Colorados Experience with TABOR:

1

• Colorados Experience with TABOR
• A Cautionary Tale
• Tulsa, Oklahoma
• March 20, 2006
• Wade Buchanan
• The Bell Policy Center
• 303-297-0456 ? Toll Free 866-283-8051
• www.thebell.org

2
What is TABOR?

• A state constitutional amendment
• Limits annual growth in state and local budgets
  by a formula of consumer inflation (CPI) plus
  population growth
• Requires a vote of the people to override
  spending limits

3
COs Experienceat a Glance

• Colorado the Only State that has TABOR
• Colorado adopted TABOR in 1992
• TABORs growth formula permanently shrinks the
  public sector every year slowly when the
  economy is good and dramatically when the economy
  is bad
• Bad effects took some time to appear, but were
  severe
• In November 2005, Colorado voted to put TABOR in
  time out for five years and entirely eliminate
  ratchet thereafter

4
TABOR Shrinksthe Public Sector
7.35
6.19
Allowable TABOR Revenue
5.20
5
COs Shrinking Public Sector

• Fell from 35th to 49th in state and local
  spending for K-12 as a share of personal income
  between 1992 and 2001.
• Fell from 30th to 50th in teacher salaries
  compared to annual earnings in the private
  sector.
• Fell from 35th to 48th in state spending for
  higher education as a share of personal income
  between 1992 and 2004.
• Sources NEA, NCES, AFT, Grapevine, and CBPP

6
COs Shrinking Public Sector

• The FY 2004 appropriation for University of
  Colorado was roughly the same as the FY 1995
  appropriation despite 4,927 additional students
  and a 26 percent increase in consumer price index
• In 2004, Colorado ranked 44th in the number of
  children receiving scheduled immunizations
• Colorado fell from 23rd to 48th in adequacy of
  pre-natal care in the decade after TABOR passed
• Colorado fell from 33rd to 50th in percentage of
  low-income children with health insurance between
  1992 and 2004
• Sources The Bell Policy Center, CBPP and the
  University of Colorado

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How TABOR Shrinks the Public Sector

• The Consumer Price Index (CPI) does not reflect
  what state government buys
• Overall population growth does not reflect growth
  in the populations government serves
• The ratchet effect makes permanent the effects
  of temporary economic downturns
• SQ 726 has all three of these problems.

8
CPI Does Not ReflectWhat a State Buys
9
Overall Population Does Not Reflect Populations
Served by Government
POPULATION GROWTH (1990-2001) Total Population
vs. Specific Sub-Population
10
The Ratchet Effect Applied to Water Supply Our
Reservoirs are Always Full. The Drought is
Permanent.
Do NOT fill beyond this level
Photo source Colorado Division of Water
Resources, August 2002
11
TABOR Did Not ImproveColorados Economy
Source Bureau of Labor Statistics.
12
Why COs BusinessCommunity Cared

• When TABOR passed, Colorado was already behind in
  investments in K12 Education, Colleges and
  Universities, transportation and infrastructure,
  and other areas critical to a competitive economy
• TABOR ensured we could not catch up in any of
  these areas
• Is Oklahoma behind in any critical investments?
  Will TABOR help?

13
Business Leaders TABOR Hurts Economy

• For businesses to be successful, you need roads
  and you need higher education, both of which have
  gotten worse under TABOR and will continue to get
  worse.
• Tom Clark, Executive Vice President of the
  Denver Metro Chamber of Commerce
• The bottom line is that institutions of higher
  learning in Colorado will continue to suffer
  funding shortfalls under the present system. If
  you ask the business community, a strong system
  of higher education is at the top of the list for
  economic development and the creation of jobs.
• Dick Robinson, CEO of Robinson Dairy and
  member of the Colorado Economic Futures Panel.

14
Business Leaders TABOR Hurts 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

15
Business Leaders TABOR Hurts 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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SQ 726OKs TABOR

• Fundamentally similar to Colorado
• Constitutional amendment
• Budget tied to general inflation rate plus
  inflation
• Vote of the people required to suspend limits
• Spending limits unable to fully recover after
  downturns
• SQ 726 fails to fix the fatal flaws with
  Colorados TABOR