A set of recommendations released Wednesday by Gov. John Hickenlooper’s blue ribbon commission TBD Colorado includes reforming the Taxpayer’s Bill of Rights, or TABOR, and finding revenue increases through tax increases and other reforms. The presentation has set off a heated debate over how the state should finance its “wish list” of services for the future.
TBD Colorado, short for To Be Determined Colorado, developed its recommendations following community conversations with more than 1,200 Coloradans during 70 public meetings across the state over the past year. Citizens weighed in on what services they would like to see the state invest in, and how to go about achieving those goals. Topics included education, health care, the state budget, transportation, state personnel and the state constitution.
Hickenlooper, a Democrat, heard the recommendations Wednesday at the Denver Botanic Gardens, where commission leaders held their presentation.
Greg Maffei, chairman of the eight-member board and a prominent Republican who is president and chief executive of Liberty Media, said the core concern is a conflict over three state constitutional amendments — TABOR, Gallagher and Amendment 23 — which essentially require spending, while also curbing expenditures and revenues collected.
TABOR is the amendment that curtails government growth, authored by the infamous Colorado Springs anti-tax Republican Douglas Bruce. Passed by voters in 1992, it prohibits any tax increase without a vote of the people. It also placed strict limits on how much revenue the state can keep and how much it can spend. Voters in 2005 backed Referendum C, which suspended for five years the growth limitation by ending a refund to taxpayers.
The result of TABOR was less government spending, which heavily impacted K-12 education. To solve the conundrum, voters in 2000 backed Amendment 23, authored by former Colorado Treasurer Cary Kennedy, a Democrat who is currently Denver’s chief financial officer and deputy mayor. It required K-12 funding to increase by inflation plus 1 percent for 10 years. It now just requires an increase by inflation. Because of the economic downturn, the measure was never fully implemented through 2011, and schools have been underfunded by as much as $800 million per year. Education advocates have sued the state for not adhering to the will of voters, and the state is currently appealing to the Colorado Supreme Court.
The Gallagher Amendment — named for its sponsor in 1982, former Sen. Dennis Gallagher, a Democrat, who is the current Denver city auditor — was designed to stabilize the ratio between property tax revenue from residential and business properties. Gallagher reduced the assessment rate whenever statewide total residential property values increased faster than business property values. The result has been that the assessment rate for residential property has declined, which has resulted in fewer revenues collected.
Maffei — who as a Republican faces conservatives who have pledged their allegiance to TABOR — said it might be time to take a look at reforming the conflicting mandates. He stopped short of calling for a repeal of TABOR, suggesting that Coloradans voiced their desire to still have the final say on tax issues. But he did say that there appears to be a will to ease conflicts.
“I’m a Republican, and I think you’ve got to look at the core finding, that we have a structural problem, and maybe Coloradans are going to choose to have some less services in some areas, some efficiencies, but in other cases, if they are going to choose to have those services, they are going to need to make choices about where their revenue comes from,” said Maffei. “No one wanted to remove the right of Colorado voters to make those choices.”
Part of the solution, TBD Colorado recommended, could be making it more difficult to amend the constitution, including increasing the number of signatures required for ballot access and requiring a supermajority of voters to change the constitution. But few specifics were offered.
Maffei added that it is not his role to gather support for any of his board’s recommendations, noting that TBD’s task was simply to develop recommendations. What happens with the recommendations is still unclear. Public officials and advocates could be driven to action, or the findings could collect dust.
“This wasn’t about the elected officials, and my job is not to convince Republicans, and it’s not someone else’s job to convince Democrats,” asserted Maffei. “My job was to be a part of a process that was to bring concerned citizens, interested citizens, forward to talk about issues that are important to Colorado.”
Authors react to recommendations
Douglas Bruce, who was released early from the Denver city jail in June after being sentenced to 180 days for using his charity to avoid income taxes, said attacks on TABOR are nothing new. The often cantankerous former lawmaker says battling the constitutional amendment will not lead to productive long-term solutions.
He says advocates for TABOR reform already failed with Referendum C. The initiative only served as a sort of band-aid, and Colorado’s budget outlook has declined since 2005. Bruce also points out that lawmakers find workarounds to TABOR, including when Democrats in 2010 pushed for the so-called “dirty dozen,” a package of bills that eliminated certain tax exemptions, credits and breaks for a variety of industries.
“TABOR isn’t about money,” Bruce said from his home. “It’s about citizen control of government. So, TABOR doesn’t need to be changed in the way that they would want to change it,” he said.
“They’re disregarding it anyway,” he added with frustration. “They keep saying Referendum C was going to be the fix that solves the problem, and they used a statute to amend the constitution, which you cannot do. But everybody is so illiterate because they’ve gone to government schools. They don’t understand, you can’t change a constitutional formula with a statute.
“There’s just no need to change TABOR at all,” he continued. “They’ve already gutted it; they’ve already blatantly violated it with the so-called ‘dirty dozen.’ Why don’t they just leave its bleeding corpse alone? There is no conflict.”
Rep. Mark Waller, R-Colorado Springs, who was recently elected by House Republicans to lead them in the minority next session, agreed that targeting TABOR is not the answer.
