Referendums C and D heat up old debate

Among the upcoming election issues contended most hotly are Referendums C and D, two measures that would impact everything from education to roads and health care.

The measures are the latest incarnation of the timeless government-spending debate: Referendum C would allow the state to spend the money normally refunded back to taxpayers under the Taxpayer’s Bill of Rights (TABOR).

TABOR was put into effect when Colorado was financially stable in 1992. The state constitutional amendment puts the control of taxes in the hands of the voters, among other things.

“TABOR limits the revenue the government can keep to the revenue from the previous year, plus inflation, plus population growth,” said John Straayer, political science professor . “It’s like if the government had $100 from last year, plus a 2.5-percent increase in inflation, and a 2.5-percent increase in population, then this year the government would have $105.”

TABOR during recession

Any money the state government would receive higher than its formula allowed would be refunded in a sales tax credit – named as such to exempt it from federal taxes.

When a recession hit in 2001, however, TABOR put a financial strain on Colorado, Straayer said.

Revenues dropped, significantly lowering the TABOR limit. This became a problem when the state started to generate revenue again, but wasn’t allowed to keep the money.

“The problem with this is that the cost of government programs didn’t drop with the recession,” Straayer said. “So when more money comes in, government can’t use it because of the limit and there is no money allowed to support these programs.”

If Referendums C and D were to pass, there technically wouldn’t be a tax raise. Instead, these sales tax credits would not be refunded to taxpayers for the five-year period.

“No one will pay a higher tax rate than they are paying today,” said Katy Adkinson, communications director for the Yes on C and D campaign. “There is a glitch in TABOR that no matter how many people move here or how many increases there are in revenue, what (the government) can spend is based on the limit set during the recession.”

If sales tax isn’t refunded for the next five years, Adkinson said it wouldn’t be a huge difference because the taxpayers haven’t seen this refund for the past three years.

If these Referendums pass, after the five-year period TABOR will continue in hopes that the economy will have recovered.

“For the five years this TABOR cap is suspended, so whatever revenues come in with existing taxes, the government gets to keep,” Straayer said.

Opponents of Referendum C claim it is a tax hike, despite technicalities.

“If this bill passes it changes the law so the people get less tax money and the government gets more tax money,” said Max Pappas, director of policy at FreedomWorks . “So I can’t see how (people who support C and D) can claim this isn’t a tax hike with a straight face.”

Where the money would go

This extra money, which would normally be refunded to taxpayers, will be used to finance the programs of Referendum C. At the end of the five years, the TABOR cap is restored, except this time the limit will be replaced by the highest amount of revenue reached during the five years.

Referendum D allows the state to borrow up to $2.07 billion in bonds to finance the repair of transportation infrastructure, K-12 and higher education buildings, and fire and police pensions, according to the Colorado Municipal League summary of Referendums C and D.

“Referendum C also includes $100 million of the revenues each year to be kept targeted to pay off bonds that will occur if D passes,” Straayer said.

This $100 million will continue to be reserved for the payment of Referendum D, if it passes, even after the five years.

Government spending

The potential for irresponsible government spending is perhaps the biggest argument touted by the referendum’s opponents. Organizations like FreedomWorks and the Independence Institute assert that this money belongs to the people.

But Straayer questioned this argument’s sincerity.

“The real bottom line is there are people that don’t like government in general and like to see it shrink and try to mask it by saying people can save more money,” Straayer said.

This is an exaggeration of their argument, Pappas argued, saying that it’s more about sticking to the TABOR plan.

“We’re not talking about reducing government, were talking about maintaining TABOR, which allows for reasonable government growth,” Pappas said.

Pappas, and others supporting his side, say that there are ways to find extra money while continuing to issue refunds to taxpayers.

“There is $100 million of saving possible, and it’s more reasonable to cut waste, not important programs,” Pappas said. “A study by the Independence Institute found more than $200 million in potential savings.”

While those opposed claim that government spending is out of control, compared to other states, Colorado spends the least.

“Colorado had the lowest state tax collections (at $44.57) per $1,000 of personal income in FY 2003-2004,” according to the Colorado Legislative Council Staff January 2005 Issue Brief. “It was the second consecutive year that Colorado had the lowest state tax burden.”

Pappas said he wasn’t convinced by this information, adding that there are ways to make these numbers seem this low.

“There are different ways to divide the numbers, so I wouldn’t be surprised if they found a way to do it,” Pappas said.

If the referendums don’t pass, higher education could be hit the hardest.

“It would have a huge effect if it didn’t pass because both C and D have specific funds for higher education,” Adkinson said. “With Referendum C, a third of the dollars go to education funds available for need and merit-based scholarships, and to fund the College Opportunity Fund, which the state can’t do if it fails.”

Scare tactics?

Pappas counters that in the past, warnings like this have been issued in other states trying to raise taxes, and funds were found.

“People tend to make up scare tactics like this to say their particular interest is not going to be funded,” Pappas said. “(FreedomWorks) has been involved in four major potential tax increases and in each they claimed that if it didn’t go through there would be less money. Each state voted against it, and in every state they found money to support programs.”

Instead on focusing on needing more money for higher education, opponents argue that one should look at the money being taken out of the funds for colleges.

“Look at Amendment 23, it mandates that K-12 spending increase whether or not the budget is going up or down,” Pappas said. “It comes from the money for higher education.”

This is an argument that is familiar to those in favor of Referendum C.

“(Those against C) make the argument that the real problem isn’t TABOR, its Amendment 23, which (they think) requires too much money,” Straayer said. “When people say that they are in favor of higher education, and I am in favor of our schools, and I do care about the disabled, but I’m not for C and D because I can’t let the government grow, they are either pathetically ignorant of the facts or purposely disingenuous.”

Bringing it home

The majority of the business community is also behind passing the referendums for fear of what will happen if higher education suffers.

“This is relevant to students because in order for the leaders in the business community to have healthy, vibrant, productive communities and economies there needs to be a good infrastructure (for transportation) and quality education,” Straayer said. “This is vital for the economic health of country and Colorado that we have high quality and affordable education.”

This is not only something that is going to affect current students, but the students of the next generations.

“When students graduate and start families they are going to want good paying jobs and quality education for their kids,” Straayer said. “So the short run is tuition and the long run is how the state will look economically and culturally with no education and art.”

Pappas remains skeptical, however, saying that this is part of supporters’ scare tactics as well.

“Before the states try to raise taxes they say there are things like bad roads and bad schools,” Pappas said. “They point to the most popular programs and say there will be cuts.”

As for the chance that CSU may have to become privatized, both sides agree that this isn’t directly tied into the referendums passing.

“If this doesn’t pass, it’s not necessarily the last attempt,” Straayer said. “But if nothing else comes along then by the end of the decade (CSU) will look very much like a private college. I say look very much like because the government will still own the land and the buildings, but will be private in terms of the cost to the student.”

The side with the strongest case is ultimately up to the voters. At CSU, it’s questioned how educated in the issues students are.

“When looking around campus, you don’t see any information on C and D,” said Kelly Dalgetty, freshman chemical engineering major . “The most I’ve heard about it is ‘vote yes’ because everyone knows it has something to do with higher education.”