Supporters of Referendum C, including some fiscal conservatives like former Gov. Bill Owens, always argued that their 2005 budget rescue plan was designed to avoid drastic cuts in state spending — not to pay for a significant growth in government.
Two years later, advocacy groups are glumly admitting that those supporters were right.
Tuesday, the Colorado Fiscal Policy Institute, the Bell Policy Center and the Colorado Children’s Campaign released a report showing the state will have to struggle to even maintain its current level of spending on health care, education and highways when Ref C’s five-year timeout from the tangled rules of the 1992 Taxpayer’s Bill of Rights expires in 2010.
It didn’t take a new study to draw that conclusion. The point was stressed repeatedly in 2005.
Essentially, TABOR was designed to forever limit real per capita state spending to 1992 levels, allowing only increases equal to the rate of inflation and population growth. Simply put, that means that if there were 2 percent population growth and 3 percent inflation in 1992, then for every $100 the state received in revenue that year, it could keep $105 in 1993 — with the same formula compounding in future years. Any increase in spending above that level would require voter approval.
But the original TABOR also contained a “glitch” that always based the next year’s revenue limit on the last year’s actual collections. That meant that after revenue dropped in the 2001-03 recession, the lower base would have forever precluded restoring cuts made during the budget crisis. In the above example, if revenue dropped from $100 in 1992 to $50 in 1993, then the limit for 1994 would be just $52.50 — not the $105 it would have been under the TABOR formula without the ratchet effect.
Referendum C didn’t raise taxes. It did permanently eliminate that ratchet and temporarily allow the state to keep all the money it could receive without a tax increase for a five-year period ending July 1, 2010. Without further voter action, those revenue limits will indeed return in 2010.
The question state lawmakers are now wrestling with is whether to ask voters for a permanent tax increase in 2008 or later — and, if so, what to spend that money on. Gov. Bill Ritter has said he wants at most one revenue proposal on the 2008 ballot and is believed to be leaning toward earmarking it for health care. Transportation advocates are seeking new money for highways and transit. Higher education supporters hope to restore some of the brutal cuts they endured during the budget crisis.
But even if voters did approve such a tax increase in 2008, an influx of new revenue alone wouldn’t eliminate the conflicting constitutional mandates governing how Colorado must spend its money. The warring rules are contained in the 1982 Gallagher property tax amendment, TABOR, and the 2000 Amendment 23 school finance law.
Those conflicts led former Treasurer Mike Coffman to joke that Colorado has the only constitution mandating both continuous tax cuts and constant spending increases.
Efforts to clean up the unintended consequences of the three separate amendments would run afoul of yet another law limiting future constitutional changes to a single subject. That has prompted House Speaker Andrew Romanoff to work on a plan that would ask voters, possibly in 2008, to authorize a one-time suspension of the single subject rule — to allow a vote in 2009 on a comprehensive amendment that would reconcile the conflicting fiscal mandates.
Romanoff’s plan, if approved by voters, wouldn’t increase the size of the government “pie.” But it would give budgeters more freedom to match limited state revenues to the most pressing public needs. That could ultimately hold down taxes while still providing better services.
We can only hope.