“The major concern for Republicans in the state is going to be that the folks that are pushing this TBD initiative are going to want to resolve the conflicts by getting rid of TABOR, and I can tell you, I certainly have absolutely no appetite to do that at all,” said Waller. “I think TABOR’s been one of the great things that’s kept this state out of many of the problems that other states have suffered.”
On the other side of the aisle, Gallagher also does not believe there is a conflict being caused by his amendment. Colorado State University business researchers have suggested that since 1982, the economic base of many Colorado counties has changed, which has caused residential values to change from 55 percent residential and 45 percent non-residential actual valuations. But Gallagher says his stabilization plan is still working and is not the problem.
“I don’t think my amendment adds to it. In counties where there is not a large amount of business — there is [a problem] in some of those rural counties — but overall, I think that keeping the residential at 45 percent and business at 55 percent has worked out pretty well,” said Gallagher. “I’ll be anxious to see what they come up with on this.”
Former House Speaker Andrew Romanoff, a Denver Democrat who in 2008 pushed a ballot initiative that would have reformed TABOR and done away with Amendment 23, said if there is to be a successful drive to untangle conflicting constitutional amendments, then proponents would need to be targeted in their approach.
His initiative would have directed surplus revenues from TABOR to a permanent savings account for education, which could have also been used as a rainy-day fund. Amendment 59 failed 45.7 percent to 54.3 percent.
Romanoff first pointed out that the measure was included on a crowded ballot with 13 other propositions. But most importantly, Romanoff said his approach wasn’t specific enough, and that voters were confused: “We were trying to untangle this fiscal knot in one fell swoop — not even untangle it, slice it — and so there were a lot of moving parts in our proposal… We tried to distill the argument, but the truth was, it was a complicated measure that sought to solve a complex problem.”
Raising taxes raises flag
Republicans have also signaled that tax increases should not be part of the solution. In several areas of its report, TBD Colorado recommends a revenue hike, most significantly for education, which might include a new tax, or mill levy increases, special districts and sales and severance taxes. In addressing budget woes, the board recommends “targeted revenue increases.”
The report also suggests changes to the tax code, such as addressing industries that are granted exemptions or taxed at a lower rate than others. Anther solution calls for reducing marginal tax rates.
Fees and tax modifications could also be associated, especially for transportation, including a vehicle miles traveled fee, indexing the gas tax to inflation, and greater regional funding authority.
But Waller cautioned against rushing to revenue enhancements: “We’re in the slowest economic recovery in the history of this nation, and the conventional wisdom is that raising taxes at this time will have a negative impact on that recovery.”
Sen. Greg Brophy, R-Wray, said government must first address entitlement reform: “Medicaid is not in the constitution, we can actually reform Medicaid, and we’d probably have enough money after that for all of the core functions of government.”
That said, Brophy is open to a discussion on tax reform, which could include extending the state’s sales tax to services: “What I think they said was we probably ought to be carrying sales tax on services, and I have to tell you, we do have to look at that, but I oppose it as a brand new tax increase on an already struggling economy. I don’t oppose it as part of a tax reform package.”
Hickenlooper was careful not to back any of the specific recommendations, and he was weary of directly addressing spending and revenue enhancements. But he did clarify an earlier comment that there is “no appetite” for a tax increase in Colorado.
“In a number of places, you saw people that were more aggressive in talking about new revenues,” he said. “There certainly was an appetite, if we’re going to have an education system that’s not 47th out of 50, we’re going to need to figure out some new money.”
Recommendations presented by TBD Colorado
Full-Day Kindergarten and Preschool
• Expand the number of children in the Colorado Preschool Program.
K-12 Education Funding
• Focus on how additional revenue could be targeted to improve outcomes for students, including a tax increase.
Higher Education Funding
• Include options such as mill levy increases, special districts, sales and severance taxes.
Increasing Efficiency of Administration
• School districts should consider consolidation to improve efficiency and responsiveness to students’ needs.
• Support the expansion of home and community-based services to increase patient satisfaction, create value and save money for elderly and people with disabilities; and
• Support additional utilization of managed care approaches to better coordinate care and control costs.
Prevention and Children’s Health
• Expand opportunities for youth physical activity; and
• Increase access to healthy foods.
• Work with private organizations to study options to address long-term spending and revenue issues;
• Create cost savings and increase efficiency;
• Consider “targeted” revenue increases;
• Consider changes to the tax code, including eliminating or revising tax rates, exemptions and deductions; and
• Encourage efficiency among local governments, such as consolidations.
• Fund the state’s merit pay system to provide incentives and rewards for performance.
• Choose how best to finance investments, including how best to maintain existing roads and bridges and to undertake new projects that relieve congestion and improve safety;
• Public-private and public-public agreements should be pursued to relieve congestion, including tolls and HOV;
• Continue research to fund maintenance and expansion;
• Continue educating the public about the status of transportation funding and the condition of the state’s aging infrastructure;
• Explore new funding mechanisms, including vehicle miles traveled fee, indexing the gas tax to inflation and greater regional funding authority;
• The state should play a bigger role in securing funding.
• Additional public engagement with the goal of identifying reforms;
• Implement a review commission to periodically review the constitution and recommend changes; and
• Make it more difficult to amend the constitution.