The promise of Colorado is in peril. Such a notion is difficult to imagine in a state with a diverse, talented and growing population; it’s hard to conceive in a land of such breathtaking physical beauty. However, after nine months of study, the Colorado Economic Futures Panel concludes that Colorado is indeed a state at risk.
The risk comes not only from the immediate fiscal crises that make headlines and occupy the time and attention of public officials. They also come more fundamentally from a number of underlying procedures, systems and attitudes. These basic drivers shape the ways in which problems are seen and the processes by which decisions are made. They are the underlying factors that determine the degree to which Colorado governments and institutions are able to meet the needs of citizens and respond to the inevitable changes that lie in our future. Understanding these basic forces and developing a long-term strategy for shaping them is the goal of the Colorado Economic Futures Panel.
The interim report of the panel is intended as a status report of a work still in progress. It outlines key issues and other concerns and begins to suggest underlying causes. This report does not, however, contain specific recommendations. Those will be presented in the panel’s final report, which will be released near the end of this year.
In examining the state’s economic condition, the panel began with an analysis of the fiscal situation and related key issues facing the state as a whole. On the basis of that detailed analysis, the panel then turned its attention to fundamentals, examining the underlying drivers, processes, systems and conditions affecting fiscal and other issues across the state. Several matters seemed to be of particular importance.
The first of these relates to perspective. The way in which one thinks about and then acts upon issues relating to Colorado’s fiscal viability and economic future is important. Typically, in the legislature, in the media and in public discussions, the focus is on specific issues or legislation, as recent debates related to funding higher education, dealing with TABOR restrictions or the impact of Amendment 23 illustrate.
While this approach appeals to the practical side of all of us, and may be necessary to solve short-term problems, it has the effect of producing piecemeal policies. It is fraught with the potential for unanticipated outcomes, conflicting results and short-term fixes. This is well-illustrated in Colorado, which, with its conflicting state constitutional provisions, is a veritable case study in the law of unintended consequences. While the panel has not yet developed final recommendations in this area, it is clear that the fiscal policy-making process in our state is deeply flawed.
A second broad area of concern relates to the process of repeatedly amending the constitution through public referendums. While Colorado’s habit of “legislation by referendum” may resonate with our Western populist heritage, it is a highly questionable way to run a modern, complex state government. Our state’s penchant for public referendums as a basic policy-making tool has had a number of very damaging outcomes. It has effectively removed from the hands of elected officials the ability to make the most important decisions affecting our state. It has allowed special interests to attempt to shape public policy to their own ends, all in the name of citizen participation. And it has crippled the state’s ability to make timely decisions in the face of changing economic circumstances, institutional needs or increasing economic competition from other states. This inability to respond to changing circumstances is a major contributor to the risks faced by the state.
Third is the increasing tendency to think of all government expenditures simply as costs to be reduced. While there is much to be said for careful scrutiny of all public expenditures, thinking of taxes simply as something to be cut, rather than as an investment to be optimized, may be intellectually easy, but it is not necessarily wise.
By discouraging a hard-headed analysis about how funds should be used and what return should be insisted upon, this focus on costs instead of returns virtually ensures poor government performance. From a policy perspective, it cripples the legislative and public dialogue about how the state will achieve its objectives. It also dampens the process of linking public resources to public outcomes, a subject on which the panel will have more to say in its final report.
A final area being examined by the panel relates to the structure of government in our state. Colorado government is amazingly disjointed, with more than 2,500 local governments as well as the state government and numerous agencies and special districts. Among these thousands of governments, there is virtually no coordination on tax policy and little cooperation on service delivery. The system is so complex it virtually defies understanding.
Few, if any, Colorado citizens know how much they really pay for state and local public services, which governmental units receive what funds, how tax payments are related to specific services and what results are produced with their tax dollars. The lack of rationality in the tax and public service delivery system breeds mistrust of government and discourages informed public discussion on key issues affecting the economic future of our state.
Within each of the broad areas mentioned above, there are numerous specific issues, causes and concerns identified by the panel. Examples include:
The lack of alignment of boundaries between state agencies and local governments with regard to service delivery and performance assessment;
The negative impact of term limits on the learning curve of public officials, the ability to provide ongoing leadership, the ability to foster a long-term perspective and to build trust in our elected officials;
The immense variations in wealth and available resources among Colorado local governments;
Constitutional provisions that have the effect of shifting the property tax burden from residential to business property;
The dramatic reduction in economic support to Colorado institutions of higher education, which carries with it a potentially profound impact upon the competitiveness of our state in the information age;
The future economic, financial and social impacts associated with disproportionately low graduation rates from high school for minorities, who are among the fastest-growing segments of Colorado society;
The likelihood that low minority high school graduation rates and insufficient support for higher education will not provide Colorado with a sufficiently strong tax base to support rapidly expanding health and social service needs driven by aging baby boomers;
The certainty of dramatic increases in the cost of public health and other social services as Colorado’s baby-boom population, among the highest in the nation in percentage terms, moves into senior-citizen status;
The ramification of significant cuts in court-system budgets resulting in high work loads for judges, administrative staff and probation officers that affect the effective administration of justice and the safety of the public;
The inability of the state to provide counter-cyclical support and investment during periods of economic decline because of the volatility of revenue sources and limitations in the state constitution;
The lack of impartial state or local mechanisms designed to analyze the economic and fiscal consequences of proposed legislation and referendums and to inform the general public of probable impacts and/or conflicts with other laws;
A state constitution filled with detailed directives and public policy minutiae that reads more like a statute book than a master plan for sound public policy development and effective governance.
These are but some of the many concerns uncovered by the panel during its work to date. The report provides additional information on several of these issues. In the coming months, the panel will refine its analysis and present proposed principles and recommended outcomes. We hope the final report may serve as a long-term roadmap to guide the state of Colorado to a sound economic future benefiting its citizens, businesses and institutions.
To read the full report, go to www.du.edu/economicpanel and click the link labeled “Preliminary Report” on the left side of the page.
Jim Griesemer is dean emeritus at the University of Denver’s Daniels College of Business.
