Memo to our good friends in California: Be careful what you wish for.
Golden State voters, no strangers to tax-and-spend limitations over the years, will consider their own version of Colorado’s Taxpayer’s Bill of Rights in November. The California Live Within Our Means Act – catchy, eh? – is part of Gov. Arnold Schwarzenegger’s effort to reform state government, and is being pushed by fiscal conservatives who think government’s run amok. In California, until voters approved an initiative last year requiring them to do so, lawmakers didn’t need to pass a balanced budget.
But what may appear to be fiscal common sense – even the title, Live Within Our Means, is hard to argue with – just might be a straitjacket.
Coloradans have learned that lesson the hard way.
After several years of state funding cuts, Republican Gov. Bill Owens and Democratic leaders are asking voters to approve Referendums C and D, which would make changes in the way Colorado government is funded. The business community is leading the charge, fearful that decline in Colorado’s educational and transportation infrastructure will damage the state’s economy. Colorado’s TABOR initiative was passed in 1992 with language that locks in recession-era spending levels.
California’s ballot issue has become a rallying cry for anti-tax zealots across the country who want to get TABOR-like amendments on ballots in two dozen states.
California’s ballot measure may be more flexible than TABOR. It would prevent state spending from growing faster than the average increases in state revenue over the previous three years. Moreover, excess revenue above the cap would go to a rainy-day fund and also would be spent on improvements such as road and school construction. In Colorado, “excess” revenues – we have a hard time calling them “excess” without rolling our eyes, since the budget is still being slashed – are doled out as tax breaks to special interest groups, or as refunds.
Yet the California initiative also contains something similar to TABOR’s fatal flaw: a ratchet effect that would keep government spending levels artificially low after an economic downturn. Activists in other states considering similar initiatives have wisely avoided TABOR’s Achilles’ heel.
Colorado, because of the ratchet effect, couldn’t adequately recover from the recession. Californians need only look here to see what can happen when lawmakers lack adequate flexibility to budget the state’s money.
