BY FREDA MIKLIN
On June 21, the Common Sense Institute (CSI), a non-partisan organization dedicated to free enterprise and a strong Colorado economy, held a panel discussion on the impact of inflation on the rising cost of living as part of its regular Eggs and the Economy program.
The program began with a sincere and inspiring bipartisan moment when with Rep. Shannon Bird (D), who chairs the State House Finance Committee, and CSI Board Chair Earl Wright giving one another kudos for the part each played in helping pass HB22-1029, a bipartisan bill that repaid the Public Employees’ Retirement Association (PERA), which has experienced longtime financial challenges, the money that it was supposed to be paid on July 1, 2020, but was cancelled due to the pandemic. The amount, originally scheduled to be $225 million, swelled to $380 million payable July 1 of this year. The increase effectively moved up payment of some of the money that was to be paid in 2023 to 2022. By any measure, it is a good thing for the public employees’ retirement fund to get a financial boost, and it is good that the state was willing and able to do it. Rep. Bird presented a plaque to Wright “thanking him for his service to the State of Colorado” in the work he did to advocate for and help pass this legislation. As he accepted the award, Wright pointed to Bird and said, “She did all the work.”
Chris Brown, CSI’s longtime vice-president of policy and research, began the affordability discussion by pointing to the role of the 12-month 8.3% inflation rate on the cost of living. Brown calculated that food had increased $578 during the past year, housing had increased $1,130, and medical care had gone up $414. The largest number his chart showed was for the increased cost of transportation, coming primarily from the rise in gas prices, which is a huge factor for Coloradans, who mostly drive everywhere all the time.
Brown also presented information on the financial impact of legislation passed by the general assembly this year. The two largest items on his list were SB22-238: 2023 and 2024 Property Tax and SB22-234: Unemployment Compensation. Both have significant impact, but whether the impact is positive or negative is not crystal clear. SB22-238 will lower property taxes for the next two years that would have otherwise gone up, by $500,000,000. While that is a positive thing for residents, it has a negative impact on state revenues. Similarly, SB22-234 increases benefits to unemployed workers, which is positive for those individuals, but ultimately decreases state revenues, which has a negative impact on the budget.
The panel that discussed issues around affordability consisted of Rep. Bird, Steven Byers, Ph.D., CSI Senior Economist, and Evelyn Lim, CSI Fellow, in addition to Brown. Luige del Puerto of Colorado Politics moderated and asked the questions.
Byers spent 23 years with the SEC and other federal agencies, as well as the public accounting oversight board, while producing award-winning research on economic impact analysis. Lim’s previous roles have included director of transportation security policy at the White House. Bird was first elected in 2018 and chairs the House Finance Committee. She holds a master’s degree in finance as well as a law degree.
When the moderator asked the panel what the state or its people could do about the issue of affordability, she said, “The state is one part of a much larger ecosystem. The issue of inflation is not unique to Colorado and it’s not even unique to the United States. The issue of inflation is impacting countries around the world.” She said that bringing down energy costs, getting a higher level of workforce participation, and resolving supply chain issues would be helpful. Lim agreed, adding that we should look at recent legislation that increases the cost of housing, “because what we want to do is reduce regulation that adds to the cost that hurts people (buying houses).” Byers pointed to the “huge supply chain disruptions” brought on by the pandemic,” which, when combined with monetary policy that made money “very cheap” and huge federal spending to combat the economic impact of the pandemic, resulted in “more dollars chasing fewer goods,” which results in inflation. He suggested that elected officials look at energy policy as a way of relieving inflationary pressure. Brown, the final panelist to address the question, agreed that, “This is a national phenomenon,” and, “There are real constraints that Colorado can’t overcome by itself,” but, “policy can make it worse.” On a positive note, he said that this year, “there was a definite recognition that the legislature has some ability to moderate this and not make it worse.”
Brown pointed to gas prices as an example of an issue that cannot be solved in Colorado because “it is driven, in large part, by higher commodity prices in the oil and gas,” an industry that “has faced massive disruption globally and are largely out of the state’s control.”
On the question of the cost of keeping a roof over Coloradans’ heads, Byers noted that “Housing prices started rising about seven or eight years ago in response to the huge influx of people that were moving to Colorado. At that time, we already had a housing shortage.” Since then, “We haven’t built enough housing to offset that increased demand… The other thing that he said has exacerbated the problem is the availability of cheap money motivated people to buy homes that they might not be able to afford as interest rates go up.
Bird pointed to actions by the general assembly “that put more money into people’s pockets,” like allowing seniors to deduct social security income on state tax returns (still a pending potential ballot measure) and exempting feminine hygiene products and diapers from state sales tax, which passed and is effective January 1, 2023.