Ref C is over, but ramifications live on in political world

By Marianne Goodland
THE COLORADO STATESMAN

DENVER — On Tuesday, anti-tax groups and the Golden-based Independence Institute gathered at the state capitol to celebrate the end of Referendum C and what they called “the return of TABOR,” the acronym for the Tax Payers Bill of Rights.

Jon Caldara, president of the Independence Institute, speaks of the importance of ridding Colorado taxpayers of Referendum C on July 13 at the Capitol.
Photo by Jamie Cotten/The Colorado Statesman

Jon Caldara, president of the free marketplace institute and a longtime vocal critic of the referendum approved by Colorado voters in 1995, joked that he “mourned” the passing of Referendum C and that it “obviously brought us all the things it promised — a robust budget, saving higher education and health care system and the state. It worked like a charm. I’m so glad we did it,” he quipped with sarcasm dripping in his voice.

July 1 marked more than just the beginning of another fiscal year. It also marked the first day that the state of Colorado no longer had a TABOR time-out established through Referendum C. And the end of Referendum C was celebrated this week by anti-tax groups and the conservative Independence Institute.

Referendum C began retroactively for the 2005-06 budget year, and continued for a five-year period ending June 30, 2010.

The referred measure from the General Assembly was designed to split the TABOR surplus and into thirds, with one-third to higher education, one-third to K-12 and one-third to healthcare. In addition, the measure would reset the state’s TABOR revenue limit at its highest point during the five-year period, adjusted by inflation plus population growth for each subsequent year. According to a July 2009 Legislative Council report, that high point is 2007-08.

But revenue available from the Referendum C time-out, according to the Legislative Council report, occurred only in three of the five years. Between FY 05-06 and FY 07-08, the state retained $3.6 billion in surplus revenue that it could spend on higher ed, K-12 and health care. Due to the recession that began in FY 08-09, the state had no TABOR surplus revenues for the last two years of the five-year period.

Amy Oliver Cooke, founder of Mothers Against Debt and director of the Colorado Transparency Project for the Independence Institute, speaks about the importance of TABOR on July 13 at the Capitol.
Photo by Jamie Cotten/The Colorado Statesman

And during the next two years, the state will be able to retain revenues that exceeded the old spending limits, because Referendum C pushed the spending limits higher. According to a 2009 Legislative Council report, state revenues are projected to be well below the new spending limits established under Referendum C. The report estimated those revenues at $464.3 million in 2010-11 and $937 million in 2011-12. In the most recent economic forecast, issued in June, those figures had changed to $748.4 million in 2010-11 and $752.5 million in 2011-12.

John Stephenson of the National Taxpayers Union said his group’s members welcome the end of Referendum C and the beginning of “a new chapter in the TABOR success story.” The return of TABOR is a momentous event, he told reporters. Coloradans can look forward to tax relief in the years ahead, he said, and take comfort in knowing that they will have the ultimate authority in controlling the budget.

Stephenson and other speakers took aim at the members of the Colorado General Assembly of the past five years, claiming that without TABOR, they would spend every nickel they get. “When it comes to government, smaller is better,” he said.

“The timeout was a lie,” said Marty Nielsen of the Colorado Union of Taxpayers.

TABOR is a “parent’s best friend,” said Amy Oliver Cooke of Mothers Against Debt, a project of the Independence Institute. “It’s the only line of defense between the spending bullies in this building and families.”

Caldara pointed out that Referendum C was supposed to go to K-12, higher education and health care, but that wasn’t the case. And that’s a point that was acknowledged early on, even by its supporters.

In March 2006, barely five months after the voters approved the time-out, the Joint Budget Committee released documents showing that much of the Referendum C dollars in the first two years would instead go to transportation under existing statutory requirements. In his budget submission just three weeks after the vote, then-Gov. Bill Owens made transportation projects a top priority for Referendum C revenues. In the November 28 request, Republican Owens proposed that $296 million out of $440 million available from Referendum C go to transportation in 2005-06. At that time, Owens said the voters “clearly understood — and expect — that some of the money from Referendum C would go to roads.”

And by 2007, voters indicated they believed the promises made under Referendum C were not being kept. A 2007 survey conducted by Hill Research Associates on behalf of the Denver Metro Chamber of Commerce said that 39 percent of 620 respondents said the money had “somewhat” been spent as intended; another 21 percent said it had not been spent as intended. Only 17 percent of respondents said Referendum C money had or “mostly had” been spent as intended. In addition 43 percent of respondents said transportation was the big winner of Referendum C; higher ed was viewed as the big winner by just 3 percent of respondents.

