TABOR: A Proven Failure

1
TABOR A Proven Failure

• Carol Hedges
• September 2005

2

• What is a TABOR?
• A state constitutional amendment
• Limits growth in state and local budgets by a
  formula of inflation (CPI) population
• Shrinks state and local budgets over time

3
Colorado is the Only State in the Nation that
has TABOR

• CO adopted its Taxpayer Bill of Rights (TABOR) in
  1992
• TABOR strangles budgets slowly, squeezing tighter
  every year. Bad effects took some years to
  appear, now are hurting CO
• In November 2005, CO will vote on a TABOR reform
  proposal to retain revenue and restore some
  deteriorated public services

4
Pro-TABOR Movement in Kansas

• Rep. Brenda Landwehr and members of the national
  organization Americans for Prosperity (AFPF) are
  on-tour throughout Kansas promoting a TABOR for
  Kansas
• They want to get it on the Nov. 2006 ballot
• But they are not telling voters the truth about
  CO, where TABOR has been a proven failure

5
Consequences in CO

• In 1991-92, CO ranked 35th in state and local
  spending for K-12 as a share of personal income.
  In 2000-01, it fell to 49th
• In 1991-92, CO ranked 30th when comparing the
  average salary of teachers to annual earnings in
  the private sector. In 2001-02, CO fell to 50th
• In 1991-92, CO ranked 35th in state spending for
  higher education as a share of personal income.
  In 2003-04, it fell to 48th

Sources NEA, NCES, AFT, Grapevine, and CBPP
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Consequences in CO

• The appropriation for University of Colorado in
  FY 2004 was roughly the same it received in FY
  1995 but it has an estimated 4,927 additional
  students
• In 2004, CO ranked 44th in the number of children
  receiving scheduled immunizations
• In 1992, CO ranked 23rd in adequacy of pre-natal
  care. In 2002, it ranked 48th
• In 1992, CO ranked 33rd in percentage of
  low-income children lacking health insurance. In
  2004, it ranked 50th

Sources The Bell Policy Center, CBPP and the
University of Colorado
7
TABOR Did Not Improve COs Economy, as Proponents
Claim

• Source Bureau of Labor Statistics.

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Evidence TABOR Hurts CO Economy

• A good business climate depends as much or more
  on the quality of public services as it does on
  the states tax level
• Deloitte Touche/Fantus Consulting
• The business community has said this is not good
  for business, and this is not good for Colorado"
• Gail Klapper, director of the Colorado Forum,
  which represents about 60 businesses statewide

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Evidence TABOR Hurts CO Economy

• Face it, business leaders have done a sober,
  businesslike assessment of where Douglas Bruce's
  Taxpayer's Bill of Rights (TABOR) has left
  Colorado -- and they don't like what they see.
  They've figured out that no business would
  survive if it were run like the TABOR faithful
  say Colorado should be run -- with withering tax
  support for college and universities, underfunded
  public schools and a future of crumbling roads
  and bridges.
• Neil Westergaard, Editor of the Denver Business
  Journal

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Evidence TABOR Hurts CO Economy

• The Taxpayer's Bill of Rights, with some
  positive attributes, is about tightly
  controlling, actually strangling, Colorado's
  income statement, its income and expenses.
  Spending on prisons, medical care for the elderly
  and K-12 education increases faster than
  inflation, forcing all other public needs to
  suffer. But while the unrealistically simplistic
  TABOR strategy is being executed, by
  constitutional edict, the decay of Colorado's
  balance sheet, its net worth, representing the
  publicly owned capital stock that provides the
  foundation for economic activity, is
  unprecedented. It will, if unchecked, eventually
  lead to economic decay.
• Rocky Scott, President,
• Colorado Springs Economic Development Corporation

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Why Would Any Other State Want to Repeat
Colorados Mistake?

• The Kansas (Landwehr/AFPF) proposal is very
  similar to COs TABOR
• Constitutional
• Holds annual expenditure and revenue growth to
  inflation plus population and
• Requires popular vote to override
• And would negatively impact Kansas, just like
  TABOR did in Colorado

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If KS TABOR Had Begun in 1993, State Expenditures
Would Have Declined by a Total of 8.5
Billion
Source CBPP analysis of data from the Kansas
Legislative Research Department .
13
If KS TABOR Had Begun in 1993, the States FY
2005 Budget Would Have Been 890 Million Less
Resulting in Severe Cuts to Important Programs
Other Includes Agricultural Natural
Resources, Youth programs, Judiciary, Highway
patrol and other government.
Assumes categories of expenditures would be cut
in proportion to their share of the total SGF
budget
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444 million in cuts from K-12 Education in 2005
How?

• Increase the pupil-teacher ratio from 15.3 to
  23.4
• - OR -
• Shorten the school year by 23 days

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351 million in cuts from Health Care in 2005
How?

• Eliminate coverage for 50,000 Kansas children
  (55 million), AND
• Eliminate ALL Medicaid payments to the 29
  Community Health Centers (90 million ), AND
• Eliminate 40 of funding for home and
  community-based care services which serve 25,000
  Kansans (143 million), AND
• Eliminate prescription drug coverage for half of
  the adult Medicaid beneficiaries (63 million)

Includes 221 million loss of federal funds
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123 million in cuts from Higher Ed in 2005 How?

• Increase tuition for in-state students by
  1,400
• - OR -
• Cut 39 of the teaching staff

17
25 million in cuts from Corrections in 2005How?

• Let 1,300 - 1 out of every 7 inmates go free
• - OR -
• Fire 610 employees, roughly 22 of the workforce
  in the states eight correction facilities

18
163 million in cuts from Other Programs in 2005
How?

• Eliminate ALL funding for the state judiciary
  program (91 million), AND
• Eliminate ALL funding for the highway patrol (31
  million), AND
• Eliminate ALL funding for The Department of
  Agricultural and Natural Resources (27
  million), AND
• Eliminate ????? (14 million)

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Why Are the Required Cuts So Deep?

• TABORs inflation-plus-population formula doesnt
  capture the growth in costs of the goods and
  services purchased by the state
• CPI measures what consumers buy, not what
  governments buy
• Subpopulations that governments serve (i.e.
  prisoners, special education students, the
  elderly) generally are growing more rapidly than
  overall population
• So each year, the state can spend a little less
  than it needs to over time, the gap grows

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The Consumer Price Index Does Not Reflect What a
State Buys
Comes from State Highway Fund
21
CPI Does Not Reflect How Much Faster Costs Rise
for the Things that a State Buys
Percent change in CPI measures from 1993 to 2003
22
KS Elderly Growing Faster than Total Population
By 2030, 1 out of every 5 Kansans will be over 65
Source US Census Bureau
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Putting the Flawed Formula in the States
Constitution is Dangerous for 3 reasons

• TABOR becomes permanent even if it doesnt work,
  getting it back out of the constitution would be
  extremely difficult
• Money becomes the name of the game statewide
  campaigns to pass a constitutional override are
  very costly. This favors special interests that
  have large amounts of money
• 3. Elected state legislators become powerless
  TABOR does not allow them to make the tough
  decisions they were elected to make

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Unintended Consequences

• Shifting burden to local level-increase in
  property taxes
• Increase in fees for licenses, new homes,
  permits, tolls, etc.
• Inefficiencies (i.e. deferred maintenance on
  buildings and roads outdated technologies)
• Loss of federal money

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The Bottom Line

• TABOR is a proven failure in Colorado why
  adopt it in Kansas?
• TABOR will undermine education, health care, and
  other vital services in KS