House Speaker KC Becker on Wednesday debuted a measure that could reshape state spending in Colorado, permanently eliminating taxpayer refunds and allowing lawmakers to ignore some of the most restrictive public spending limits in the nation.
If the state legislature approves the bill – and Colorado voters pass the measure in November — it would allow the state to spend more money on transportation, K-12 schools and higher education during economic booms without raising tax rates.
It would be a major policy change, exempting the state from one of the central features of the Taxpayer’s Bill of Rights, which voters approved in 1992. But supporters were quick to downplay the measure’s potential impact. Becker said it won’t solve the state’s intractable financial challenges, or completely reverse the decades of spending cuts that have fallen hard on popular public services.
“Is this the long-term fix to any of the state’s long-term issues? No, it’s not,” Becker, a Boulder Democrat, said as she unveiled the proposal. “I think it’s a necessary, important part of it.”
That tightrope could make for a tricky sell to voters.
On the one hand, supporters argue that the measure will allow the state to invest more in some of the public services voters want the most without raising taxes. But those promises could fall short if the state’s economy finally cools off from its recent highs, as one economic forecast released this month suggests it will. Meanwhile, conservatives are already gearing up for a fight to protect what they see as a crucial restraint on government spending.
Here’s what you need to know about the measure:
It represents a major change for Colorado state finance.
The spending cap, which allows revenue to grow at the rate of inflation plus population growth, has long been one of the most controversial aspects of TABOR. Supporters believe it’s a key restraint on government, allowing spending to grow modestly from year-to-year, while offering taxpayers refunds if the state takes in significantly more in any given year. But critics say the cap grows too slowly to allow state policymakers to cope with the booms and busts of the economic cycle.
MORE: A citizen’s guide to how TABOR and spending works in Colorado.
“Colorado’s had one of the strongest economies in the country,” Becker said. “And people think that the state itself can make more investments, more improvements, but we can’t because the state constitution prohibits the budget from growing with the economy.”
The state has temporarily eliminated the spending cap and taxpayer refunds once before, getting voter approval for a five-year timeout in a 2005 measure known as “Ref C.”
There’s also precedent for permanently ditching the spending cap at the local level. More than 100 local governments and school districts already have set aside their own TABOR spending caps in a maneuver known as “de-Brucing,” a nod to Douglas Bruce, the author of TABOR.
The measure wouldn’t eliminate TABOR’s best-known provision, which requires voter approval for tax hikes and debt.
The effort has the governor’s support.
Democratic Gov. Jared Polis has long backed the idea of loosening TABOR’s spending restrictions – and even made it a campaign pledge — but earlier this month he broke with lawmakers and questioned whether this was the right time to go to the ballot.
Polis rebuffed an interview when approached at the Capitol by The Colorado Sun on Wednesday. But Becker read aloud a statement from the governor’s office in which he offered his full-throated support for the initiative, saying he was working to build a bipartisan coalition to campaign for voter approval.
“Gov. Polis supports allowing the state to keep the tax revenue it already collects,” the statement said. “This common sense policy doesn’t alter the right of citizens to vote on taxes, but allows Colorado to keep pace with a growing economy. The governor is engaging bipartisan civic leaders across the state because he believes broad bipartisan support is essential to win in November.”
It could generate as much as $1 billion in new spending capacity through 2020. It could also generate very little.
Under one economic forecast released by the governor’s office, Colorado could owe taxpayers refunds up to $950 million over the next three fiscal years.
But economists at Colorado Legislative Council expect the state’s economy to cool off significantly in the coming years. They expect the state to generate $65 million in revenue over the cap in the 2019-2020 fiscal year, and to stay below the cap in the years to follow. So it’s not clear whether eliminating the spending caps even would lead to new revenue in the short-term.
MORE: How the state budget works in Colorado
Any money the state gets to keep over the limit would be split into equal thirds between K-12, higher education and transportation, Becker said. The transportation dollars would flow into the state highway fund, which sends money to state and local transportation projects. (A companion bill would lay out exactly how the money is to be distributed.)
It has bipartisan support at the legislature, with a Republican co-sponsor in state Sen. Kevin Priola.
But expect most — if not all — of his GOP colleagues to oppose the measure.
“It’s outlandish because we haven’t even hit the TABOR caps, we haven’t even had TABOR refunds but they try to blame (spending limits) on TABOR,” House Minority Leader Patrick Neville, R-Castle Rock, told The Sun in an interview.
Noting that state revenue has boomed in recent years, he said, “When is it going to be enough that they actually let the people receive refunds for once?”
Michael Fields, a conservative activist who leads the advocacy group Colorado Rising Action, said the measure was tantamount to a permanent tax hike.
“We’re not surprised, but we anticipate that voters will give the same answer they have over and over — ‘no,’ ” he said in a statement.
Priola pushed back against conservative criticism, saying the state had clearly fallen behind on keeping up with a growing state’s needs. He pointed to last year’s ballot measures to either raise taxes or issue debt for roads, noting that voters said no to both.
“This proposal in my opinion is the middle ground,” he said. “Can we simply retain (revenue)?”
Staff writer John Frank contributed to this report.