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Published in Print: October 19, 2005, as Colorado Referendum Targets Revenue Cap

Colorado Referendum Targets Revenue Cap

Easing restrictions would free up more tax dollars for schools and colleges.

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To some Colorado residents, Referendum C is the best chance to spare the state’s schools from deep budget cuts. To others, the ballot measure—which will go before voters Nov. 1—represents a steep tax increase and gives lawmakers too much power over how state revenues are spent.

Referendum C is a proposed five-year suspension of Colorado’s Taxpayer Bill of Rights, or TABOR. TABOR is a voter-approved 1992 constitutional amendment that imposed a formula-driven cap on state spending and required the state and local jurisdictions, including school districts, to give back to taxpayers any revenues in excess of the cap.

“It is by far and away the most restrictive tax and spending limitation in the country,” said Wade Buchanan, the president of the Bell Policy Center, a think tank in Denver. “It really is a measure that gives fiscal decisionmaking powers almost exclusively to the voters.”

With efforts to get TABOR amendments passed in other states, including Wisconsin and Kansas, policymakers are closely watching the outcome of the vote in Colorado.

Because Colorado’s formula limits spending growth to the rate of inflation, plus annual population growth, Mr. Buchanan explained, the state’s spending limit was permanently lowered when the economy went sour in 2001.

“When you have a recession, [TABOR] essentially moves the cap down,” he said. “It’s like not being able to refill the reservoir after a severe drought.”

As the economy improved, rebates to taxpayers grew larger and larger, reaching a total of about $1 billion out of an $8 billion general fund in fiscal 2005.

That’s why Mr. Buchanan’s group and education associations in the state are supporting the referendum, which was placed on the ballot following a bipartisan agreement struck in March between Colorado Gov. Bill Owens, a Republican, and top Republicans and Democrats in the legislature.

In his March letter to the state, Mr. Owens wrote: “I have never been one to shy away from spending cuts. But we have cut what we can responsibly cut.” He added that he thought residents would rather forgo their rebates than see more cuts to important programs.

If it passes, Referendum C will set a new cap at the highest level of state revenue reached between now and 2011, and allow those extra tax dollars—roughly $3.7 billion—to be spent on schools, higher education, and health care.

“This will help us keep the status quo,” said Jana Caldwell, a spokeswoman for the Englewood-based Colorado Association of School Executives, which includes principals and other administrators. “If it fails, we’re really going to be hurting. We are estimating that districts can plan to lose 3 to 5 percent of their current budget.”

In an effort to protect K-12 schools from TABOR, the voters also passed Amendment 23 in 2000, which requires per-pupil spending and funding for special “categorical” education programs to increase annually by at least the rate of inflation, plus 1 percent.

If Referendum C passes, Colorado will be able to fully fund that formula, which lawmakers have not yet done because of a dispute over the formula.

A Tight Race

If the K-12 system is hoping for the measure to pass, then higher education officials are desperate for its approval. Since 2001, spending on higher education in the state has declined from 20 percent of the state budget to 10 percent, even though enrollment has continued to increase, according to the Colorado Office of Planning and Budgeting.

Hank Brown, a former Republican U.S. senator from Colorado and now the president of the University of Colorado, has said he supports Referendum C and has warned that if it doesn’t pass, serious cuts are likely.

A companion ballot measure—Referendum D—would authorize the state to issue $1.56 billion in bonds to repair and maintain public schools in poorer school districts, build roads and bridges, and make facility improvements at state colleges and universities. Gov. Owens and education groups back the measure.

Observers presume that if one measure passes, the other is also likely to pass. But if C passes and D does not, the legislature will have more say over how the additional revenue is spent.

Recent polls have shown that the votes on referendums C and D will be very close, and that those who are portraying the adjustment to TABOR as a huge tax increase are also getting their message to the voters.

In an op-ed essay that appeared in The Denver Post on Sept. 4, former U.S. House Majority Leader Dick Armey, R-Texas, who co-chairs a conservative Washington-based organization called FreedomWorks, wrote: “If the people vote ‘yes,’ TABOR will change and the government will collect and spend $3.7 billion more in taxes than is currently allowed. That’s a tax increase—no matter how much political spin supporters try to put on it.”

FreedomWorks is one of the organizations pushing for TABOR amendments in other states.

Colorado’s Independence Institute has also been a leading opponent of both measures. The institute’s president, Jon Caldara, argues that Colorado taxpayers need the money more than the government does.

Pamela Benigno, the director of the Golden, Colo.-based institute’s education policy center, said that the condition of school funding is not as dire as some claim. In an e-mail message, she said, “Even if Referenda C and D pass, school districts will continue to demand more money.”

Vol. 25, Issue 08, Pages 17,21

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