Similarities don't add up in Colorado comparison to I-1033

Opponents of Tim Eyman's Initiative 1033 say you need only look at Colorado's Taxpayer Bill of Rights to see what would happen here if 1033 were approved.

Colorado voters passed a constitutional amendment in 1992 with a provision requiring state and local governments to limit revenue increases to population and inflation, and send any excess money back to taxpayers. But that's about the only thing the two measures have in common.

In fact, the Colorado law, known as TABOR, and I-1033 have more differences than similarities.

And there is no apparent consensus on whether TABOR has been a success or a failure in Colorado.

Steve Johnson, a former Republican lawmaker who spent 12 years in the Colorado General Assembly, said "TABOR has been a nightmare for the state. Fixing it is even more of a nightmare."

On the other hand, Barry Poulson, a University of Colorado economics professor affiliated with the conservative Independence Institute, said the law "has created one of the best business-tax climates in the country."

Even voters seemed mixed on TABOR.

A poll done in September by a Republican firm, and paid for by a conservative-policy group, shows two-thirds of voters support a provision in TABOR requiring voter approval of all tax increases.

However, a majority of the people polled also supported repealing the entire law.

Sean Tonner, executive director of the Colorado Policy Institute, which paid for the survey, thinks it shows people want to keep some parts of the law and dump others. "We'll be the first to admit TABOR can be tweaked," he said.

Impact on education

That seems to fit a pattern in Colorado. They tweak on a grand scale there, making fundamental changes to the state's constitution through initiative — something that can't be done in Washington state.

It's led to a budgeting process in Colorado that bears little resemblance to what happens in Olympia, and complicates comparisons between TABOR and I-1033.

For example, Eyman's opponents argue that funding for K-12 education in Colorado has plummeted since TABOR was passed. But they don't note that Colorado voters approved a constitutional amendment in 2000 that essentially exempts state funding for public schools from the revenue limit and mandates annual increases in spending.

Colorado state funding for education has steadily increased for several years. Several national rankings put per-pupil spending in both Colorado and Washington below the national average. However, Colorado is generally shown as close to or higher than Washington in those rankings.

Deborah Fallin, a spokeswoman for the Colorado Education Association, which represents about 40,000 educators, argued that TABOR has hit schools hard.

But when pressed for details, Fallin said it's not a case of schools doing poorly — they need additional money to improve. Simply doing "OK is not good enough for the 21st century," she said.

The most recent eighth-grade math and reading scores were similar for Washington and Colorado in the National Assessment of Educational Progress, and both were slightly above the national average.

That's not to say TABOR has had no effect in Colorado.

The amendment was approved during an economic boom. The revenue limit led to big tax rebates because a lot more money was coming in than the state was allowed to spend.

So much money was being sent back to taxpayers, in fact, that the General Assembly permanently lowered both the state sales tax and income tax to reduce the amount of revenue being collected.

Then the dot-com bust hit early this decade and sent revenues plunging. Lawmakers had to cut state spending.

Because much of the budget, including K-12 and Medicaid spending, was protected, the General Assembly had to cut other parts of the budget, such as higher education.

Tuition was increased to help make up the difference. Between 1997 and 2007, resident undergraduate tuition increased about 98 percent at four-year institutions in Colorado, according to the Western Interstate Commission for Higher Education. However, undergraduate tuition in Washington increased nearly 103 percent in the same period.

TABOR did force Colorado to apply the growth limit using the new lower, recessionary level of tax revenue during the dot-com bust. This is often called a "ratchet" effect, because every time tax collections drop during a recession, it permanently lowers the base used to calculate how much revenue can increase in the future. I-1033 shares this provision.

As a result, concern mounted in Colorado that TABOR would prevent state spending from recovering with the economy.

In 2005 voters approved Referendum C, which suspended TABOR for five years. It also removed the ratchet effect. Once the suspension expires, state revenue will be allowed to grow based on the highest amount of revenue collected in a fiscal year during the timeout, adjusted by inflation plus population growth for each subsequent year.

Effects of economic downturns

Charlie Brown, director of the Center for Colorado's Economic Future at the University of Denver, said it's difficult to separate the effects of TABOR from economic downturns. It could be argued that most of the budget cuts happened because of recessions, not because of the constitutional limit, he said.

Lawmakers probably would have been forced to make budget cuts because of TABOR in recent years, Brown said, but Referendum C helped alleviate the problem by allowing the state to keep any increase in revenue while the timeout is in effect.

Perhaps the biggest effect was when lawmakers reduced tax rates because of TABOR. That lost income would be worth about $500 million annually now, Brown said. Colorado cannot restore the taxes to their previous levels without voter approval.

Brown said TABOR could become a problem in the future, once the timeout expires, because it's expected that mandated state expenses such as K-12 education and Medicaid will increase more rapidly than the TABOR limit can handle.

There's already talk in Colorado about making more changes to the constitutional limit.

And therein lies one of the biggest differences between Eyman's proposal and what's happened in Colorado.

Voters in Colorado put TABOR in their constitution, making it very difficult to change or remove.

I-1033, if approved, would become a state law that can be changed by a two-thirds vote in the state Legislature within the first two years. After that, it would take only a simple majority vote of lawmakers.

There could certainly be pressure on the Legislature to not mess with the initiative. After all, in another two years we'll be in the middle of another big election cycle with a governor's race.

But the restraints here are nothing compared to Colorado.

Andrew Garber: 360-236-8266 or agarber@seattletimes.com