When Colorado voters enshrined the Taxpayer’s Bill of Rights into the state constitution in 1992, it had a simple premise: If lawmakers want to raise taxes or issue debt, they should ask voters for permission.
In practice, lawmakers rarely ask. But that hasn’t stopped them from charging Coloradans billions more for government services and borrowing costs anyway.
Designed to impose fiscal discipline on government, the amendment known as TABOR also sets a cap on spending growth each year. But 25 years later, policymakers on both sides of the aisle say Colorado government finance has instead become an increasingly complicated exercise in sidestepping those restraints.
Can’t raise taxes without a public vote? Charge a fee, instead. Want to plug a hole in the transportation budget? Borrow against the equity of government buildings.
“It gives voters the impression that we’re playing games,” said Scott Wasserman, president of the liberal Bell Policy Center. “And they’re right — we are playing games.”
These workarounds are legal — many have been explicitly authorized by state courts. But they have wide-ranging consequences for Coloradans.
In the TABOR era, state tax rates have gone down, but fees have increased, shifting a higher share of the cost of public services to low- and middle-income residents.
Meanwhile, the state seems to lurch from one funding crisis to the next. Some years, it’s deep cuts to schools or infrastructure. This year, it was a narrowly avoided bid to cut $528 million for hospitals.
Despite growing frustration with its side effects, don’t expect TABOR to go away anytime soon. At this point, experts say the landmark constitutional amendment is so woven into the state’s political fabric — and so popular with the general public — that unraveling its web of restrictions would be much easier said than done.
But there’s a common theme in the face of growing spending needs and deteriorating sources of revenue: the preferred policy solution at the state Capitol is frequently whatever doesn’t require approval at the ballot box.
Tangle of TABOR: Exhibit A
Look no further than last session’s Senate Bill 267 to understand the convoluted policies that this creates.
The far-reaching measure exempted a $264 million hospital provider fee from the TABOR spending cap, raised pot taxes to pay for a business tax credit, doubled Medicaid prescription co-pays and called for $1.9 billion in borrowing for roads — all without a vote of the public.
To many on the right, these sorts of workarounds are sacrilege — an elaborate subversion of the intent of TABOR.
“What’s always coming up is ‘How do we do this without respecting the taxpayers enough to put it to a public vote?’ That’s all it is,” says Jon Caldara, president of the Independence Institute, a conservative think tank.
The sweeping hospital-provider fee reclassification is the most recent example, but it’s far from the only one. And it’s not just Democrats who employ these workarounds.
- In 2003, the Republican-led legislature authorized $130 million in a mortgagelike arrangement known as a certificate of participation to pay for a new prison — the sort of project that, if funded by bonds, would have had to go to a vote of the people. The prison, completed in 2010, sits empty today, but taxpayers were left on the hook for $208 million in payments, with interest.
- In 2004, the legislature under Republican Gov. Bill Owens created the College Opportunity Fund, which effectively exempted the growing cost of public universities from state revenue limits under TABOR. That freed the state to raise tuition, while clearing out room under the cap for general state tax revenue to grow.
- In 2009, Democrats passed FASTER, a series of fee hikes on vehicle registrations. The fees now generate around $200 million annually for transportation projects.
- In 2010, the Democratic-controlled legislature under Gov. Bill Ritter repealed a series of sales-tax exemptions, now derisively referred to among conservatives as the “dirty dozen.” The result: more than $100 million in additional revenue annually, without increasing the sales tax rate.
“All of those are workaround gimmicks,” said John Straayer, a political science professor at Colorado State University who specializes in legislative politics. “I just think in the aggregate, it’s a terrible way to make policy. And TABOR has triggered it.”
“Nickeled and dimed”
For the typical Coloradan, the most tangible consequence of these workarounds has been an explosion in fees.
According to a Pew Charitable Trusts analysis of U.S. Census data, Colorado has the nation’s third-highest reliance on “service charges” — a broad category that includes park fees, student tuition and textbook sales, and patient charges at public hospitals.
Since 1992, lawmakers have raised fees for court users, college students, car owners, parkgoers and others. Meanwhile, state income and sales taxes — with the exception of taxes on pot — have gone down.
Experts say this has led to a philosophical shift in government: The users of a product, whether it’s a park, a university or a road, wind up paying for a higher share of its cost, instead of everyone chipping in for the general public good.
Take higher education. In 2001, the state paid 67 percent of the cost of public higher education, with students chipping in the remaining third. By 2016, that ratio had almost flipped. Students now contribute up to 64 percent of the costs of Colorado’s public universities.
