In Colorado, Colleges Fight Anti-Tax Lobby

Vote on whether to ease spending cap is being watched closely nationwide

By KARIN FISCHER

October 21, 2005

Colorado, home of the nation's most restrictive limits on state spending, has become the scene of a much-watched vote that pits anti-tax forces against higher-education advocates.

Voters will decide on November 1 whether to roll back the state's constitutionally imposed spending cap, known as the Taxpayer Bill of Rights, for five years to allow lawmakers to spend an estimated $3.7-billion they otherwise would have had to refund to taxpayers.

The reverberations of such a vote could be felt nationally. Colorado's constitutional amendment is considered a model by some of the nation's leading anti-tax organizations. This year alone, similar spending restrictions were proposed in two dozen other states. Conservative activists seeking to persuade state lawmakers elsewhere to adopt similar caps worry that any move to amend Colorado's law could undermine their efforts.

"There's definitely a lot at stake," says Max Pappas, director of policy at FreedomWorks, a Washington-based advocacy group that has led anti-tax fights in several states. Last year it helped to defeat a proposal in Washington State to increase the sales tax by one cent to pay for education programs.

"Colorado is seen as the gold standard," he says.

Higher-education officials in Colorado also see the vote on Referendum C next month as crucial. They say the stringent spending limits imposed by the Taxpayer Bill of Rights, often called Tabor, have contributed to a 20-percent reduction in the state's financial support for higher education since 2000, the largest cut in any major sector of state government. Higher education is likely to bear the brunt of any future spending reductions because federal and state requirements put other government programs, like Medicaid and elementary and secondary education, largely off-limits to cuts. Some public colleges in Colorado may have to close or consolidate, the officials warn, while others could be forced to rely almost solely on higher tuition or private fund raising, if the temporary rollback of the amendment does not pass.

College leaders in other states, too, are watching closely, concerned that an approval of strict limits on state spending could squeeze the budgets of public colleges.

Higher education is often one of the first areas where lawmakers look to trim appropriations in response to budget gaps. In Kansas, where lawmakers are expected to begin debating a proposed revenue restriction in January, the chairwoman of the Board of Regents of the state universities wrote a newspaper editorial last month encouraging voters to ask "tough questions" of their lawmakers.

"If Tabor is such an economic cure-all," wrote Donna Shank, "why is Colorado running on life support?"

Colorado was not the first state to pass a spending cap, but its constitutional amendment, approved in a 1992 referendum, is the nation's most restrictive. It limits annual increases in state spending to inflation, adjusted for population growth, and requires that any state revenue above that threshold be returned to taxpayers.

Supporters of the measure say it has helped keep Colorado on a responsible budget path, limiting spending even as tax revenues grew in the 1990s, and spurring economic growth. Now they are pressing other states to adopt the Colorado model. In California, voters will be asked in November to tighten spending limits first imposed in 1979. Next fall voters in Arizona, Maine, Nevada, and Ohio are likely to consider ballot measures that would impose similar revenue caps.

Downturns Made Worse

Under the 1992 Colorado measure, if state revenue does not meet expectations, then spending is capped at a lower level, and the base for determining the following year's spending limit is likewise reduced.

Some observers say the provision exacerbates the effects of economic downturns, such as the one that began in this decade, because spending is limited by the previous year's cap, preventing policy makers from restoring cuts made in services during hard times. The spending cap has dropped in at least three years

That experience has led even some supporters of the measure, including Gov. Bill Owens, a Republican and one of its biggest boosters, to call for a "timeout" from the spending cap.

Referendum C would suspend the spending limits for five years, allowing the state to keep a projected total of $3.7-billion in additional funds. The extra revenue would be used for education, health care, and transportation needs, as well as for pension plans for police officers and firefighters.

A companion measure, which would take effect only if Referendum C passed, would allow the state to issue $2.1-billion in bonds to repair highways and bridges and to renovate and replace aging facilities at colleges and public schools.

While Referendum C would not change the formula for calculating the spending limit, it would create a new cap based on the largest amount of money collected in any year between 2006 and 2010.

