View From a Height
Commentary from the Mile High City
Friday, December 19, 2003

Budget Woes Continued

In what's shaping up to be the big Colorado political story of 2004, the state is trying to do something about its budget problems before the next recession. We may have sailed between the Scylla of TABOR and the Charybdis of Amendment 23 this time, but the point of the Odyssey is that Odysseus is the only one that makes it back.

Amendment 23 requires state spending on education to rise by inflation +1% every year until 2010. TABOR requires that the state balance its books from year to year, can't raise taxes without asking the people about it, and that the amount of spending can only rise by the population change + inflation, from the previous year. The Gallagher Amendment keeps the percentage of total property taxes paid individuals, instead of businesses, at 45%. Since more people move into an area than businesses, the individual property tax rate tends to fall.

So here's the problem. Amendment 23 means that an ever-growing dollar amount needs to be spent on public education. (For some obscure reason, judges don't appear to consider this a violation of local control...) TABOR keeps spending well in check, but it also has a downward ratchet from recessions. Rather than using a given year as a baseline, it uses last year, which means that absent high inflation, you can't ever make up lost ground. And the Gallagher Amendment tends to reduce the per-person amount of property tax collected.

This means that the amount of money left over for discretionary spending keeps falling. The college presidents are going nuts, since their tuitions count against TABOR. They've not done anything to structurally reduce spending (aside from a few well-publicized layoffs; I don't see the administration or tenured faculty offering to take pay cuts or go to fewer well-catered conferences to save the jobs of those staff they profess to love). And they see that they're going to have to compete fiercely for a shrinking pie.

This doesn't mean the problem isn't real. It is. State Treasurer Mike Coffman is trying to get everyone to give a little. The voters rejected a change to Gallagher, but they may not have grasped the full import. The Democrats want to gut TABOR, seeing it as a the tether that it is. Coffman is willing to set a given year as the baseline, getting rid of the downward ratchet. At the same time, the Coalition for Children, or whatever, is threatening to lie down in front of bulldozers or something to keep that extra +1% in Amendment 23. Coffman is proposing killing the 1%. His proposals seem reasonable enough to me.

At the same time, there's talk of a "rainy-day" fund, which sounds a lot like a scam to me. Rainy-day funds, in the hands of elected officials with constituencies to please, tend to get used up in a light drizzle. The only reason we didn't run through it a year ago was because it wasn't there. Once that cushion exists, bet on committees saying to themselves that, "well, there's always that rainy-day fund."

Pretty much any change is going to have to go to the voters, since these provisions are all written into the state constitution.

The big disappointment here has been Governor Owens. He owes a lot of his popularity to TABOR, which predates him by years. Because of it, raising taxes was never really an option, and Colorado managed to avoid a lot of the fiscal problems faced by other states. Having weathered the storm, he's not come forward with any real proposals short of securitizing the tobacco settlement money, and putting it in, you guessed it, a Rainy Day Fund. This is Owens's big chance to show leadership and broker a deal putting his successor in better shape, and he's been all but AWOL on it. Some local Republicans, wishing to preserve his viability for the 2008 Presidential race, are willing to make excuses for him. I say that if he can't show leadership now, he's got no shot at being President, anyway. And this is the job he's got now.

Why do you care, especially if you don't live in Colorado? Because this story is likely you state's story, too, only with higher taxes now. California Democrats just pushed Arnold away from any actual spending or taxing restraints. Your state probably raised taxes in the middle of a recession or an incipient recovery to make ends meet. Given that, TABOR has started to sound real good to a lot of people living elsewhere, and if we lose faith in it here, you'll never see it in your state.

And you won't even have the option of moving here to enjoy it.

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