Initiative proposes tax hikes

The Colorado Statesman

Democratic legislators this week unveiled separate tax proposals intended to find a way out of the $375 million budget cut Gov. John Hickenlooper proposes for K-12 education.

The lead-off proposal this week was from Sen. Rollie Heath, D-Boulder, who said he will back a citizen’s statutory initiative to raise $1.63 billion for K-12 and higher education over the next three years. Heath’s proposal would raise the state individual and corporate income tax to 5 percent from its current level of 4.63 percent, and raise the state sales and use tax rate to 3 percent from its current 2.9 percent.

If approved by voters, the initiative could put as much as $285 million into the 2011-12 budget.

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Heath said his proposal was in response to several reports in recent weeks that detail just how bad the state’s fiscal situation is. “It’s very discouraging,” he said.

Heath was referring to a report released Feb. 25 by the University of Denver’s Center for Colorado’s Economic Future, which said the state could not grow out of its current budget problems. The second report, from the Buechner Institute at the University of Colorado Denver, pointed out that Colorado is a relatively wealthy state with low taxes. However, the February report said, Colorado is among the lowest-spending states in core services, and “the state has passed the point where it is operating efficiently to the point where levels and quality of services are suffering.” The report cited K-12 education; higher education, with a doubling in tuition since 2001; a rapidly growing rate of children in poverty, and a crisis in road and bridge repair.

Heath’s initiative, which he filed on Monday, would enact the tax increases for three years, beginning Jan. 1, 2012 and ending Dec. 31, 2014. He pointed out that the initiative would temporarily return the state to the same tax rates that were paid in 1999.

That was at a time when the state was flush with cash. In September 1999, Gov. Bill Owens announced that the TABOR surplus for 1999-2000 was $941.1 million, and that taxpayers would get average refunds of $267 each. That same year, the state income tax rate was reduced from 5 percent to 4.75 percent; the following year it was reduced again, to 4.63 percent, both as acts of the General Assembly. The reduction in the sales tax took place at the same time, along with a number of other tax-cutting proposals. The impact of those tax cuts have resulted in $4.8 billion less in total state revenue since 1999, with $519.5 million lost in 2009-10 alone.

Heath said Monday his proposals would not conflict with six others that were filed Feb. 3 by the Colorado Fiscal Policy Institute. In the end, there will be only one proposal that goes forward to voters for the 2011 ballot, he said.

“Our kids can’t wait,” Heath said, in announcing his initiative. He said the “straw that broke the camel’s back” was Hickenlooper’s announcement that he would cut $375 million from K-12 education.

“We’ve talked endlessly about how to finance the state, and every year we’ve found reasons not to do anything about it,” he said. The end result, he explained, is that Colorado’s education system is less competitive with other states and with other countries. “That’s not the kind of state I want to live in. I expect the state to give a child a competitive education, and we’re not doing that.”

“We have delayed asking for too long what kind of state the citizens of Colorado want to have,” Heath said.

During the three-year period of the tax hikes, Heath said the state could have the conversation about what to do long-term. “It will take time to figure out how to make TABOR and Gallagher work together.”

He described his initiative as a short-term fix and time-out, like the 2005 Referendum C measure. “We’ve sunk to the depths. We can’t let it go any further — we’ve got to stop the bleeding now.”

Hickenlooper has said repeatedly that citizens are not ready for a tax increase, but Heath said he thought “the world changed when we saw the reality of the budget…I think people are ready to take this on. I am in hopes that citizens will say ‘enough is enough.’”

Heath said he has not asked the Democratic caucus to take a position on his initiative, and he has yet to put together the business, education and community coalition that will be needed to get the measure passed in November.

But Heath also acknowledged that the money might not go where he wants it to, which also became a problem with Referendum C. While it was billed as a way to help fund higher education and health care, much of the Ref C dollars ended up funding transportation, a function of the state’s statutory fiscal structure. “It’s up to the General Assembly and the Joint Budget Committee to decide where to put it,” Heath said, but added that voter intent is that it goes to K-12 and higher education.

Senate President Brandon Shaffer indicated he would not support Heath’s proposal. “It’s not an option I’m looking at,” he told reporters Monday. “We’re focused on what we can accomplish in the Legislature” and on balancing the budget. “We have to look at revenues and the current tax structure.”

Shaffer pointed out that he has asked his committee chairs to go through the budgets of the departments they oversee and come back to him by March 7 with ideas on where to further cut, in order to spare K-12 education some of the cuts proposed by the governor. He said there have been positive discussions and a few suggestions, and feasibility tests will be needed to vet those ideas.

Sen. Greg Brophy, R-Wray, observed the Monday press conference and said that the proposal “shows a disconnect between Democrats and the people of Colorado.” When the recession is over, revenues will recover, he said.

Brophy downplayed Heath’s assertion that businesses that want to relocate to Colorado want to know about the education system and the education of the workforce. “They also need a tax system that helps them be profitable,” Brophy said.

He also believes the cut to K-12 education proposed by Hickenlooper won’t be as big as what is proposed, and suggested cutting Medicaid spending, which he said would reduce the K-12 cuts.

The initiative’s $1.63 billion “ought to stay in the pockets of the public,” Brophy said.

Marianne@coloradostatesman.com