A new study detailing the Colorado Taxpayer’s Bill of Rights and an upcoming ballot measure claims that restrained government spending from the constitutional amendment would be “more useful” in a recession than increased funding for government programs.
TABOR, approved by voters in 1992, requires voter approval for tax increases. It also restrains government spending by capping spending growth each year and requires refunds to taxpayers in years when state government collects revenue above the cap.
Next month, Colorado voters will head to the polls to decide if state government should be allowed to permanently keep those potential refunds when they decide on Proposition CC.
The Common Sense Policy Roundtable (CSPR), which describes itself as free-enterprise think tank that studies Colorado’s economy, released a study last week examining the ballot measure and TABOR.
“Proposition CC arises at a time where state spending is at an all-time high and future revenue is forecasted to grow faster than the rate of population + inflation,” unlike Referendum C, which was a five-year timeout from the spending cap that passed when the state was facing budget cuts.
CSPR said that restraining government spending is more important now to mitigating cuts during a potential recession than increasing funding for government programs during a time of surplus.
“If it were the case that the state experienced a recession, then more restrained spending would be useful to mitigate severe cuts,” the study said.
There are several different TABOR refund projections ranging from the Office of State Planning and Budget (OSPB) projecting a $1.7 billion surplus over the next three years to the Legislative Council’s projection of $407 million for fiscal years 2020 and 2021. (That projection was reduced from the previous estimated $652 million over two years.)
Despite TABOR’s spending cap, government spending has still increased substantially since the constitutional amendment was passed, the study also found.
“While the purpose of the TABOR spending limit is to maintain state spending at rate of population growth and inflation, since the passage of TABOR, real state spending per Coloradan has actually grown by 69%,” said Chris Brown, CSPR Director of Policy and Research. “This means the state now spends over $34,000 annually for a Colorado family of four.”
There have been nine years when surplus tax revenue totaling $3.9 billion was refunded to taxpayers.
The share of government spending that’s subject to TABOR has also dropped from 54% when it was implemented to 28.35% in 2018 because of an increase in state enterprises that collect fees, which generate revenue outside of TABOR limitations, the study said.
The study also detailed the three scenarios that could happen depending on how voters decide: the measure could fail and taxpayers would see refunds in years with excess revenue; the measure could fail and taxpayers would see no refunds in years with no excess revenue; the measure could pass and government would retain revenue in years with tax revenue excess that would go toward funding K-12 education, higher education and transportation.
“Colorado’s outdated budget formula makes it nearly impossible to keep up with the state’s to-do list, particularly when the economy is booming,” says Yes on Prop CC, the campaign seeking to pass the measure.
“The money must be spent on three specified areas, which will create construction jobs and help students and teachers in the classroom,” the campaign also says. “This isn’t funding government growth; it’s funding public services that help our state and the people who live here.”
Proposition CC, which was put on the ballot by the legislature, will be decided on in the November 5 election.