Colorado lawmakers turn to ‘fees’ to avoid Taxpayer Bill of Rights limits

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Posted: Sep 11, 2017 11:31 AM

Colorado state lawmakers increasingly engage in fiscal gymnastics to get around provisions of the state’s landmark Taxpayer Bill of Rights (TABOR), according to both supporters and critics of the state’s 25-year-old constitutional amendment.

Approved by voters in 1992, the TABOR amendment mandates that state and local governments get voter approval for specified tax increases, and it limits the rate of government spending growth based on population increases and inflation.

Though a subsequent voter-approved measure eased the spending cap, critics like Jon Caldara, president of the Denver-based Independence Institute, say the legislature has turned to “dark money,” such as newly designated “fees” that don’t require votes of the people, to avoid TABOR’s restrictions. Colorado courts have tended to uphold those TABOR workarounds.

In a blog post, Caldara pointed to efforts to create a hospital provider fee as one of the ways lawmakers evade the spirit of the amendment and avoid difficult budget decisions. The bill exempting the hospital fee from the TABOR spending cap was signed by Gov. John Hickenlooper in May.

Caldara credits TABOR with helping the state avoid economic pain. When the nation went into a recession in 2002, other states saw huge drops in revenues that caused massive budget shortfalls, but that didn’t happen in Colorado, he said.

Other observers, however, say TABOR has made Colorado nearly impossible to govern.

“From my perspective, it’s an unmitigated disaster,” Colorado State University political science professor John Straayer told Watchdog.org. “It’s stripped the legislature of its fiscal authority.”

Under TABOR’s provisions, lawmakers can’t enact a new tax or continue a tax scheduled to expire without a vote of the public. School districts and counties also fall under the restriction, Straayer said.

At the same time, lawmakers must deal with the increasing costs of the Medicaid program as well as a voter-passed amendment in 2000 mandating a minimum level of funding for K-12 education, he said.

“We’re trying to run the state with one foot on the gas and one foot on the brake,” said Straayer, quoting a line from former Colorado House Speaker Andrew Romanoff.

The legislature has engaged in workarounds and has raised fees on things like license plates and vehicle registrations, and Republicans have been incensed by the increasing reliance on such fees, which they say are just taxes by another name, Straayer said.

“The reason is that the legislature, in desperation to balance the budget and keep programs going, had to pull one rabbit after another out of the hat,” he said.

A fee, according to the nonprofit TABOR Foundation, allows governments to recoup the cost of providing a service to a specific beneficiary. A tax, on the other hand, applies to a more broad population and has as its primary purpose to raise revenues.

One potential problem with the TABOR spending cap is that it is based on inflation and population growth, but those indicators do not track income and productivity, according to Straayer. In turn, the state has handed out TABOR-mandated rebates to taxpayers over the years while money for transportation and higher education has eroded, he said.

At the same time, the political climate in Colorado and the nation has changed as what Straayer calls the anti-government industry has gained ground, making changes to TABOR politically challenging.

However, one lawmaker this year advanced a bill that would have modified TABOR’s spending cap formula. Rep. Dan Thurlow, R-Grand Junction, sponsored legislation that would have revamped the cap based on a five-year average of personal incomes within the state.

Using the national inflation rate as a benchmark to limit spending doesn’t really relate to what’s happening in Colorado, Thurlow said.

“What my premise is, is that it’s a false measurement to use,” he told Watchdog.org.

Personal income is outpacing inflation by 1.6 percent a year, according to Thurlow. That measurement would be more workable for Colorado, and it’s time to take a hard look at how TABOR is functioning after 25 years on the books, he said.

In terms of state support for K-12 education, higher education, and roads and highways, Colorado finishes at the bottom of the pack compared to other states, Thurlow said. He agrees that the concept of limiting government is a good one but says that the fiscal process is undermined by the current system.

“It creates a disingenuous relationship between voters and legislators …” Thurlow said. “There is constant pressure to, I guess the word is, cheat.”

Lawmakers have created a patchwork of fees that don’t technically increase taxation under the legal definitions of the words, he said. And others complain that this process is complex and often hidden from voters.

Thurlow’s bill passed the House but died in a Senate committee because the leadership did not want to give it a floor vote, he said.

State Senate President Kevin Grantham, R-Cannon City, continues to support TABOR.

“Taxes and fees should be levied only through the strict adherence to TABOR without circumvention through the use of fee increases and the Colorado Supreme Court,” he said in a statement on his website.