Would State Budget Cap Pinch Like Colorado's?

By Evan Halper
Times Staff Writer

October 23, 2005

LOVELAND, Colo. — The scene may seem familiar to Californians: a Republican governor warning that fiscal meltdown is imminent unless voters approve new rules on how much money the state can spend each year.

But Colorado Gov. Bill Owens isn't looking for the kind of budget cap that California Republicans want voters to approve next month. That was imposed 13 years ago.

Now he is pleading with voters to lift it.

The problem: Colorado's spending controls appear to have worked too well. Now some of the most strident fiscal conservatives in Colorado — long viewed as a model for others considering such restraints — say the cap has strangled government. There is talk of closing community colleges, privatizing the university system, releasing inmates early.

Owens said he never saw it coming.

"I don't think it was designed to cripple government," he said of the Taxpayers Bill of Rights, or TABOR, amendment his state's voters approved. "This is an unintended consequence."

He may be powerless to stop it. Colorado voters do not appear enthusiastic about a proposal Owens hopes they will pass Nov. 1 to lift the cap for five years. The measure is too close to call, polls show.

Critics of the spending controls say Colorado's problems should serve as a warning to California and every other state considering them.

"This is just a mess," said Tucker Hart Adams, a Colorado Springs economist whose forecasts are used by businesses throughout the state. "The process was just not thought through."

A report released Wednesday by the Center on Budget Policy and Priorities, a left-leaning Washington think tank, highlights how far Colorado has fallen behind other states in providing government services since implementing the Taxpayers Bill of Rights.

K-12 spending has fallen below the national average. Colorado lags every state but one in keeping teacher pay competitive with private-sector earnings. The state ranks near the bottom in providing health insurance to its poor.

Public university tuition has shot up 21% in the last four years as the state economy reeled from recession. And traffic is snarled, with 55 road projects threatened with cancellation if voters don't lift the cap.

"We've been cutting virtually every department," Owens told a group of seniors Tuesday in Loveland, a bedroom community an hour's drive from Denver.

The irony is that Colorado is finally rebounding from its worst economic slump since the 1950s. Revenue is surging.

But the budget cap, which prevents state spending from increasing faster than Colorado's population and inflation, prohibits lawmakers from getting at much of it. Instead, they must send it back to voters in refund checks averaging about $100 per family. The cap forces state government to continue as if it were still in recession.

"If we lose this thing … I don't know how I could tell people to come here," Owens said of his efforts to lure out-of-state businesses to Colorado. "It is going to have a dramatic impact."

The spending controls Gov. Arnold Schwarzenegger wants to put in place in California through Proposition 76 on the Nov. 8 ballot differ from Colorado's. The California measure restricts growth to the average increase in state revenue over the most recent three years. And the money that comes in beyond the cap would go into a rainy-day fund instead of refund checks.

But budget analysts say some of the unintended consequences could be the same if the state economy goes into a prolonged slump.

A report this month by California's nonpartisan legislative analyst's office showed that such a limit would have had a profound impact on California services had it been in effect over the last 20 years. The report concluded that by now, it would have forced annual state spending down $15 billion — more than California spends on the entire University of California system, California State University system and all of its community colleges combined.

In Colorado, nearly the entire political establishment, including the Chamber of Commerce, is behind the push to take a break from the cap. But the refund checks have become almost sacred — not just to Coloradans, but to grass-roots conservatives across the country. They have long seen Colorado's cap as a symbol in their crusade to restrain government growth.

"It is the holy stone," said Floyd Ciruli, a local pollster. "You come here to touch it."

Grover Norquist, president of the Washington-based Americans for Tax Reform, says pulling back now would be tragic. "Colorado is in much better shape than other states because for 10 years it has had some modest discipline," he said, noting that taxes are low and Colorado is not struggling with multibillion-dollar deficits.

Norquist and others, including former U.S. House Majority Leader Dick Armey, have been rallying their supporters to fight Owens, whom they once hailed as one of the country's most responsible governors. Earlier in the year, Owens and Armey squared off in a televised debate on the issue.

Owens has challenged Norquist to come to Colorado and do the same, but Norquist declines to face off anywhere but Washington.

"They are wrong on this one," Owens said of his former friends in the antitax movement. "They are dealing with this esoterically, as a philosophical exercise…. I'm dealing with it as a conservative governor who understands directly the real costs of their theories."

His opponents have crafted a highly effective campaign around the real costs they say will fall on voters if the cap is lifted. Perhaps the staunchest defender of TABOR is the man who wrote it, a crusty El Paso county commissioner named Douglas Bruce. He says Owens is a "sellout" who has "made himself look like a national fool." At a debate with the governor this month, Bruce pulled a pair of flip-flops out of a bag and handed them to Owens.

"They're saying all the lawns in our parks will shrivel and die, all the children will get Alzheimer's, everything else in the world will go wrong and this place will be a living hell," Bruce said in an interview. "They're trying to scare people."

Bruce says the problem is not a lack of revenue, but a lack of leadership.

"They are saying, 'Because we are weak and can't take control of a budget, you have to give away your spending limit,' " he said. "Now that is a bad deal."

Opponents have blanketed Coloradans with calls, radio spots and television ads warning of "the biggest tax increase in Colorado history." They are driving a 10½-foot high Trojan horse around the state to make their point that lifting the spending cap is really a phantom way for bureaucrats to hike taxes.

They held a news conference to say the state will use the extra money on services for illegal immigrants.

Those campaign tactics have helped opponents on several occasions outmaneuver the more heavily financed Owens coalition, which seems unable to escape the rut of formulas and percentages and "ratcheting" effects on the budget.

"The closest we've been able to get to a sound bite is, 'Fix the glitch,' " Adams said. "That doesn't communicate in the same way as 'Biggest tax increase in history.' "