Colorado fiscal lid a tight fit

DENVER — Sidewalk tables fill quickly in LoDo, a trendy district of shops and cafes, as the playful sound of jazz wafts into the warm spring afternoon.

A dozen blocks south, however, a darker mood prevails under the dome of the state Capitol where lawmakers study the state’s finances and shudder.

As the downtown street scene suggests, Colorado’s once-roaring economy has begun a slow recovery from the hard crash it took in the 2001 recession. Accordingly, lawmakers want to replenish the budgets of universities, health programs, highways and other public services to pre-recession levels.

But they can’t. They’re blocked by what is widely believed to be the most restrictive tax and spending limits in the nation. And, they have a message for Oregonians looking to emulate their system.

“Don’t do it. Run away from it,” said Colorado state Rep. Brad Young, a rural Republican who heads the Legislature’s Joint Budget Committee.

The warning comes at a time when Oregon lawmakers and antitax groups are pressing for similar spending caps here. What began as an effort to stabilize Oregon’s roller-coaster revenue stream has morphed in recent months into a push for tighter, locked-in controls on the state budget.

An Oregon legislative committee last week explored details of a plan to put an annual cap on state spending and stash the surplus in a “rainy day” fund. Meanwhile, the state Republican Party and the tax watchdog group Citizens for a Sound Economy are gearing up to launch initiative campaigns if the Legislature fails to adopt a meaningful spending limit.

The Oregon Legislature passed a spending cap in 2001, limiting growth in the two-year budget to 8 percent of personal income. But the limit, which is rife with exceptions, has yet to be reached.

Supporters of tighter restrictions cite Colorado’s Taxpayer Bill of Rights, or Tabor, as the most explicit example of an effective clamp on government spending. Passed by voters 12 years ago, it has drawn both acclaim and derision for its billion-dollar tax rebates and ironclad restrictions — state spending cannot go up by more than inflation plus population growth, and no taxes can be raised or imposed without voter approval.

But as momentum grows in Oregon for Tabor-like controls, a growing number of Colorado lawmakers from both parties want to dump theirs, or replace it with a looser version. Colorado’s reputation as a great place to live and do business has suffered under Tabor, they say.

Even Gov. Bill Owens, a longtime supporter of the law, has called for a two-year moratorium on the limits to give his state some financial breathing room.

Recession tests Colorado’s resolve

Three years of slumping revenues cooled fervor for Tabor as it wiped out reserve funds in Colorado, and the state fell $400 million behind on capital projects and highway construction. Under Tabor, the state can’t make up the deficit, even if the economy returns full throttle.

As a result, University of Colorado students are staring at a proposal for a 40 percent tuition increase because of cuts in state aid, and the state has steadily reduced staffing in areas ranging from mental health workers to water quality inspectors.

To some, the budget problems sting all the more because the state has returned more than $3.25 billion to taxpayers.

Supporters say the Colorado law has done its job, shielding the state from the kind of unsustainable spending during the booming 1990s that brought California to the brink of fiscal disaster.

“It’s healthier, frankly, for government to be forced to live on a budget,” said Douglas Bruce, the Colorado Springs real estate developer who wrote the Tabor amendment. “They have to set priorities, like families and businesses.”

Critics say the law has worked too well, shrinking state government to the point where it can’t respond to obvious public needs. They offer it as a cautionary tale against inflexible budget mandates and against the overuse of the citizen initiative process to set state budget policy.

In times of economic decline, the lower state revenue becomes the base on which the Tabor limits apply. State budgets never have a chance to recover, even when the economy does.

Young, the state budget chairman, said he looked at a long-term Tabor projection that “shocked the heck out of me.” Eventually, he said, the state would be refunding up to a quarter of its annual revenues.

Oregonians push for spending cap

Despite those concerns, antitax groups in Oregon look to Colorado for inspiration as they prepare drafts of similar constitutional spending limits.

At a statewide meeting earlier this month, the state Republican Party adopted a resolution calling for a constitutional spending limit based on inflation and population growth.

“It’s a concept that’s similar to the Colorado model,” said party Chairman Kevin Mannix. Tabor may not be ideal, Mannix said, “but the concept is good.”

Russ Walker, director of the Oregon branch of Citizens for a Sound Economy, said his group also is working on an initiative to limit state spending based on a population and inflation equation similar to Colorado’s.

However, he said it may be impossible to write such a measure in a way that meets the “single subject” requirement for constitutional amendments. In that case, he said, his group would offer an alternative: limiting state spending increases to between 3 percent and 5 percent per year.

Laws such as Tabor “threaten the spending class,” Walker said, but they force state policy-makers to be more efficient and thrifty when budgeting tax dollars.

Like Mannix, Walker hopes to persuade lawmakers to refer a measure to voters. If not, he’s ready to take petitions to the streets.

Walker said this is the time to clamp down on state spending, right as the economy is beginning to pick up speed.

“In the ’90s, we had explosive income growth and explosive growth of state government.” A spending limit “would send a strong message to all businesses around the country that Oregon is serious about controlling its budget.”

Other proposals floating around the Oregon Legislature would impose a limit based on personal income levels and establish a rainy day fund to capture whatever surpluses might come out of such a cap. House Speaker Karen Minnis, R-Wood Village, said she wants lawmakers to meet in June in a special session to put a spending limit measure on the ballot.

It’s unclear whether any tax proposals will come forward this year, said state Sen. Ryan Deckert, D-Beaverton, co-chairman of a joint committee on tax reform.

If the committee fails to offer a new tax plan at the June special session, that could give Tabor supporters, such as Mannix and Walker, the political momentum to take their proposals directly to voters. Deckert said that doesn’t concern him.

“I have confidence Oregonians would look at Tabor in Colorado and see what an unmitigated disaster it’s been for schools and universities in that state,” he said.

Tabor still popular with taxpayers

Colorado joined the ongoing taxpayer revolt in dramatic fashion in 1992 when voters passed the Taxpayer Bill of Rights by a narrow 54 percent majority.

They saw Tabor as a way to control government growth and put more power over state spending in the hands of taxpayers.

It took nearly four years for the first refunds to kick in, a relatively paltry $139 million in 1996. Refunds exploded after that, totaling more than $3 billion over the next four years. They halted abruptly with the 2001 recession. The rebates are projected to resume next year and continue at least another four years.

“Tabor has been good for Colorado,” Gov. Owens said in a recent interview with The Oregonian. “Our economy led the country for 10 years.”

But Owens has seen projections that indicate several more years of state budget shortfalls, even as the economy improves and the state hands out refunds. Because of that, he has said he would support a two-year suspension “to allow us to recalibrate.”

Colorado Democrats have treated Owens’ proposals with scorn, calling it a Band-Aid, and he doesn’t have much support from Republicans, either, who want a broader restructuring of the limit.

It takes a two-thirds vote of both houses in the Colorado Legislature to refer a constitutional amendment to voters. Colorado political observers say that balancing act probably will be too difficult for the Legislature to achieve before time runs out on the session May 5.

A coalition of Tabor opponents has begun working on a citizen initiative to repeal the law. Polls show public support for Tabor remains strong but has begun to taper off.

Bruce, Tabor’s author, said he isn’t worried about Tabor going away anytime soon, despite what elected officials say about it.

“Talk to Joe Taxpayer on the street,” he said. “The average citizen feels empowered by Tabor. That’s why there are over a dozen states that are trying to emulate it.”

Harry Esteve: 503-221-8226;