D-minus (there are no “failed states”) for their procedures in estimating revenues and expenditures; their use of one-time actions to balance budgets; how they oversee and use rainy day funds and other fiscal reserves; the adequacy of their funding of public worker retirement and other postemployment benefits; and the quality of transparency of budget and related financial information. The grades are based on research conducted by public finance and budgeting professors and students at eight US schools of public administration or policy. The universities’ research efforts were augmented by Volcker Alliance staff, data consultants at Municipal Market Analytics, and special project consultants Katherine Barrett and Richard Greene.
State Budget Sources
State Budget Sources: An Annotated Guide to State Budgets, Financial Reports, and Fiscal Analyses is a resource published by the Volcker Alliance designed to help public officials, policy advocates, journalists, academics, and concerned citizens fully understand the critical fiscal decisions that governors and legislators must make. The guide includes the links below to budgets for this state as well as legislative analyses of budget bills and treasurers’ or comptrollers’ monthly state cash-flow statements; capital spending plans; reports on public-worker pension funding and returns; and reports by local and national fiscal research organizations, bond rating firms, and associations of state fiscal and finance officials.