Imagine the blurring of the senses were you asked to study Colorado’s framework for governing and finance. A blue-ribbon panel has been at it for nine months now, only to reach a sobering conclusion that conflicting mandates in the Colorado Constitution makes our state “a veritable case study in the law of unintended consequences.”
If only these were positive consequences.
The preliminary report of the Colorado Economic Futures Panel, summarized on the cover of today’s Perspective, brings an impressive amount of detail and analysis to bear on our fundamental economic challenges.
This edition doesn’t point any fingers or offer any solutions. The panel’s recommendations will highlight a final report that will be issued at the end of the year.
By then, Coloradans will know the fate of Referendums C and D on the Nov. 1 ballot. Passage of these reform measures is an essential first step, but only that, to a long-term overhaul of our state’s unwieldy governmental structure. How unwieldy is it? The report found that Colorado embraces more than 2,500 local governments and special districts – and has been been tied in knots by contradictory mandates.
Colorado makes it easy for voters to change the state constitution through the initiative process – probably too easy. As the panel notes, “While Colorado’s ‘legislation by referendum’ may appeal to our Western populist heritage, it is a highly questionable way to run a modern, complex state government.”
To cite just the three biggest constitutional conflicts, the 1982 Gallagher Amendment is designed to hold down residential property taxes – once the mainstay of public school finance – while the 2000 Amendment 23 is designed to ensure increased support for public schools. Add the 1992 TABOR amendment restricting both state and local revenues, and the result, as former Treasurer Mike Coffman quipped, is “a constitution that mandates continuous tax cuts and continuous spending increases.”
The maze of conflicting constitutional mandates has spawned many ad hoc fixes in the legislature or additional citizen initiatives – for example, last year’s cigarette tax increase earmarked health programs for the new tax dollars. The report notes that focusing on such Band-Aids has contributed to the long-term deterioration of such vital state assets as our higher education system and our transportation network.
The panel’s wisest observation may be about the problem posed by “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.”
Indeed, a wise business increases those investments that pay the biggest returns, while Colorado is often forced to cut them.
For instance, Colorado spent $4.9 million on tourism advertising in 2004 – every dollar generating $18.10 in tax revenue, according to a study by Longwoods International. Yet, despite that return, legislators reduced tourism promotion to $3 million. The reason is that the funding counts against the state’s TABOR revenue limits. The new revenue raised from tourism, however, becomes part of the state surplus – which TABOR prohibits the state from spending.
The immediate answer to such absurdities is to approve Referendums C and D in November, so Colorado can invest in items like tourism, education and transportation that offer positive intended consequences. But even if it is approved, the Colorado Recovery Act essentially expires in 2010. By then, Colorado is going to have to undertake a basic overhaul of its tatterdemalion state and local finance system.
