Consequences of TABOR - August 2002

Denver Women's Commission
Consequences of TABOR - August 2002

August 1, 2002
Prepared by Chaer Robert
For Colorado Woman News

Addams Family Budget: The Unanticipated Consequences of TABOR

What if a family's budget operated the same way as the state's budget? It's mysterious and spooky and altogether frightening.

If that family made $40,000 last year, they would only be allow to make $41,600 this year, even if promotions raised salaries $3000. No problem, you think-- they should just save the difference. Not allowed. They could save $1200. for natural disasters, but this would come out of the $41,600. If used, it would need to be repaid within a year. They would need to give back the other $1400.

But last year the Addams had their second child. Their family grew from 3 to 4-- a 25% increase. This allowed the Addams to earn and spend $51,600. So they accepted the full promotion of $43,000.

Lets say this year, Mr. Addams loses his job at WorldCom, and spends 3 months looking for a job. He quit a previous job a few months early to take the new job. So he doesn't get unemployment insurance. The family earns $30,000 this year. To cope, the family cuts out their vacation, entertainment, and eating out expenses. If families' budgets worked like the state budget, he would only be able to earn $31,200 next year. The "excess revenue" would need to be returned.

Next year, Mrs. Addams's father dies, and he leaves her $10,000. But since this will put them $10,000 above their $31,200 limits, they must give the money back. Late that year, their furnace goes out. Repair cost is $5000. The $5000. must come out of the $31,200. They could not use the $1200. emergency fund because this was not a "natural disaster". So they make new cuts --no clothes, no internet, no cable, and reduced grocery budget.

Their standard of living spirals downward. They were not able to capitalize on good fortune - like increased earnings or inheritance, no to recover fully from bad fortune. Yet these are the constraints on our state budget written into our constitution by the TABOR Amendment (Taxpayer Bill of Rights).

Colorado has sunk to the bottom handful of states when it comes to funding for Medicaid, higher education, affordable housing, adult literacy, substance abuse, etc. K-12 education had sunk, but is being reversed by the guaranteed funding through voter approved Amendment 23. Its protection forces cuts elsewhere.

In our state's good years, legislators made many permanent tax cuts. So did 35 other states. But legislators in other states can reinstate taxes. Only voters can in Colorado. Our State Budget could grow by no more than the Metro Denver Consumer Price Index (4% for our example) plus population growth, or 6% total-- whichever was less.

This past year the census confirmed more growth than what had been figured into the formula to date. But as the economy and tax revenues plummeted, we did not have the revenue this year to grow at the level the formula allowed. In the coming years, this reduced spending becomes a new, lower base on which future budgets are based. So even if incomes improve, state services, programs and staff will not fully recover.

What difference does this make to your family? It depends. Our institutions of higher education receive so little state funding, that some are considering going out of their own-- becoming "enterprise funds" which operate as a business and receive less than 10% state money. Until they do, both student tuition and state funding are limited by TABOR. Think just because you're lost your job at Quest or Lucent or the local hotel or restaurant, that you might qualify for medical assistance or financial assistance from the state? Unlikely... Colorado has the just about the stingiest programs allowed by federal law. Employment services have been reduced. States without such tight restrictions can add new programs like affordable housing, where each State dollar can generate $14. in other funding. Enjoy the arts? Metro-area state funding is gone. Your local suburban library able to get you information or a book through interlibrary loan? Gone.

As 4% budget cuts take effect, and some state workers are not replaced, expect delays when you do business with the state. Fighting wildfires and coping with drought? Moneys borrowed for "natural disasters" must be paid back within the year according to TABOR by cuts elsewhere. Even if the economy bounds back, state government cannot.

For a group presentation on "TABOR: The Unintended Consequences" , contact the author or the Colorado Fiscal Policy Institute at 303-573-5173 on online