In an early-morning appearance before the Pikes Peak Rotary Club in Woodland Park, Colorado State Treasurer Walker Stapleton emphasized the red flags in the state’s fiscal health.
However, he started with the good news, about the state’s consolidation of debt as it relates to the issuance of bonds.
“In the past, the legislature would give authority to issue bonds to the transportation department, for instance, for a highway project,” he said.
In the past there was no oversight of the particular state agency nor was there anyone within that agency with any financial background, he added.
“Furthermore, the process for hiring bankers and lawyers was not a blind one, to avoid any particular conflict of interest,” he said.
“Beyond that, there was no requirement at the state level that any of these 18 state agencies refinance their existing bond obligations to take advantage of the low interest-rate environment we’re in right now.”
Had the agencies refinanced bond obligations, the state, as well as the taxpayers, would have saved a significant amount of money, he added.
“So we had existing bond obligations at ridiculously high interest rates and nobody bothered to look at refinancing, which makes no sense,” he said.
The state also had no tracking mechanism in place to find out how much aggregate debt had been issued on an annual basis across the state agencies, he said.
Today, the debt-issuing process is managed by the state treasurer’s office. “So we’re finding the lowest interest rate possible while making sure the process for hiring bankers and lawyers is a blind one,” he said.
“We’ve established the first tracking mechanism for the debt issue in Colorado history; all of this has made Colorado, in my opinion, more fiscally accountable and responsible.”
As an example of the efficiency, under the new legislation, the state saved nearly $10 million in two transactions for the Department of Corrections, he said. “I’m very proud that this bill was conceived in the treasurer’s office and we accomplished this across party lines.”
The treasurer’s office also refinanced unemployment insurance. “Colorado has led the way; the state has borrowed money from the federal government to pay unemployment-insurance benefits,” he said. “We have refinanced that over a longer period of time with more attractive financing terms and by doing that we were able to save Colorado businesses up to $150 per employee.
On the bad-news side, there are three buckets that threaten Colorado’s budget priorities over the next five to seven years:
• The healthcare mandate: “The governor has chosen to expand Medicaid, along with a number of other states,” Stapleton said. If health costs are not lowered with the expansion, federal subsidies at the state level are going away within a couple of years, he said. “If the state can’t afford to pay for the expansion that is a significant cost in our budget that nobody at the state capitol has thought about addressing.”
• Education funding for students K-12: In the upcoming ballot measure that seeks a sales-tax increase for the state’s education system, there are no provisions in the bill that specifically deny that the money will go into the state’s public retirement plan, he said.
• Retirement obligations for the state’s public pension plan. “If left unchecked the plan will consume more than 100 percent of the state’s budget over the next five years,” he said.