Oct 232005
Authors: Vimal Patel

A momentous decision for Coloradoans looms ahead.

The average taxpayer will be asked to give up $491 over the next five years so that more money can be spent on road repair, healthcare and education, according to non-partisan state economists.

The future of student tuition hinges on what happens Nov. 1. Student tuition has increased by 15 percent this year. If C and D fail, CSU president Larry Penley estimated a 30- to 50-percent increase in tuition. College officials have said this extra student money won't even be enough to offset the reduction in funding caused by the measures' failure.

As mammoth of an issue the proposed referendums are for CSU students and all Colorado residents, the measures reach beyond the state's borders. Observers nationwide are viewing the November ballot as the battleground in the debate over just how much taxpayer money should go to the state.

TABOR returns to the battleground

Colorado's state government was rocked in 1992 when voters approved the Taxpayer's Bill of Rights (TABOR).

Anti-tax advocates said the constitutional amendment would set an example of fiscal responsibility for other states to follow. Opponents of the measure, like former Colorado governor Roy Romer, said it would lead to economic ruin.

Flash forward 13 years: TABOR is once again set before voters.

On Nov. 1, Colorado voters will decide on Referendums C and D, measures that would alter TABOR and allow the state to spend more money on roads, healthcare, education and pension plans for local police and firefighters.

TABOR set strict state spending limits and has made Colorado one of the most tax-friendly states in the nation. Between 1997 and 2002, Colorado has reduced taxes more than any other state, issuing annual tax rebates totaling more than $3.2 billion, according to Michael New, adjunct scholar at Americans for Tax Reform, a national group headed by anti-tax advocate Grover Norquist.

But backers of the ballot measures say the cost – to healthcare, roads, education and other government services – has been severe and will only get worse if the ballot measures are defeated.

"Higher education's going to be hit hard," said John Straayer, a CSU political science professor. He said that certain parts of the budget – such as K-12 education, Medicaid and prisons – are mandated to increase by the state and federal government.

This means that the loss of state revenue – if C fails – would largely be shouldered by higher education, according to the non-partisan state economists.

C would allow the state to keep and spend an additional $3.7 billion that would otherwise have to be returned to taxpayers, and D would immediately borrow $2.1 billion of that money for roads.

C and D supporters say the state is cash-strapped and in desperate need of a funding injection, especially in higher education. Currently, Colorado spends less on higher education than the vast majority of other states.

Opponents say wasteful government, not state spending, is the problem. They argue that state spending has increased every year since TABOR's approval and that gloomy diagnoses of the state's economic condition are overblown.

"Before TABOR passed, state spending was increasing at twice the rate of inflation," said TABOR author Douglas Bruce. "Since TABOR passed, spending increased 130 percent. That's what politicians call a cut. … A lower rate of increase is not a cut. There were no cuts."

The Ratchet

TABOR's most contentious element is what's known as the ratchet clause, a powerful provision that Referendum C aims to eliminate, at least for five years.

Colorado suffered an economic downturn in 2001. The ratchet kicked into gear the next year when state spending was restricted to increasing at population growth plus inflation from the year of the downturn. Thus, state revenue could never increase beyond downturn levels, as long as the ratchet remains in place.

For tax rights advocates, this makes Colorado a model that other states should follow. For Referendum C and D supporters, it's lunacy.

Sen. Steve Johnson, a Fort Collins Republican and a supporter of C and D, used a reservoir in times of drought as an analogy. The reservoir is the state budget. The state suffered a drought – the economic downturn – in 2001, and now has regained the moisture to be able to fill the reservoir again, but is restricted from doing so.

"According to the ratchet, that low level would be the new high level," he said. "In other words you could never fill the reservoir higher than its lowest point in a drought."

Because of the ratchet, legislators have had to slash about $1 billion, or a fifth of the entire general fund, Johnson said.

Colorado has since recovered from the downturn, but the ratchet continues to restrict state spending.

TABOR is being considered by several other states, but proponents of the bill have wised up and are leaving out the ratchet clause, Straayer said.

"They take it out when they try to sell it to other states," Straayer said. "They've recognized that the ratchet is basically a recipe to dismantle government."

If passed, C would eliminate the ratchet for five years. After the five years, the new state-spending base would be equal to the highest of that five-year period. From that point, state spending would again be restricted to population growth plus inflation.

Just how much?

Non-partisan state economists estimate that the average taxpayer will have to give up $491 over five years, which comes out to about 27 cents a day.

Opponents, however, have claimed the number to be significantly higher, saying an average family of four would forfeit $3,200 in TABOR rebates over five years.

The $3,200 figure widely used by opponents is calculated by taking the estimated amount of TABOR rebates over five years, $3.7 billion, and dividing it by the state population, about 4.5 million, and multiplying by four.

However, the calculation is misleading and simplistic, says Rich Jones, director of policy and research at the Bell Policy Center.

TABOR refunds are calculated by using 18 separate rebate mechanisms. The $3,200 number assumes that taxpayers will receive each one, but that's impossible, Jones said.

"A lot of these mechanisms are mutually exclusive, if you qualify for one you don't qualify for the other," he said.

Many rebate mechanisms, such as those for research and development, high technology scholarships and interstate commerce, to name just a few, won't impact most Coloradans.

Some people will receive more than $491 over five years, and some less, but that estimate is far more accurate than the impossible $3,200 per family of four, Jones said.

A question of ideology

Underneath the rhetoric and disagreement over the sea of details, the question is essentially one of ideology. How much taxpayer money should go to the state?

Simply put, which do you prefer: Keeping $491 in your pocket over five years, or allowing the state to spend that money on healthcare for senior citizens, road repair, higher education and government programs such as suicide prevention?

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