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Debate Rages Over TABOR's Effect in Colorado
10/20/2009 06:16 PM ET   Reported By: A.J. Higgins

Former Colorado Gov. Bill Owens says his state's Taxpayer Bill of Rights law succeeded in reining in state spending while giving average voters more control over policies that affect their pocketbooks. But opponents of the tightest tax cap in the nation say Colorado's TABOR law was so restrictive, it almost crippled the state's economy. Owens says the mistakes in Colorado's law have been corrected and are not included in a similar proposal that's before Maine voters next month. But some TABOR critics aren't buying that.

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Bill Owens says that when he became governor of Colorado a decade ago, he inherited a 1992 Taxpayer Bill of Rights Law that was functional -- but flawed. Owens would have to wait until 2005 to find out just how flawed TABOR was. "They'd had something in it called the rachet effect, which was something we didn't recognize 15 years ago," he says.

A deepening recession exacerbated by the economic impact of the 9-11 terrorist attacks, an unprecedented drought and the dot.com bust that flattened Internet commerce, all coincided to produce a 16 percent revenue drop in Colorado between 2001 and 2003.

Owens says that because of the racheting mechanism in the Colorado TABOR law, the lower revenues sank, the longer it took for state spending to rebound, since it was locked in by population growth and inflation.

"Our revenue dropped, and if your revenue drops you set a new base," he says. "Let's say we lost 10 percent of our revenue. Under the old TABOR, we would go down to 90 percent, and then the following year, if you had two percent inflation and two percent population growth, you'd go up to 94, then 98 and it would take you years to get back to where you were when the drop occurred."

"This is the same old TABOR, this contains a rachet -- without question, without a doubt, this has a rachet," says Robb Gray, a state project coordinator at the Washington, D.C.-based Center on Budget and Policy Priorities, who is working to defeat Question 4, which would tie the growth of state, county and municipal spending to the rate of inflation plus population.

Although Owens maintains he led the effort to suspend the rachet effect and another aspect of the Colorado law that refunded excess revenues to the taxpayers, Gray alleges Maine would face the same risks under its TABOR law as Colorado once did because of its slow population growth, low inflation and declining tax revenues.

"Essentially the rachet just ensures that the worse of times becomes your best of times, and that's exactly why putting this measure in right now is such a big, big problem," Gray says. "You basically are starting off from a very, very low base, and any time your budget ever drops further, that becomes your new base. So essentially, you can never climb out of that hole, except for a small, tiny percent. And that's what this formula allows. So the formula on top of the rachet is really this recipe for disaster."

Owens and other Maine TABOR supporters reject Gray's assertions. They argue that unlike Colorado, Maine's law would make provisions for a Rainy Day Fund that would divert 20 percent of all excess revenues into a budget-stabilization account. They add that the voters would ultimately be able to determine whether they wanted to raise taxes at the ballot box.

Gray and other TABOR critics say that policy nearly devastated Colorado's public education system -- a claim that Owens disputes.
"Our spending per student is in the mid-range of the country. Our results are better than that, our college graduation rate's among the best in the country, and the claim that public education has been devastated is factually incorrect, and I would say it's a lie."

But Gray says the numbers paint a truer picture of what's going on in Colorado's schools. "Actually in Colorado, the spending per thousand dollars for education has actually dropped, and as a national average, has dropped below that; where Colorado used to be about a middle-of-the-pack state, it's fallen to the bottom," he says. "When you look at teacher salary, and what you pay teachers, that has actually dropped. When you look at class sizes, all of those things have been impacted by TABOR."

Despite the observations of TABOR's critics, Colorado voters soundly rejected an effort to repeal their tax cap at the ballot box last year.





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