Contrary to what Coloradans have been hearing about state budget shortfalls since the coronavirus pandemic began last year, a Feb. 17 Joint Budget Committee (JBC) hearing would lead an outside observer to believe the state is overly flush with funds, with the committee voting to force more money into Division of Housing (DOH) coffers than the agency even wanted.
The DOH, which administers affordable housing programs in Colorado, said they do not need as much funding as they received in last year’s appropriation due to an increased stream of funds from other sources. Yet at the Wednesday hearing, however, the JBC essentially told the agency, “You’ll take the money whether you want it or not.”
“Despite the large influx of money to the [Housing Development Grant Fund] due to recent legislation, staff recommends denying the [DOH] request” for a $4.5 million reduction in funding, states a committee document prepared by JBC staff.
The JBC voted 5-1 to approve staff’s recommendation to reject the $4.5 million reduction requested by DOH. Instead, they will recommend the General Assembly increase funding. As a result, funding allocated to affordable housing will exceed what the agency has said they need and what it received last year, barring amendments in the full legislature.
JBC staff justified their recommendation to increase funding, saying, “[T]he COVID-19 pandemic has resulted in significant financial hardship on Coloradans and exacerbated affordable housing issues” and that “it is counterintuitive to reduce funding.”
In reality, affordable housing has already experienced a massive increase in funding, which dwarfs the decrease requested by DOH.
The executive branch funding request explains, “Due to the increased availability of overall funding for affordable housing…the Department is proposing a one-time reduction of $4,544,962 General Fund to the Affordable Housing Grants and Loans.”
Before the pandemic, normal annual appropriations for DOH were around $68 million (FY 2019-20). The agency request – with the reduction – would have put funding at $106.8 million for FY 2021-22. That number, however, does not include additional emergency stimulus allocated to affordable housing since the pandemic started.
Total funding for these programs in Colorado is over $550 million in the current fiscal year, including $60 million from Colorado’s emergency legislative session and $365 million from the latest congressional stimulus signed into law at the end of last year.
The specific increases in overall funding referenced in the DOH request came from several pieces of legislation passed in 2019 and 2020. One of those was HB 19-1245, the notorious vendor fee increase, which raised $50 million in new fee revenue annually without voter approval. Typically, fee increases are meant to free up general fund revenues for other purposes. The folks at DOH seem to understand that; our elected officials at JBC apparently do not.
The other source of new revenue which the agency referenced came from the passage of Proposition EE, the $180 million per year tax increase on cigarettes, tobacco, and nicotine products approved by voters last year. Just over $11 million of that will go to housing programs in the coming fiscal year.
The agency has received such an influx of cash, in fact, that they can’t hand it out fast enough.
“We’re literally trying to build the bus as we go down a highway 100 miles an hour with these programs,” said Brett McPherson, a communications person for the Department of Local Affairs. “Nothing like this has ever been done in the history of housing assistance in the state of Colorado, especially to this scale.”
According to a report Tuesday by 9News, the agency has approved $50 million in assistance that it has yet to send out.
Yet the JBC voted to give DOH more money than the agency told the committee they wanted or needed.
If the legislature adopts JBC’s budget hike, they’ll need to explain to voters why they’re overfunding DOH while claiming that there’s not enough money to fix our roads, improve our schools, or even just reduce taxes on working Coloradans.
Ben Murrey is director of fiscal policy at the Independence Institute, a free market think tank in Denver.
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