State Sen. Shawn Mitchell, R-Broomfield, disputed some of the common myths about TABOR and its impact on the state budget during the current recession. TABOR has not been a “straitjacket” on state government,” Mitchell said Tuesday. “The budget challenges we face today have nothing to do with the spending limits from TABOR,” Mitchell explained; it’s challenged because the economy is struggling. In one sense, the celebration is hypothetical, he said, because the economy will have to come back before the TABOR surplus resumes, and the revenues available for refunds are once again available.

“The Legislature has stretched the law to the breaking point,” Mitchell said, pointing to recent efforts to raise taxes and fees with the Colorado Supreme Court covering “its back. The return of taxpayer protections under TABOR is a happy day for Colorado taxpayers,” he said.

And despite claims that Referendum C was over as of July 1, Caldara acknowledged that one aspect of it would never go away — its reset of the TABOR spending limit during the time-out. “That’s a permanent angle to Referendum C,” Caldara admitted. “The largest budget of the last five years” is now the spending limit.

That high point, in 2007-08, was $7.687 billion, as reflected by the June 2009 Legislative Council economic forecast. The 2010-11 estimated budget is $7.119 billion, although that number may drop because of increased revenue shortfalls and the possibility that the state may have to cut another $245 million because Congress has so far failed to enact a six-month extension of enhanced federal Medicaid payments.

Caldara said that without Referendum C the state would have faced fiscal realities sooner and could have made smaller reductions along the way instead of huge ones in the last two years. “Did it help higher education or health care? It prolonged the problem,” he said.

State Sen. Shawn Mitchell, R-Broomfield, says “the return of taxpayer protections under TABOR is a happy day for Colorado taxpayers.”
Photo by Jamie Cotten/The Colorado Statesman

Caldara also disputed one question from reporters that Tuesday’s celebration was an insult to the voters who supported Referendum C. The measure passed with 52 percent of the vote, just 1.7 percent less than the winning percentage for TABOR in 1992. Caldara said that Referendum C was supported by 1,100 groups that “had their hands out [for Ref C revenues]. It wasn’t a Republican or Democrat effort — it was taxpayers versus tax-spenders.”

Notable in his absence was TABOR author Douglas Bruce. Caldara joked that he had sent Bruce an invitation to attend 29 times, referring to the 29 attempts by the El Paso County Sheriff’s Department to serve him with subpoenas to testify in a trial in Denver related to three tax-cutting ballot measures on the November ballot.

Speaker of the House Terrance Carroll, D-Denver, was not available for comment Tuesday. But one of the groups that supported Referendum C in 2005 issued a statement rebuffing some of the comments made Tuesday at the capitol.

“I suggest that Jon Caldara and his friends actually read Referendum C before celebrating too hard,” said Wade Buchanan, president of the liberal Bell Policy Center. “Referendum C did not end at the beginning of this month. Coloradans will be benefiting from its effects for many years to come.”

Buchanan noted in his statement that the new spending limit imposed by Referendum C is $2 billion higher than the old TABOR limit, and did not have the “draconian ratchet effect of the old spending limit.

“Governor Owens and the others who crafted Referendum C showed great foresight,” said Buchanan. “They designed a mechanism that not only allowed Colorado to recover from the economic downturn in the early part of this decade, but which would ensure that our schools, community colleges and other public systems would be able to recover from future downturns as well.

“Because of Referendum C, class sizes have been smaller, tuition has been lower, more families in need have received health coverage and more construction workers have had jobs fixing roads and bridges in Colorado,” said Buchanan.

“Because of Referendum C,” Buchanan said, “Colorado will have $750 million more in just the current fiscal year alone (FY 2010-11) to help schools and other critical public systems recover from the current brutal economic downturn. Avoiding that level of additional cuts may be bad news for the anti-government crowd but it’s finally a little bit of good news for Colorado businesses and families. It’s good news for our economy and our quality of life,” he concluded.

Referendum C also has been a political “hot potato” for Republicans who supported it in 2005. In a 2006 interview with ColoradoBiz, Owens cited the passage of Referendum C as his greatest accomplishment as governor. But it cost him support from conservative groups like the Colorado Union of Taxpayers. In 2002 they called him “the best Governor in America,” but at the end of his 2006 term, they called him “spineless” in his protection of taxpayers, based in part on his support for Referendum C.

Owens’ lieutenant governor during that time, current U.S. Senate candidate Jane Norton, also has taken heat from conservatives and her fellow Republican candidates over her support of Referendum C. In an interview last month with The Colorado Statesman, Norton defended her support of Referendum C but indicated she wouldn’t do it again. “I did support Ref C, but I am an advocate of TABOR,” Norton told The Statesman. However, “I would not support a Referendum C in this environment. I regret that the money didn’t go to what — as Hank Brown and I talked about it — the money didn’t go to what it was intended to go to. But I do believe strongly that people should have a say.”

Marianne@coloradostatesman.com