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Spending limit dies by Ritter's signature

By: DEAN TODA
June 3, 2009
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photo - Colorado Gov. Bill Ritter talks about spending stimulus money during a ground breaking ceremony on a highway project in Littleton, Colo., on Tuesday, May 19, 2009.  Photo by (AP Photo/Ed Andrieski)
Colorado Gov. Bill Ritter talks about spending stimulus money during a ground breaking ceremony on a highway project in Littleton, Colo., on Tuesday, May 19, 2009. Photo by (AP Photo/Ed Andrieski) 

Perhaps the most significant bill to come out of the 2009 Legislature was signed into law Wednesday by Gov. Bill Ritter.

This wasn't merely a life-and-death issue such as 3.2 beer, or even the death penalty. This was the big deal: repeal of the Arveschoug-Bird limit.

You're not alone if your reaction was "huh?" But the newly minted law makes an important change in how your state tax dollars are spent: Legislators now get a greater say in deciding the state's spending priorities.

When Ritter put a pen to SB228 Wednesday morning, a series of mandatory budget formulas protected some state spending, such as K-through-12 education and the state's roads and bridges, leaving the state's other major priorities - prisons, health care and so on - to compete for their share of the pie. That pie has been shrinking lately, and the state has been struggling to protect basic services. This year, the Legislature narrowly avoided cutting funding for public colleges and universities in half.

One of those formulas was Arveschoug-Bird (AHR-veh-scow, rhymes with now), a 1991 measure that placed a 6 percent annual growth limit on appropriations to the state's general fund and mandated that money in excess of the 6 percent be automatically diverted to two separate pots of money, the transportation and capital-construction funds.

During a five-year phase-in period that will be triggered when the state's economy recovers from the recession, the new law will remove that formula. SB228 also increases the state's rainy-day savings.

"This might be the most important bill to come out since TABOR was passed," said Sen. John Morse, D-Colorado Springs, the bill's primary sponsor. The Taxpayer's Bill of Rights, the crown jewel of the state's tax-protest movement, took tax-increasing authority away from the Legislature and gave it to voters.

At the bill-signing ceremony Wednesday morning, Ritter noted that TABOR is still in effect. SB228, he said, "Maintains one of the nation's tightest caps on spending and does not raise taxes."

"It simply provides greater flexibility so the state can make wiser investments with existing resources."

Supporters of Morse's legislation say the state budgeting process has so many mandatory formulas, Arveschoug-Bird included, that political leaders don't have the flexibility to spend money where it's most needed.

They also point to what happens after recessions, when state revenues (and spending) fall by more than 6 percent. When the economy rebounds, general-fund spending could only rise by 6 percent, not fully restoring pre-recession spending - even when the state had the money to do so.

This is what budget wonks mean when they talk about the "ratchet effect," by which the economy puts state spending further behind the levels it would need to maintain consistent funding of various state services.

Champions of smaller government say that's just fine.

"With the governor's signature today, Colorado's budget is becoming Californicated," said John Caldara, president of the Independence Institute, a conservative think tank and advocacy group in Golden. Caldara argued that Referendum C, a voter-approved, five-year suspension of TABOR's taxpayer-refund provisions, made Arveschoug-Bird the last line of defense against rampant state spending.

"If they (the Democrats) think Coloradans want California-style taxing and spending, let the debate begin," said Josh Penry, the Senate minority leader and a possible challenger to Ritter's 2010 re-election bid.

Morse emphasized that spending will not increase because of the repeal of Arveschoug-Bird.

"Those that say, ‘Yeah, it (SB228) is going to blow the lid off government spending,' that's blatantly false," Morse said. The old formula, he said, "doesn't keep you from spending the dollars. It just keeps you from spending them in the general fund and has you spend them somewhere else. You still spend them. That's not a limit."

Carol Hedges, a senior analyst at the Colorado Fiscal Policy Institute, a liberal think tank and advocacy group in Denver, stood the California argument on its head, noting that the Golden State is flirting with bankruptcy after years of wrestling with competing budgetary formulas.

"We have been very alarmed that our state was on the same path that California was on, in terms of restricting the ability of the Legislature to adapt to circumstances and putting formulas that don't give choices," she said.

SB228, Hedges said, "restores the ability of the Legislature to make decisions based upon the priorities of the time."

Morse described SB228 as the first step in "untying the Gordian knot" that the state's budget process has become.

Other steps could target:

• The Gallagher Amendment, approved in 1982, which establishes a 45 percent/55 percent ratio between residential and commercial property tax revenues. It also fixes the commercial property tax rate at 29 percent of assessed value. To maintain the 45/55 ratio, the residential property assessment rate has dropped from 21 percent in 1982 to less than 8 percent today, relieving homeowners of a tax burden but making it harder for school districts and municipalities to raise money and forcing them to rely more on state funding.

• TABOR, which is acknowledged to be the most sweeping tax and spending limitation in the country.

• Amendment 23, a voter-approved 2000 backlash against TABOR that requires the state to increase spending on K-12 education by inflation plus 1 percent for 10 years - and by at least inflation thereafter. This mandatory spending increase tends to crowd out other state spending.

Action against these budget-by-formula pillars may be harder to take, because, unlike Arveschoug-Bird, they are enshrined in the constitution and can't be repealed without voters' OK.

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Contact the writer at 476-1654.


BUDGET BASICS

Colorado's government gets money from personal and corporate income taxes, sales taxes, fees for services, federal grants and severance taxes on mineral production.

With these revenues, which rise and fall with the health of the state's economy, it maintains several pots of money. About half its revenues are held in "cash funds," principally the transportation fund, which bankrolls the state's road network; the education fund, which goes to public schools; the capital-construction fund, which constructs buildings; the unemployment-insurance fund collected from companies and workers; and the higher-education fund, where tuition and fee collections are held.

The rest of state money is in the general fund, which pays for everything else, principally the state prison and judicial systems; state universities; and the state's matching dollars for the Medicaid health-insurance program.

 

 

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