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Budget battle begins

Final budget proposal may be a chimera

By Leigh E. Rich

In a desperate attempt to put Humpty Dumpty back together again, it seems all the state’s lawmakers have weighed in recently about how to fix Colorado’s cracked budget. They have no choice. Colorado’s Constitution requires a balanced budget every year.

And this fiscal year, the state is expected to come up short—to the tune of $234 million, according to state Treasurer Mike Coffman. Like the many budget proposals issued just in the past month, that number has varied, depending on the source, to as much as $263 million.

Most of the state’s public officials at least agree as to why Colorado is in the fix it’s in: a “perfect fiscal storm” resulting from a combination of the economic recessions beginning in 2001 and several state constitutional amendments that both limit and mandate government spending.

During his State of the State address last week, Gov. Bill Owens reiterated the now oft-heard remark by members of both sides of the aisle that the 1992 Taxpayer’s Bill of Rights (TABOR) amendment is not the lone culprit.

“It’s become fashionable in many circles to blame TABOR for every challenge that Colorado faces. That’s not fair. And, worse, it’s simply not accurate,” the governor told a packed House chamber last Thursday.

TABOR, a revenue limit, restricts the growth of government by limiting the amount of revenue the state can keep, and thus spend, from year to year. It also dictates that any tax increases must be approved by the voters.

“You and I know the facts,” Owens said. “The combination of a recession, the terrorists attacks, the drop in tourism, the effects of a devastating drought and the fire season—all of these factors hit our budget hard (and) led to an unprecedented 16 percent drop in revenue over two years.”

In the past month, even House Speaker Andrew Romanoff, D-Denver, and Senate President Joan Fitz-Gerald, D-Jefferson County, said as much. Romanoff, speaking at a legislative forum in December, and Fitz-Gerald, during her opening day address last Wednesday to the state Senate, credited “a devastating recession” as the greater part of Colorado’s economic problems.

Both Owens and the state Democrats already have unveiled their own proposals to address the state’s budget blues.

During his State of the State address, Owens encouraged legislators to “ask the taxpayers’ permission to keep some of these available TABOR surplus dollars” that have accumulated as the economy has started to rebound.

Owens’ five-point budget plan includes retaining $500 million of the $540 million TABOR surplus expected over the next two years; investing $100 million annually in transportation projects, allowing the state to bond up to $1.7 billion; securitizing Colorado’s portion of the 1998 master tobacco settlement into an immediate lump sum to be partially used as a short-term fix; eliminating the ratchet effect during and following recessions; and reducing the state’s income tax rate from 4.63 percent to 4.5 percent.

The 0.13 percent reduction in income tax was originally Romanoff’s idea, put forth last summer, and the new House speaker smiled broadly, shaking his head in agreement, when Owens mentioned it during the State of the State.

Romanoff’s plan from seven months ago also included eliminating the structural deficit caused by TABOR restrictions and 2000’s K-12 educational spending mandate, Amendment 23, over the next two years. The original proposal called for some combination of removing TABOR’s current inflation-plus-population growth spending limit and Amendment 23’s inflation-plus-1 percent funding increase or increasing TABOR’s base spending limit and delaying 23’s mandated yearly 1 percent increase. It would leave Colorado’s 6 percent growth cap on allowable spending intact.

Updated plans from the Dems are currently under way. According to Joey Kirchmer, assistant communications director for the House Democrats, Romanoff says that the Democrats “are continuing to negotiate and we believe we’re very close to a proposal.”

Last Friday, the Republicans put in their two cents, as Rep. Keith King, R-Colorado Springs, and Sen. Ron Teck, R-Grand Junction, added their plan to the growing list.

Calling his initiative “a simple approach,” King said the GOP bill “makes more palatable sense to the voters of Colorado” because it doesn’t change TABOR or Amendment 23.

“Both of them were quite popular with the voters,” he said, who “do not want us to dramatically change anything.”

Instead, the King-Teck plan calls for lowering the state income tax rate to 4.45 percent; reducing the appropriations growth cap from the current 6 percent to 5 percent over the next three years; and increasing the TABOR allowable spending limit by one-third of 1 percent of taxable income—putting this money equal to the amount the TABOR limit was lowered by the State Education Fund back into the general fund and “fulfill(ing) the original philosophical concept of the surplus funding the K-12 education and not the general fund,” King explained during a press conference.

King and Teck anticipate that, for fiscal year 2006-07, a 4.45 percent income tax rate would amount to a tax cut of $183.8 million; that a 5 percent appropriations limit would equal a savings of $122.5 million; and that the small TABOR spending increase would earn $316 million.

Any potential changes to the constitutional amendments would be postponed until 2006. Because of Colorado law, no modifications to Amendment 23 can be put before the voters in a 2005 general election, and King said waiting until 2006 is “a timely fashion to address both.”

Additionally, King said the GOP proposal would only require a majority vote in the House and the Senate, unlike the Democrats’, which would need a two-thirds majority. As for the governor’s budget idea, King took aim at the $100 million earmarked for transportation.

“Capitol construction is a separate issue,” he said, emphasizing that his plan gives voters “a rational reason” for de-Brucing TABOR while still demonstrating that the Legislature has “some fiscal discipline” and can curb “the overall growth of government.”

“This is something that will solve the structural deficit” and “deserves consideration,” King said last week.

Yesterday, Coffman, a Republican, also renewed a call for “a lasting solution to Colorado’s fiscal problems that involves reforms to both the Taxpayer’s Bill of Rights and Amendment 23”—emphasizing in a statement that the General Assembly “must address both the revenue and the spending sides of the ledger.”

Coffman challenged the Democratic leadership for its “apparent refusal to recognize that mandated spending increases”—i.e., Amendment 23—“will force the state into another budgetary nightmare the next time the economy slows down” and requested that the Legislature “craft measures making the necessary changes to both TABOR and Amendment 23 now,” even if it must wait until 2006.

“It appears that the Democratic leadership is going to attempt to fix the budget on the back of TABOR,” said Bill Ray, spokesman for the treasurer’s office, explaining that a “lasting, long-term solution” necessarily includes changing how the Colorado government both acquires revenue and how it is mandated to spend it.

“Something’s got to give” on Amendment 23, Ray said.

But the treasurer also criticized Owens’ tobacco securitization plan, stating that a one-time gap-filling solution “will set the state on the road to another fiscal crisis, the brunt of which would likely fall upon the budget for higher education.”

“The proposals that are out there, none are perfect right now,” admitted Teck, who called his own proposal “a good beginning.”

Regardless, both Teck and King say that, when it comes to Colorado’s budget, they are cautiously optimistic.

The former is encouraged by the fact that lawmakers from both sides of the aisle have already begun addressing the problem, even holding a joint session on the subject the very first day of the legislative session. Last year, according to Teck, the General Assembly waited too long, giving legislators time to become “hardened” into positions.

And King believes the GOP plan can garner bipartisan support. He even asked Senate Majority Leader Ken Gordon, D-Denver, to co-sponsor the bill.

Gordon evaded the question, both when asked by King as well as reporters, saying he’d rather wait to see what ideas come out of the Joint Budget Committee.

“I’d prefer to support that,” he said.

Rich, L. E. (2005, January 21). Budget battle begins: Final state budget proposal may be a chimera. The Colorado Statesman, pp. 1, 11.

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