Budget fix, tax hike or both?
EAGLE COUNTY – In a few weeks, Colorado voters will check the “yes” or “no” box on a pair of questions that could have long-ranging financial implications for the state.Known as Referendums C and D, they are part of what’s called the “Colorado Economic Recovery Act,” approved by Gov. Bill Owens and the state Legislature last spring. (See sidebar.) Proponents say approval of Referendums C and D are essential for fixing the state’s economy. Opponents call it just another tax hike by politicians unwilling to make strong choices cutting the budget.Whichever view voters take at the polls, one fact appears undisputed: A “yes” vote will mean no refunds will flow to taxpayers for the next five years under the provisions of the Taxpayer Bill of Rights (TABOR) amendment approved by voters in 1992. (Regular state and federal tax refunds will not be affected either way.)Different estimates put that amount at anywhere from $41 to $491, although the state’s economic downturn has meant no one has seen any kind of refund since 2001. Keeping anticipated refunds over the next five years will give the state an estimated $3.1 billion; approval of Referendum D will add another $2.1 billion over that period. Approval of the measures will not increase the current sales taxes rate, but that doesn’t convince Edwards resident and local Republican party member Rob Spangler.”I think they need to find ways to balance the budget without raising taxes,” Spangler said. “That’s what this is (a tax increase). It doesn’t return tax money to us that we’ve already paid.”Ray Christensen, the director of the lobbying group Vote Yes On C&D, had another opinion.”It’s clearly not a tax increase, he said. “The ballot question reads ‘without raising taxes.'”Jon Caldara, director of the Independence Institute, a conservative think tank in Golden leading the charge against C&D, laughs at such talk.”Let’s remember that proponents of the tax increase wrote the ballot title and the blue book, the official guide,” Caldara said. “They can say it’s not an increase, but if it’s not, then why are we voting on it?”(In fact, since TABOR is part of the state’s constitution, a vote of the people is required to change it.)State fix’er-upperWhile conservatives like Caldara and Spangler reject C&D on the grounds that it’s a tax increase, others think the tradeoff – forgoing a relatively small refund in exchange for a package of state improvements that will benefit everyone – is worth a “yes” vote.”We’ve been using our MasterCard to pay our Visa bills for the past few years,” said State Rep. Gary Lindstrom, who represents Eagle County. “For transportation projects, we literally ran out of money several years ago, to where we can’t even do routine maintenance.”To keep up, Lindstrom said the state has had to find money in other places, including raiding the pension funds of the police and firefighters. A “yes” vote will see that money returned to the funds, he said. “There’s a huge amount of support, even from Republicans,” Lindstrom said, adding that he recently returned from a statewide tour supporting approval of C&D. “The people who are opposed to it are just flat-out opposed to government.”Caldara said that’s not the case.”We don’t hate government,” he said. “We hate runaway government, and policies like those that led to the catastrophe in California’s government. TABOR saved Colorado’s fiscal fanny.”Amendments C&D, Caldara said, represent an “anthem to week-kneed political leadership,” and the fact that a majority of the state’s Republican leadership signed off on it says only one thing:”It says politicians are politicians,” he said. “They will always take the easier way out – including some Republicans.”The ratchetOne of the things proponents point to as a problem with TABOR is the so-called “ratchet effect.” Since what the state can spend is pegged directly to its income the previous year, an economic downturn can mean the funds available get “ratcheted” down.In other words, say the state collected and spent $100 in 2000. The law allows the 2001 budget to be that number plus 6 percent, or $106. But in 2001, the state only collects $90 due to a recession. That means the new budget is that plus 6 percent, or $95.40. That figure now represents the new spending limit, even while expenses might still be $100 – and probably more due to population increases. Fiscal conservatives say the answer is simply to spend less, but others say fixing the ratchet is a better idea.In an interview in Vail last June, Gov. Bill Owens said approving C&D would do just that.”We had two straight years in a row where we cut government 15.8 percent, per person,” Owens said. “The reason for that was in the two years previous to that we had a 17-percent drop in revenue.”Owens said that TABOR needs an “adjustment” to recover back to where the state was pre-recession.”We have some significant needs, so as a fiscal conservative who supports TABOR, I’m strongly in favor of Referendum C,” Owens said.Caldara said the flip-side is that Referendum C pushes up baseline spending “forever.” He decried what he calls the “boogie-man list” – projects and programs proponents say will be cut if the measures fail – and said there are all kinds of ways to cut spending.”For Referendum C to make sense, you have to believe that Colorado’s government is running so efficiently that we can’t find any savings anywhere,” he said.Caldara’s opponent at Vote Yes On C&D says further budgets cuts will result if the referendums fail. “It’s just foolish to think you’ll find enough waste in government to balance the budget,” Christensen said. “If it fails, the Legislature will have no choice but to cut out a third of the budget that’s not mandatory.”Higher fees, tuitions and reduced services would also result, he said. “With the recession, it doesn’t make sense to return these dollars with all these needs in these areas, especially when the state has already collected them,” Christensen said. Alex Miller can be reached at 949-0555, ext. 615, or firstname.lastname@example.org.Vail Daily, Vail, Colorado
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