Colorado

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.

Download Printable State Report Card

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 presented here are taken from the 2020 Volcker Alliance report, Truth and Integrity in State Budgeting: The Balancing Act, which proposes a set of best practices for policymakers. For those wishing to gain greater insight into state fiscal issues, the accompanying budget resource guide is derived from the Alliance publication State Budget Sources: An Annotated Guide to State Budgets, Financial Reports, and Fiscal Analyses (2016). 

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