Education Funding

Colorado Voters Suspend Revenue Limits

By Linda Jacobson — November 08, 2005 5 min read
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In a victory for major Colorado school groups and Gov. Bill Owens, voters there approved a statewide measure last week that suspends the state’s Taxpayer Bill of Rights, or TABOR, and will allow roughly $3.7 billion in additional revenue to be spent on education, health care, and transportation projects.

The proposal, called Referendum C, won with 52 percent of the vote on the Nov. 1 ballot. Its passage curtails for five years the strictest constitutional limits on state and local revenues in the country. Voters, however, narrowly turned down a companion bond issue, Referendum D, that would have allowed state officials to borrow up to $2.1 billion and start spending on repairs in some of Colorado’s needier school districts to comply with the terms of a lawsuit against the state.

That money also would have been used to construct roads and bridges, and to build facilities at state colleges and universities. Just over 50 percent of the voters rejected the bond measure, according to unofficial election results late last week.

Tax-Control Setback?

But the passage of Referendum C, which was strongly opposed by groups advocating low taxes in Colorado and around the country, could slow efforts to get small-government measures passed elsewhere. Groups such as FreedomWorks, a Washington-based group co-chaired by Dick Armey, the former Republican majority leader in the U.S. House of Representatives, have been pushing TABOR-like constitutional amendments in Kansas and Wisconsin.

Colorado Voters Decide

Two high-profile referendums that sought new revenues for K-12 education and other social programs and that were backed by Colorado Gov. Bill Owens met different fates in a statewide ballot on Nov. 1.

Referendum C: PASSED

Reallocates $3.1 billion in revenue surplus over the next five years.

K-12 schools: Textbooks, libraries, kindergarten and preschool, in-classroom instruction.

Health Care: Health care for Colorado’s elderly, low-income, and disabled populations; programs to lower health-insurance costs for individuals and small businesses.

Community Colleges and State Colleges: Need-based financial help; merit-based financial aid; College Opportunity Fund Program.

Repayment of Referendum D Bonds: Would have helped state repay bonds if other referendum had been approved.

Referendum D: FAILED

Provides bonding capacity for $1.56 billion in capital investments.

$1.2 Billion for Roads and Bridges: A specific list of road and bridge construction projects across Colorado.

$147 Million for K-12 Schools: Capital fund to repair dilapidated school buildings in poorer districts; traditionally a 2-to-1 matching grant fund, the $147 million would leverage into $220 million in total improvements.

$50 Million for Higher Education: Improvements and repairs to facilities at state universities, colleges, and community colleges.

$175 Million for Fire/Police Pension: Colorado’s outstanding share of state-local match of police-fire pension plan.

SOURCE: Education Week

“It is certainly disappointing to see a flagship fiscal limit like TABOR suffer an electoral defeat,” Michael J. New, an adjunct scholar at the Washington-based Cato Institute and an assistant professor at the University of Alabama, wrote Nov. 2 in National Review Online, the Web-based counterpart of the prominent conservative magazine. He added: “Fiscal conservatives certainly have their work cut out for them.”

Meanwhile, Jon Caldara, the president of the Independence Institute, a Golden, Colo.-based free-market think tank, told the Rocky Mountain News of Denver that he was considering a legal challenge on the grounds that the vote undermines the Colorado Constitution without amending it. Mr. Caldara, who led the fight against the measure, has railed against Referendums C and D on his evening radio show.

Opponents of the measures weren’t the only ones across the country keeping a close watch on the state’s election results.

“Colorado voters sent a clear message yesterday: High-quality public services matter and are essential to the health, safety, education, and prosperity of Colorado citizens,” Edward J. McElroy, the president of the Washington-based American Federation of Teachers, said in a Nov. 2 press release. “What united these supporters was the stark realization that TABOR was crippling state services and undermining Colorado’s future growth and prosperity.”

‘On a Good Track’

Amendment 23, a measure passed in 2000 that is supposed to protect K-12 funding from TABOR by requiring the education budget increase at the rate of inflation, plus 1 percent, was not fully funded because of state budget cuts.

With Referendum C, that school aid formula will now “be stable for the next six years,” said Phil Fox, the deputy director of the Englewood-based Colorado Association of School Executives, an organization of principals and other administrators.

With one referendum passing and the other failing, some supporters of both proposals felt a bit conflicted last week.

“We got the one that was most important, absolutely,” said Heather McGregor, a spokeswoman for the Bell Policy Center, a Denver-based think tank that promotes economic and educational opportunities for Colorado residents. “We’re happy, but there’s a definite tone of disappointment. But Colorado is now on a good track, and we can figure out other ways to meet those needs.”

Mark Salley, a spokesman for Gov. Owens, said rejection of Referendum D doesn’t mean Colorado residents don’t value improvements to transportation and school buildings.

“It says that voters weren’t comfortable with the bonded indebtedness,” he said.

Under Referendum C, roughly a third of the $3.7 billion will be used to support reading programs, reduce class-sizes, purchase textbooks, and make other improvements in K-12 schools. Another 30 percent will go toward higher education, whose finances—like those of K-12 education—have been hit hard since 2001. Since then, state spending on higher education 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.

A Strict Limit

Since its approval by Colorado voters in 1992, TABOR has limited revenue collection to the rate of inflation, plus an adjustment based on the percentage of annual population growth. Anything over that formula was sent back to the taxpayers in the form of rebates. Since 1997, taxpayers have received over $3.2 billion.

The formula-driven revenue caps fell after the state’s economy entered a recession in 2001. And even though the economy began improving, the state had to keep cutting the budget to meet the caps, which continued to reflect the low points reached as the result of the poor economy. In the meantime, taxpayer refunds grew larger as overall revenue climbed. That’s why Gov. Owens, a Republican, supported Referendum C, which was the result of a March budget compromise between the governor and top Republicans and Democrats in the legislature.

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 to be used for state projects.

Ms. McGregor at the Bell Policy Center, however, doesn’t think the five-year suspension of Colorado’s TABOR amendment will deter small-government and tax-cut advocates.

But, she said, it has “sent a message to the rest of the country how Colorado has felt about the restrictions of TABOR.”

Pamela Beningo, the director of the education policy center at the Independence Institute, said she was still encouraged by the fact that almost 48 percent of the voters “declared that government should streamline its budget rather than take more money from families.”

“I hope that legislators keep this in mind,” she said, “and don’t go on a spending spree.”

“This is huge,” Mr. Fox said, adding that the education community is “just ecstatic about the passage of C. Had C failed, there were going to be major cuts in K-12 [spending].”

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A version of this article appeared in the November 09, 2005 edition of Education Week as Colorado Voters Suspend Revenue Limits

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