Tomorrow voters of Colorado will decide the fate of the state’s
Taxpayer Bill of Rights (TABOR), the most restrictive, and hence
effective, limit on state government spending in the nation. Many
individuals and groups in Colorado, including GOP Governor Bill
Owens, maintain that TABOR is putting far too much pressure on
state expenditures. One could argue their complaint is reasonable.
Their solution, Referendum C, is not.
TABOR, passed by Colorado voters in 1992, limits annual growth
for portions of the state budget to increases in inflation and
population growth. Any surplus must be sent back to the voters in
the form of tax rebate checks. However, TABOR also has a “ratchet
down” effect that, in part, is causing some of the current
consternation. Whenever state revenues decline, the lower revenues
become the new TABOR “baseline” to which inflation and population
growth are added to determine the new spending limit for Colorado’s
state budget. If the state experiences a small decline in revenue,
this is not much of a problem. But since 2001 Colorado has been hit
by a recession, a sluggish tourist ski season due to 9/11, and a
reeling agricultural sector hit by a severe drought. This resulted
in a 13% decline in state revenues over two years, and a much lower
baseline due to TABOR. Now, it would seem reasonable to ask
Colorado voters to suspend TABOR until the portion of the state
budget that is subject to TABOR returned to its 2001 level. It
might also be reasonable to ask voters to fix TABOR so that there
were limits on how low the baseline could fall. Unfortunately,
Referendum C does neither of these things.
Referendum C permits the state legislature to spend any
surpluses over the next five years that result from TABOR on
education, health care, and road construction. That means that for
the next five years taxpayers in Colorado would receive no rebates.
It also means that the state legislature could spend money in the
next five years in amounts above what would be required to meet the
2001 level of spending. According to most estimates, that would
result in an additional $3.7 billion in spending.
Nor does Referendum C fix some of the other problems that are
putting strains on the Colorado budget. In 2004, the Colorado
legislature passed bills that granted “enterprise status” to
Colorado colleges and universities and the Petroleum Storage Tank
Fund, thereby exempting them from TABOR. However, it also removed
their funding from the TABOR portion of the state budget, resulting
in another lowering of the TABOR limit and less money for other
items in the budget. There appear to be no plans to repeal those
bills.
In 2000, Colorado voters passed Amendment 23, which mandated
that education spending must grow by inflation plus 1% of what was
spent in the previous year’s budget. Amendment 23 permitted budget
surpluses to be used to fund it. But when the surpluses dried up in
the recession, Amendment 23 had the effect of crowding out other
items in the budget. In fairness, Colorado law only allows for
changes in TABOR to be put on the ballot in an odd numbered year.
Yet there doesn’t seem to be any effort to put a measure on next
year’s ballot that would suspend Amendment 23.
The fact that Referendum C does not really fix any of the
problems that led to the current mess suggests that the intent
behind it is to undermine TABOR. That perception is reinforced by
three other factors.
First, Referendum C has a sister measure, Referendum D. Referendum D (which is contingent on C
passing) permits the state to borrow an additional $1.5 billion to
spend on roads, health-care, and education. Ten percent of the
money the state receives from Referendum C will be used to pay back
the bonds. The remainder would be paid back by some other revenue
source — perhaps with another measure to suspend TABOR?
Second, the coalition that supports Referendums C & D is
huge, and reads like a who’s who of those who love to spend other
people’s money: American Federation of Federal, State, County &
Municipal Employees, Colorado Education Association, Colorado
Association of Public Employees, Colorado Bar Association, Colorado
Association of Realtors and the Colorado Democrats. A Nexis search
revealed that other groups in the coalition also opposed TABOR in 1992, including
Colorado Ski Country USA, Colorado Municipal League, and Colorado
Municipal Bond Dealers Association.
Finally, Referendum C changes the TABOR spending limit. It takes
the highest amount of revenue in any of the fiscal years from
2005-06 to 2010-11, and sets it as the new TABOR limit. Each year
after that the limit will increase by inflation and population
growth, regardless of whether revenue declines. Thus, it is
possible that revenues would almost always fall below the TABOR
limit, meaning that the state legislature could spend every last
red cent in perpetuity and Colorado taxpayers would never again see
a tax rebate.
What are the chances that Colorado voters will, in effect, “gut”
TABOR? No poll has yet shown Referendum C receiving more than 50%
support, although a recent Rocky Mountain News poll had it
winning by 49-46%. Plus, many of the supporters of Referendum C,
such as unions, have better machinery for turning out the vote. On
the positive side, a Mason-Dixon poll taken at the same time showed
a margin of 47-44% in favor, but over half of the undecideds were
Republicans.
At present, it could go either way. Here’s hoping it goes in
favor of Colorado taxpayers.
David Hogberg is a senior research analyst at the
Capital
Research Center. He also hosts his own website, Hog
Haven.
