With taxpayers due refunds for the first time in a decade, lawmakers mull workarounds

DENVER — The Colorado Legislature has entered Bizarro World.

The revenue forecast it received last week confirmed that while the state’s economy is booming overall, and its coffers are overflowing with money, it can’t fund everything lawmakers on both sides of the political aisle want because it must return some of the extra money to taxpayers.

That has led many under the golden dome to believe they’ve entered an old Superman comic book that featured a backward Earth.

And it’s all because of the Taxpayer’s Bill of Rights.

That 1992 constitutional amendment put a permanent cap on how much government can grow each year, and requires that any long-term debt and tax increases be approved by voters.

While some lawmakers credit TABOR for preventing the state from going even deeper into the hole during the recent recession, others are blaming provisions in it for hindering the state’s ability to keep pace with funding such big-ticket items as roads and schools.

And now that forecasts are calling for anywhere from $70 million to $220 million in excess TABOR revenues, lawmakers are debating whether to try to work around TABOR limits and fill funding gaps.

Lawmakers on both sides of the aisle already have killed measures their constituents want because they would have an impact on those TABOR refunds, even if they bring in new revenue, such as a measure to allow off-highway vehicles to be licensed to drive on state roads because it would bring in cash, and a felony DUI bill because of its $17 million price tag.

For the first time ever, fiscal impact notes that legislative staffers attach to every bill introduced into a session include what they would do to the TABOR refunds, and if they cut into general fund money that goes to those big-ticket items.


Under TABOR’s strict provisions, government budgets can only grow by inflation and population growth. But some lawmakers are questioning both as not accurately reflecting how governments operate.

At the same time, other TABOR provisions lump all state revenue into one big pile when it comes to calculating when a refund is required. That formula, however, doesn’t take into account that much of the revenue already is dedicated to specific uses.

The inflation rate under ?TABOR is based on the consumer price index of the Denver-Boulder area, which makes no sense to Sen. Pat Steadman, D-Denver.

Steadman, the longest-serving member of the Legislature’s Joint Budget Committee, says the price of milk that consumers pay has nothing to do with the cost of building a new school or prison.

“The inflation rate, that’s based upon a market basket of goods that consumers buy, but the goods and services government buys are very different from what the average household consumer buys,” Steadman said. “We’re buying prisons. We’re buying roads. We’re buying a lot of things that most people don’t have to pay for, and that has nothing to do with the consumer price index.”

When it comes to population growth, TABOR impacts could spell danger to areas of the state that see their populations decrease, such as in rural Colorado.

That’s because most of the growth in new residents is on the Front Range. As that region of the state gains more people, they will demand more services, taking away resources for areas such as Grand Junction, some Western Slope lawmakers say.

That’s happening right now on transportation funding.

Last week, the Colorado Transportation Commission, which prioritizes road and bridge projects statewide, released a new statewide transportation plan. In it, the commission says there is an $800 million annual funding gap and calls for a statewide discussion on finding new ways to augment dwindling gasoline taxes, which haven’t been raised since TABOR was enacted.

“These are exciting but challenging times for transportation in our state,” said Ed Peterson, chairman of the commission. “Increasing population and employment are putting greater demand on the existing statewide transportation system. Changing demographics and travel behavior are increasing demand for greater modal choice.”

In 2009, the Legislature approved a bill that called for allocating money for transportation and capital development, but only if there is money above a higher spending limit that voters approved in 2005 with Referendum C, but below the TABOR spending cap.

But the way the law was written, that transportation funding transfer actually goes down as the TABOR surplus goes up. Under it, if revenues are between 1 percent and 3 percent above the new Ref C cap, transportation and capital development only gets half that money.

If it is 3 percent over that Ref C line, none of it goes to those things, and all of it goes to a refund to taxpayers.



Rep. Bob Rankin, R-Carbondale and another JBC member, says his greatest fear — now that TABOR refunds are being projected in ever increasing amounts over the next few years — is over severance taxes, money the state collects from oil, natural gas and other mineral extractions.

“There’s going to be a lot of pressure to roll some of that over to support the TABOR refund,” Rankin said. “That’s what scares me. If you look at next year’s projections for severance, it’s even lower. We need to roll that money forward to keep that distribution for us, for Western Colorado.”

The issue is that some revenue the state collects is earmarked for specific programs, such as severance taxes, which are required to go to the Department of Natural Resources and to local governments most impacted by that mineral extraction.

When those revenues come in higher than expected, as severance taxes are expected to do this year, that money is counted under the TABOR spending limit.

As a result, general fund revenues, which primarily come from sales and income taxes, bear the brunt of covering the TABOR refunds even if they weren’t the cause of the state reaching the TABOR revenue cap.

The governor’s office has already called for taking about $47 million in unallocated severance taxes to help offset the refund payments to taxpayers.



The severance tax issue has sparked serious talks in the Legislature about finding ways to ease the impacts of the ?TABOR limit, and that is centering on finding ways to take certain state revenues known as cash funds out of the overall TABOR mix.

TABOR allows for that, but only under the most stringent of circumstances. It’s called an enterprise, which is defined as a state-owned business that provides a specific service, but gets no more than 10 percent of its money from tax dollars.

A good example of that is Colorado’s hospital provider fee, which hospitals pay to fund health care programs for the state’s poorest residents. None of that money comes directly from taxpayers, but revenues under it are included in the overall TABOR formula.

“The hospital provider fee is a big chunk of money,” Steadman said. “By moving that all offline into a separate enterprise, it creates space under the TABOR limit for other revenues to occupy.”

Creating such an enterprise would require a simple majority of lawmakers in the Legislature. Getting enough to agree, however, is another story.

“I’m not counting votes on that one,” Steadman said. “But this focusing on the refund of the hospital provider fee is just a nice way to zero in on the larger philosophical debate about whether TABOR is good or bad.”

The law also allows voters to “de-Bruce” state revenues, so named for Douglas Bruce, the so-called father of Colorado’s TABOR amendment.

Doing so, however, would require a vote of the people, and there’s no guarantee they will go along.

“I still want to look at some proposal to de-Bruce severance tax,” Rankin said. “I’m almost not ready to say that yet, but yet I am,” he said. “We need to start talking about it.”

Lawmakers in both chambers and both parties are pretty much already in agreement over tax revenues the state receives from the sale of recreational marijuana.

As the law stands now, that money, too, is counted under the TABOR limit, but the 2013 Proposition AA that voters approved to tax marijuana also dedicated that revenue to school construction, to regulate the industry and to deal with its public safety impacts.

Lawmakers say they hope to have a proposed measure on this year’s ballot to deal with that marijuana issue, but few are optimistic they will agree on other tax reform.

“It’s easy to see this as the football, but this really goes to the heart of TABOR itself,” Steadman said. “Do we want to constrain government and keep it from growing at a pace that makes it able to meet the needs of our growing state? There are some people who would answer that question in the affirmative.”


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