Denver
With Referendum C now on the books, the legislature has five years to budget without the fiscal guardrails that the Taxpayer’s Bill of Rights provided.
Lawmakers now stand at a critical crossroads. One direction leads to prudent, sustainable budgets; the other to runaway expectations.
Prudent, pay-as-you-go budgeting requires lawmakers to stick to their stated goals of merely restoring funding for programs that were scaled back during the recession. For example, Amendment 23’s State Education Fund served as a de facto reserve fund, but it’s now depleted. With one-third of new Referendum C spending earmarked for K-12 education, the legislature can replenish the fund rather than spend it. Also, the value of “opportunity scholarships” for in-state college students can rebound, so tuition costs should rise very little or not at all.
Health care, the fastest-growing portion of the budget, requires the greatest restraint. New funds must be carefully managed to pay for existing programs that benefit the truly needy.
Because Referendum C did not change the 6 percent limit on new general fund spending, anything over that amount should restore funding for transportation and maintenance of state buildings. However, a more tempting course looms – and the siren song of special interests seeking new programs won’t be so easy to resist.
This course might be called “The Road to Referendum X” because its ultimate destination is to set the stage for the repeal of any meaningful limitation on state spending by convincing voters that government – given enough time, power and money – is the solution to so many unsolvable problems.
Averting this path will require statesmanship and budgetary discipline from leaders in both parties, including adherence to some basic principles that need not be partisan:
Budget conservatively. Before Referendum C, some argued that government must maximize spending each year or else its “spending base” would be permanently reduced. Now that TABOR limits will be based on allowable (rather than actual) spending, that argument is moot.
Last year, the legislature pegged the state budget to its own optimistic economic forecast rather than that of the governor’s office, which was $110 million lower. This avoided difficult budget decisions but could have been disastrous had the economy soured.
No new entitlements. Joint Budget Committee forecasts verify that the 6 percent limit on general fund growth will do little more than accommodate existing programs. Last year, Gov. Bill Owens vetoed two massive new health care entitlements, and a third died on a bipartisan vote in a House committee. Health care is particularly perilous because government is a colossal failure at controlling costs. New programs – even those that explicitly say “this is not an entitlement” – create dependency on government rather than incentives for self-determination.
Restore trust funds. The legislature “borrowed” some $366 million from trust funds during the recession, including a transfer of $170 million from a fund that pays the medical bills of severely injured workers, resulting in a de facto tax increase on Colorado businesses. Those actions may have been the lesser of evils at the time, but the state now has a moral obligation to restore those funds.
Rein in fees. During the recession, fees for state services were increased substantially to help balance the budget. Although it stands to reason that users of state services should pay the cost, many services provide regulation for the benefit of the public at large. It’s reasonable then that general tax dollars share these costs. Lawmakers must also avoid the temptation to raise fees even higher to inflate the TABOR limit when it is reinstated.
Voters narrowly approved Referendum C, not because they want expansive government, but because they believed it reasonable to allow the state budget to rebound to pre-recession levels. If lawmakers now open the floodgates to new programs and unsustainable spending, they shouldn’t be surprised when voters’ skepticism returns with a vengeance.
Mark Hillman (mail@markhillman.com) is Colorado’s acting state treasurer.
