Passage of Referendum C in 2005 not only opened the door to an additional $5.9 billion in state revenues over five years, it set up a fiscal tug-of-war between transportation and higher education.
So far, asphalt is beating ivy, hands down.
Transportation received a $272 million boost in this year’s budget from the state’s general fund – on top of the $619 million already funneled into transportation by the state’s Highway User Tax Fund and $415 million in federal funding.
In contrast, as University of Colorado president Hank Brown notes in a guest column today, Colorado’s higher education system received just a $49 million increase, for a total of $746.3 million. That’s less than the $764.7 million higher education initially received in 2002, despite increases in enrollment since then.
The robust growth in transportation funding versus the slim pickings in higher education is easily documented. But that doesn’t mean that the state legislature has reneged on supposed promises to share Ref. C revenues equally, with one-third to K-12 public schools, one-third to higher education and one-third to health care.
To begin with, the legislature never promised such a precise split. Referendum C’s enabling legislation, House Bill 1194, merely specified that the “retained excess state revenues” would be used “to pay for education; health care; roads and bridges, and other strategic transportation projects; and retirement plans for firefighters and police officers.”
To be sure, the notion of a specific one-third for K-12 education, one- third for higher education and one- third for health care was bandied about by some supporters of Referendum C on the campaign trail. The promise, as written in HB 1194, has been faithfully kept, as far as money directly controlled by the legislature is concerned. As a new report by the Colorado Legislative Council shows, audited final figures for the 2005-06 budget year show Referendum C allowed the state to retain a little more than $1.1 billion that year. Most of that cash went into three almost equal shares, with K-12 public schools getting $361.6 million, health care $361.7 million and higher education $353.7 million. Additionally, police and fire pensions received $29.1 million and transportation projects $10 million.
Unfortunately, as the report also notes, most of the money allocated to higher education only averted massive cuts that would have had to be made if the referendum had failed. Likewise, because Referendum C didn’t change other existing laws, increases in the state general fund, which pays for both K-12 and higher education, are limited to 6 percent a year. Money above that level is legally earmarked for capital construction – which explains the surge in highway funding. (For a full explanation of how the state’s budget process works in this case, go to www.leg.state.co.us and click on Report on Referendum C Revenue and Spending Fiscal Year 2005-06.)
The fact that existing state law has channeled a flood of new money to transportation and just a trickle to higher education doesn’t mean that’s the way our tax dollars necessarily should be spent.
Both highways and higher education have staggering shopping lists. Highway advocates argue the state needs to spend $105 billion in new revenue on highways by 2030 just to keep pace with population growth. Higher education leaders claim they need $832 million a year in additional state support to come up to the average funding levels of their peer institutions in other states.
Looking realistically at the current state budget, Referendum C’s passage is likely to yield enough new net revenue through 2010 to give either higher education or highways about half of the money their respective advocates are clamoring for in that period. Meeting both sets of demands even halfway would require a major new revenue source.
But unless voters approve such a new tax or the legislature scraps the 6 percent general fund spending limit and the companion laws channeling most money above that ceiling into highways, the benefits of Referendum C will continue to flow overwhelmingly into highway construction and only modestly into higher education.