The referendum's critics say the change would undermine the intent of the Taxpayer Bill of Rights. Next month's referendum, they say, amounts to a vote on a tax increase for every Colorado taxpayer. A nonpartisan budget analysis says taxpayers could lose between $350 and $1,021 in refunds over five years.

"To call this a five-year timeout from Tabor is misleading," says John Andrews, a former president of the Colorado Senate and a fellow at the Claremont Institute, a conservative research organization in Claremont, Calif. "What Referendum C really asks for is a tax increase that lasts and compounds forever because it changes the baseline by which future allowable surpluses are calculated."

Ethan Eilon, a spokesman for the Independence Institute, a free-market research group based in Colorado, is more blunt: "In every sense of the word, Referendum C will cut the knees out from Tabor."

Looming Privatization?

But public-college leaders say the prospects are just as dire if voters do not pass the ballot measure.

The State Planning and Budget Office estimates that if higher education has to absorb most of the projected $365-million cut that would result from Referendum C's defeat, the College Opportunity stipend provided to each in-state undergraduate could decrease by 61 percent, from $2,400 to $935 a year. (In July, Colorado became the first state to provide substantial funds for higher education directly to students through the voucherlike program.)

A University of Colorado study warns that state appropriations for higher education, which have dropped from 23 percent of the state budget in 1982 to 10 percent today, could dwindle to almost nothing by 2009 if the trend continues.

The Colorado Commission on Higher Education, the state's coordinating board, has already asked colleges to identify potential cutbacks should Referendum C fail. University of Colorado officials recently released budget projections showing the university system could be forced to increase in-state tuition by as much as 42 percent. Metropolitan State College, a four-year institution in Denver, is considering a combination of tuition increases and program cuts. Administrators at Colorado State University have talked about charging students variable tuition rates based on their majors.

Some educators warn that if the ballot measure fails, the state's largest and wealthiest institutions, the University of Colorado and Colorado State University, could begin to look much more like private colleges, relying mainly on tuition and private giving. Already both systems derive less than 10 percent of their overall budget from state appropriations.

"Colorado is at a crossroads. We can privatize our public universities, or we can begin to fund them at a level that continues their present missions," Larry E. Penley, president of Colorado State, told university supporters in a September speech.

Community colleges, however, continue to rely on state support for nearly half of their budgets. Nancy McCallin, president of the Colorado Community College System, says some of the state's 13 two-year public institutions could be forced to close their doors or face consolidation, as could small four-year institutions.

"What's at stake is whether we can continue to provide the opportunity and entry point for higher education," Ms. McCallin says. "We're the entry point for low-income and minority students. This really strikes at our core mission."

But Referendum C critics say higher-education leaders are wrong to view the ballot measure as a panacea for the squeeze on college budgets. The real culprit, they say, is another constitutional amendment, which requires annual increases in spending for elementary and secondary education.

Bottom-Line Pressure

Passing Referendum C will remove the incentive for lawmakers to deal with the public-school spending requirement and for college administrators to find operating efficiencies, says Mr. Andrews, the former Senate president.

"Incentives to manage better don't come in a vacuum," he says. "They come because there's pressure on the bottom line."

In fact, critics of the measure say the state government could save as much as $615-million a year by cutting duplicative programs and re-examining priorities. Higher education is no exception, they argue.

To make their point, researchers at the Independence Institute like to bring up the annual raises given to Ward Churchill, the University of Colorado professor whose remarks that Americans killed in the 2001 terrorist attacks were not innocent victims made headlines.

"When Ward Churchill gets a pay increase, there's definitely room to cut the fat," says Mr. Eilon.

With public polling suggesting that Colorado voters are evenly split on the ballot measure, higher-education officials say they worry that the spate of bad news that has dogged the University of Colorado over the past 18 months — including Mr. Churchill's inflammatory statements and accusations that the football team on the Boulder campus used sex and drugs to lure recruits — could affect the outcome of the vote.

Hank Brown, president of the University of Colorado System, who was a Republican U.S. senator from Colorado, says he thinks voters ultimately will focus on the importance of higher education to the state.

"Providing opportunity is more important than most things government does," says Mr. Brown, who has taken vacation time to campaign for Referendum C. "And that's pretty well what the election's about."

http://chronicle.com

Section: Government & Politics

Volume 52, Issue 9, Page A1