Another consequence: Because fees tend to be flat and taxes tailored to income, $10 here and $50 there shift more of the burden onto the poor and middle class and away from the wealthy.
“When we get fees — and FASTER is a great example of this, people get nickeled and dimed,” Wasserman said. “You see that fee on your auto registration, you pay it every year, … but then you see a headline, or you hear politicians talking about an underfunded transportation system, and you think, ‘Wait, I just paid that massive fee.’ ”
“Budgetary gymnastics”
To lawmakers on both sides of the aisle, these workarounds often represent the best of their limited options to address the state’s mounting needs.
Today, Colorado faces $9 billion in unfunded transportation projects over the next decade. Per capita funding for higher education has fallen to 47th out of the 50 states, according to State Higher Education Executive Officers data — a drop from 35th in 1991, the year before TABOR passed. Medicaid costs have soared as more people have signed up for health insurance. And even as voters limited the growth of government with TABOR, they also passed a separate constitutional measure in 2000, Amendment 23, requiring the state to spend more each year on K-12 schools. Lawmakers have underfunded this by $830 million to date under yet another workaround, formerly known as the negative factor.
Many conservatives say the lack of funding for roads and schools results from lawmakers not prioritizing them over other things, such as Medicaid.
“Here’s the reality — both sides use budgetary gymnastics when they want to find more money,” said Jesse Mallory, state director of Americans for Prosperity and the former chief of staff of Republican Senate President Kevin Grantham. “And then they offer the public false choices to avoid tough votes” — such as cutting popular programs.
Moderates counter that it’s impossible to have a serious conversation about budget priorities under the current system.
“My contention is we don’t have a revenue or a spending problem, we have a process problem,” said state Rep. Dan Thurlow, R-Grand Junction, who for years has called for TABOR reforms. “And if we would fix our processes, … then we could have the actual debate of ‘Should we spend more or should we spend less?’ ”
Most tax hikes fail
So why don’t lawmakers simply ask?
For one thing, the track record of tax hikes at the ballot box is dismal.
Since 1992, advocacy groups have put more than a dozen statewide tax increases on the ballot. Only two passed — a citizen-initiated tobacco tax hike in 2004 and the lawmaker-backed tax on marijuana after voters legalized it. But efforts to boost funding to schools, highways and other popular causes have repeatedly been rejected by wide margins.
Given the voters’ predisposition to oppose new taxes, the conventional thinking is that it would cost millions of dollars to mount a successful campaign to pass one.
This year, lawmakers and business leaders said they were hopeful that if the divided legislature came together behind a sales-tax hike for transportation, it could be sold to voters. But while the effort appeared to have the votes to pass both chambers, it was defeated by a Republican-led committee in the Senate.
To Straayer, the CSU professor, this is simply a sign of the political times.
“(Republicans) are forever worried about being primaried,” Straayer said. “And having them join hands with the Democrats to not only put something on the ballot, but to push it? Good luck.”
State Rep. Bob Rankin, a Republican budget writer who voted against the transportation-tax hike, offered another explanation.
“I personally think it’s time to constrain the growth of government,” Rankin said. “Legislators don’t like voting for taxes, either. We feel like if we’re voting for a (referred ballot) measure, we’re recommending it.”
After this year’s hospital provider fee compromise, the state revenue limit — another provision of TABOR that has spawned its own workarounds — isn’t expected to come into play for years to come. But TABOR will still play a role in fiscal policy.
Colorado still faces an unfunded infrastructure backlog, and school district needs are only expected to grow in the coming years, as statewide property tax cuts are phased in. And if lawmakers won’t ask for more money, that leaves them with only two real options: Cut spending or employ the same sorts of workarounds they have in years past.
“It’s kind of a thing that I think everybody realizes has to occur,” said Henry Sobanet, budget director to Gov. John Hickenlooper.
“Over the years, the tool kit available to legislators has been taken away by constitutional rules. People still expect the same things from our government that they do across the country, and so it takes different steps, or harder steps, to get to the same place.”
How does TABOR work?
Added to the state constitution in 1992, the Taxpayer’s Bill of Rights imposed a slew of financial restraints on state and local governments in Colorado. Under TABOR, lawmakers can’t raise taxes or issue debt without voter approval. It also established a spending cap, limiting the growth of government revenue to the increase in population and the Denver-Boulder-Greeley consumer price index. Any tax dollars collected above the cap have to be refunded to taxpayers, but certain fees are exempt from the cap and can grow without limit.