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Press Release

    Colorado's Governor: Pennsylvania Needs Spending Limits

    11/16/2005

    As Pennsylvania policymakers consider limiting the growth of government spending, some Pennsylvanians may be under the impression that the government spending cap in Colorado—our Taxpayer Bill of Rights—is dead. To paraphrase Mark Twain, the reports of its demise are greatly exaggerated.

    In our November 1 election, Colorado voters fixed a glitch in the spending cap law; they didn’t overturn it, as some reports might have you believe. There was no “up or down” vote. I believe that a majority of Coloradans support the law, and when the election dust settles, other states will see how well spending caps can work and more will adopt them.

    Pennsylvania voters will have the opportunity to do exactly that if one of the Constitutional amendments winding their way through your General Assembly makes it to the ballot in 2007. Until then, Pennsylvanians may soon be the beneficiaries of a statutory spending limit that may land on Gov. Ed Rendell’s desk in the near future. For the sake of your economy and your commonwealth’s taxpayers, I hope he signs it.

    The spending cap in Colorado is a success story. Added to the state Constitution by referendum in 1992, it helped keep the reins on Colorado’s budget, primarily by using a formula based on population growth and inflation. If taxes provided surpluses above that budget, the money was returned to the taxpayers.

    This has meant that our budget could grow, but only at a prudent pace. So when the recession hit, the resulting drop in tax revenue meant serious belt-tightening, but it did not lead to the cataclysmic cuts seen in other states.

    The recession did, however, uncover an unintended glitch in the law. As the economy recovered, the law didn’t allow for the budget to return to earlier levels, even though the revenue was available. Any future budget growth had to be calculated by using the lowest point hit during the recession as the base. That was too restrictive.

    Compare the budget to a reservoir. During a drought, the water recedes. Then, when the rain returns, you should be able to refill the lake. But instead, because of the glitch, the reservoir had to stay dry. In Colorado, our budget was being kept too low by the rules even though state revenue was increasing.

    On November 1, the voters—by approving our Referendum C—fixed the glitch. The voters gave the state permission to retain all surplus revenues for five years, allowing the budget reservoir to return to pre-recession levels. The measure also allows for similar flexibility in the future if an economic downturn again drains the reservoir.

    As Pennsylvanians debate the merits of state government spending limits, if you hear from opponents that Colorado voters decimated the spending cap because they decided it wasn’t working, don’t believe it. The taxpayer protections that originally were part of the law are still in place. The same formula for figuring the budget, a requirement that tax increases be voted on and, after the general fund is replenished, the return of tax surpluses to taxpayers remains intact.

    Most importantly, however, those who crafted Pennsylvania’s spending limit legislation learned from Colorado’s difficulties and corrected the glitches that led to Referendum C.

    But once you get passed the minutiae, most people agree that placing appropriate limits on the growth of state spending makes sense. Why should government spending grow at a rate faster than the growth of the economy in general? The answer is easy. It shouldn’t.

    My friend and colleague Ed Rendell understands this. He got it exactly right in his 2003 inaugural address when he said: “Like working families across the state, we must find a way to make government live within its means. That is my first priority as Governor.” His support of a spending limit would be a tremendous step toward fulfilling that priority promise.

    Bill Owens has been governor of Colorado since 1998
    Commenwealth Foundation