An effort to reform the Taxpayer’s Bill of Rights, or TABOR, passed its first test on Monday with Republican support. File photo.An effort to reform the Taxpayer’s Bill of Rights, or TABOR, passed its first test on Monday with Republican support, though the legislation faces an uphill battle.
Some TABOR observers call it progress that two Republicans are sponsoring the effort to change how the state calculates its spending cap.
The bill received bipartisan support from the House Finance Committee. It heads to appropriations for consideration.
Despite the bipartisan support, Rep. Dan Thurlow of Grand Junction and Sen. Larry Crowder of Alamosa, sponsors of House Bill 1187, are still mavericks on the subject though an evolution appears to be underway.
“Let’s merely take a look at TABOR one more time and see how it’s working over the last 25 years, and if it’s working we leave it alone, and if it’s not working we make an adjustment,” Thurlow said during a well-attended hearing at the Capitol.
The bill passed the Democrat-controlled House Finance Committee 10-3, with Thurlow, who sits on the committee, and Republican Reps. Polly Lawerence of Littleton and Phil Covarrubias of Brighton joining Democrats in supporting the bill.
The measure would tie the state’s spending cap to personal income rather than the current formula: inflation plus population change. The idea is that government would be allowed to grow when economic times are good. Government would not grow faster than people’s incomes.
By taking a five-year look at the rolling average of the change in personal income from year-to-year, the legislation would take volatility out because an average would be used, rather than calculating based on spikes and plummets from year-to-year.
The bill would not change a TABOR requirement that voters approve tax increases.
It would decrease the state’s TABOR rebate obligation by nearly $133 million in the upcoming fiscal year and more than $209 million in the 2018-19 fiscal year.
Over time, the proposal would likely result in less rebates offered to taxpayers. The new formula in some years would raise the TABOR cap to a higher level, which would result in less rebates. Many Republicans still look at it as more money out of taxpayer’s pockets.
Jon Caldara, president of the libertarian-leaning Independence Institute, said efforts like House Bill 1187 led to the rise of President Trump.
“This is another ploy to make government bigger by changing the rules by insiders .” he said. “TABOR is here to help you.”
Conservative Americans for Prosperity questioned whether lawmakers can change and alter the TABOR formula through statute.
House Bill 1187 would have to be referred to voters. It would only take a simple majority vote in both chambers to refer the issue. Republicans hold only a one-seat majority in the Senate, so if the bill makes it to the Senate floor, there is a good chance it would pass both chambers with Crowder’s support. But getting to the Senate floor would be a feat.
The legislation would amend Referendum C rather than TABOR. Referendum C, backed by voters in 2005, offered a five-year TABOR timeout, allowing the state to retain and spend money above the TABOR limit.
Because Referendum C was statutory, it would only take a simple majority vote in both chambers to ask voters to amend it, as opposed to a two-thirds majority vote for amending constitutional provisions.
Supporters of the bill who testified on Monday said the measure offers a practical change to TABOR as it hits its 25th anniversary and the state continues to grow. Business groups such as the Denver Metro Chamber of Commerce and the Colorado Competitive Council backed the proposal.
The bill received wide-ranging support on Monday, including from the Colorado Fiscal Institute, the Colorado Farm Bureau, the League of Women Voters, the Colorado Association of School Boards, the University of Colorado system and AARP Colorado, to name a few.
The legislation comes as lawmakers struggle with cutting as much as $600 million from the upcoming budget.
Few Coloradans realize they receive a tax rebate when TABOR kicks in. The rebate comes as a tax break, which is essentially taxes that are never collected, and it’s difficult to notice the change over the course of a year. Individual rebates stemming from 2015 tax returns ranged from $13-$41.
“The TABOR growth factor makes it exceedingly difficult to truly prioritize what we as a state invest in,” said Mizraim Cordero, vice president of government affairs for the Denver Metro Chamber. “If approved by voters, it (House Bill 1187) maintains a growth cap while offering some relief by issuing a calculation that is more reflective of our state’s economic growth.”
The larger optics behind the Republican-sponsored bill is that GOP lawmakers in Colorado may finally be shifting in how they view TABOR. The first shot across the bow came last year, when a handful of Republicans bucked their party by expressing support for a proposal to restructure the Hospital Provider Fee as an enterprise fund, or government-owned business. The fee is assessed on hospitals to force a match of larger federal health care dollars.
The plan – which also is being discussed this year – would have exempted the hospital fee from TABOR, taking the revenue out of the TABOR calculation and lowering taxpayer rebates set aside in the general fund, thereby freeing money for spending.
Like the hospital provider fee change, many view the TABOR effort this year as practical reform.
The state’s spending cap, which triggers TABOR rebates, is based on the Consumer Price Index for consumers in the Denver-Boulder-Greeley area, or Front Range consumer inflation. That percentage of inflation from one year to the next is added to the state’s percentage of population growth for the year. TABOR-defined revenue, or state fiscal year spending, cannot grow beyond the total percentage. Rebates come out of the general fund, which is used for discretionary spending.
Some economists argue that it is an arbitrary formula. They point out that businesses don’t often use the CPI when considering costs, and that population growth is largely unrelated to inflation.
Because most government fees are defined under the TABOR cap, all of the general fund falls under the limit.
“We as the legislature should have a duty to start to solve the problems, and the way we do it is we go to the voters and say, ‘Here is a proposal that we think is good. You can accept it if you want, you don’t have to accept it if you don’t want,'” Thurlow said. “My premise is the voters are smart enough and should be trusted to make that decision.”