Colorado, other states consider tax-and-spend limits
DENVER (AP) — At least eight other states are looking to adopt tax-and-spending limits as lawmakers in Colorado consider tinkering with their budget cap — the nation’s strongest — to help better weather economic downturns.
Colorado’s Taxpayers Bill of Rights, which has returned millions of dollars in refunds to taxpayers, is seen by fiscal conservatives as the best way to rein in government. Critics say it hurts the state’s ability to maintain operations, particularly in lean budget years.
The TABOR restrictions have been compounded by a constitutional amendment that sets a specific increase for education funding. Lawmakers say the one-two punch has had a devastating effect on their ability to budget properly.
Lawmakers in other states are looking at similar tax-and-spend limits by starting with the concept in Colorado’s amendment and making improvements to build in more flexibility, such as including a rainy day fund.
The TABOR amendment requires governments to limit spending to no more than a 6 percent increase over the previous year. It also limits the amount of taxes and fees local governments and the state take in to a formula based on population growth and inflation. Extra money must be refunded to taxpayers and voters must also approve any new tax increase.
When Colorado lost $2 billion worth of revenue during the weakened economy, lawmakers made massive budget cuts that ratcheted down the spending base. In addition, they had to make sure to increase kindergarten through 12th-grade education funding at a rate equal to inflation plus 1 percent as required by Amendment 23. Supporters of Amendment 23 say it was passed in reaction to cuts required by TABOR.
Lawmakers from other states say they are learning from Colorado’s experience.
In Tennessee, Republican state Sen. Jim Bryson said his father, who lives in the Colorado mountain town of Dillon, suggested he try something like TABOR in his state.
Bryson wants to head off the “ratchet effect” by keeping the spending cap independent of revenue limits. His proposal also would put the state’s spending cap in its constitution — a cap tied to growth in personal income, which is usually higher than inflation allows.
Bryson thinks his proposal will succeed in forcing the government to make tough choices about how to spend taxpayers’ money. “You’re choosing between good and better,” he said. “When you have to make those choices the easy decision is to do both. What TABOR does is force lawmakers to make hard choices.”
After talking with Colorado officials, Wisconsin state GOP Rep. Frank Lasee said he has added a rainy day fund to his tax-and-spending limit proposal to help deal with the first year or two of a recession. Lasee said it would deal with the practical problems of an economic downturn but also would head off critics.
Other states considering similar proposals are Mississippi, Wisconsin, California and Tennessee, according to the National Conference of State Legislatures. Barry Poulson, a member of the American Legislative Exchange Council, said he has been working with lawmakers in Minnesota, Maine, Alaska, and Virginia on such proposals.
Lawmakers in Kansas also considered a proposal but have dismantled it and sent it to a committee, where it is expected to die.
Colorado lawmakers are looking at similar fixes for TABOR and Amendment 23. There are about a dozen proposals being discussed at the state Capitol. A Senate committee will take up four of them this Thursday.
Most people don’t understand that by tying government growth to inflation, TABOR actually shrinks government because the limited increase will never allow government to keep up payroll for its workers — the bulk of government spending, said Rep. Brad Young, a Lamar Republican who considers himself a fiscal conservative and heads the Joint Budget Committee.
Both Young and officials at the Bell Policy Center, a Colorado think tank, believe the increase should be tied to growth in taxpayers’ salaries — as Tennessee’s proposal would do. They say that would allow the government to keep pace with demand for its services.
“The real question should be what kinds of services do we want to provide for one another in the state? Do we want to include public higher education, roads, good schools?” said Carol Hedges of the Bell Policy Center, which is working on its own TABOR fix.
Poulson, a University of Colorado economics professor, believes Colorado would have been facing a California-style budget crisis if TABOR hadn’t forced it to stay lean during the 1990s.
Because it’s a constitutional amendment, any change to TABOR has to be approved by both lawmakers and voters.
Wisconsin’s Lasee thinks it will be a hard sell.
“Giving money to politicians is like giving whiskey and car keys to teenage boys — it’s just not a good idea,” Lasee said. “Once you’ve given people a taste of control over how much money government can take from your pocket, it’s hard to give up.”