As those of us who recently filed taxes know, making annual budgets is hard work. Our state legislators are finishing their own efforts this year, with some good new bills, but it is amazing how thoroughly we have tied their hands.
As John Ingold reported in the April 14 Denver Post, the Joint Budget Committee assessed 151 amendments to the 2008 budget, totaling $2.4 million, but, remarkably, this amount changed only 0.014% of the $17.6 billion total budget from its initial allocation.
If the budget represents a statement of Colorado’s collective priorities, ours is virtually on auto pilot.
Admittedly, budget debates are complicated by the scale of activities – as per comments often attributed to former Illinois Senator Dirksen- “a billion here, a billion there, and pretty soon you’re talking real money.” Any “-illion” number looks big, since most of us don’t deal in “-illions” of dollars every day.
But, legislative discussions look different when placed into context. For example, the best measure of Colorado’s economy is its Gross State Product (GSP), the state equivalent of a nation’s GNP. Colorado’s GSP is currently more than $230 billion per year (about equal to Finland’s economy). So, over the 5 year “TABOR refund timeout” of Referendum C, Colorado’s economy will generate more than $1.15 trillion dollars in output – that’s $1,150,000,000,000 +, a whole lot of “-illions.”
Some have complained that, contrary to the initial estimate of $3.7 billion generated from Referendum C, it might generate as much as $6.1 billion in added investment into Colorado’s education, health, transportation and other services, a whopping $2.4 billion difference (in the increasingly unlikely event of a sustained strong economy). That sounds like a lot of “-illions.” But, compared to the $1.15 trillion dollar Colorado economy over the same five year period, it’s only 0.2%. For a sense of scale, on a $50,000 median household income in Colorado, 0.2% would equate to $8.50 per month.
Or, consider the mill levy stabilization law approved last year, to stop local property taxes from declining as a matter of gravity, currently facing a lawsuit on the argument that it did not go in front of the voters (supporters counter that it did get approval from voters in 175 of 178 districts). Anti-tax advocates are incensed that mill levy stabilization may raise $3.8 billion over 10 years rather than the originally estimated $1.74 billion, again, if the economy remains strong, a difference of $2.1 billion. Big money “-illions” for you and I, but less than 0.1% of Colorado’s likely economic output of at least $2.3 trillion over that decade.
Despite all of these “-illions”, as the Joint Budget Committee’s experience with shifting 0.014% of the spending allocation illustrates, legislators actually have control over a very small share of state pending – at most perhaps 10% of the state budget, essentially the categories of “general government” and higher education. The rest is essentially mandated spending, by the federal government or by prior Colorado decisions.
This lack of legislative flexibility comes from TABOR and other constraints that make Colorado likely to be a permanently low-tax, low-spending state. This was not true 20 years ago, when Colorado was close to national averages. Now, according to the Tax Foundation, a nonpartisan group with no stake in Colorado’s relative ranking, the US average total state/local tax burden is 10.10% of per capita income. Colorado’s rank is tied for 38th in this measure, with 9.50% of per capita income taxed.
Absent some magic alchemy that turns magic fairy dust, or better yet snow, into public services, you can’t be a low tax state and have high quality public services. You largely get what you pay for. Thus, the familiar litany that Colorado ranks 39th in highway spending per capita, 48th in spending per student on higher ed, and 49th in per capita spending on Medicaid coverage.
This lack of investment in essential services has consequences. Tom Clark, EVP of Metro Denver’s Economic Development Corporation, whose job is to attract businesses noted recently: “After analyzing seven years of data, we are quite concerned that Colorado’s competitive position is eroding and is in jeopardy due to lack of sufficient investments in higher education, transportation, and healthcare.”
And, amazingly, even during this long period of low state taxes, the private sector economy in Colorado has been weak, especially for typical working families. Adjusted for inflation, Census data show that the median Colorado household has not seen an increase in its income over the past 9 years. No increase in private household incomes for almost a decade, coupled with significant declines in public services, evidence of failed fiscal policy.
While finding new revenues requires extraordinary creativity, consider how things might look if Colorado were an “average” (not a high) spending state. The Tax Foundation shows a 0.6% difference between taxes on Colorado and the average state’s income. Colorado’s personal income was about $190 billion in 2006, so that 0.6% difference translates to $1.14 billion more general fund revenues if Colorado taxed liked the average state.
With an additional $1 billion, state legislators could actually make some choices about how best to make a dent in the health care insurance problem, provide more funds for highway maintenance, and restore higher education cuts. Just by being average, something that current Constitutional constraints like TABOR do not allow, our legislators could do more than tinker at the margins.
Paul Teske is professor at the University of Colorado Denver’s School of Public Affairs and Director of its Center for Education Policy Analysis (CEPA).
EDITOR’S NOTE: This online-only guest commentary has not been edited.
