There are several components to the Taxpayer’s Bill Of Rights amendment to Colorado’s Constitution, but the two which residents pay the greatest attention to are the requirement that voters approve tax increases and that annual state spending is limited to population increase plus the change in the consumer price index.
There is little interest in eliminating the mandate to vote on tax increases — polling shows dropping that provision is a nonstarter — but some good minds are suggesting that using the population increase and CPI is not the most relevant method to determine state spending.
In House Bill 1187, that began the legislative process last week and heads to the Finance Committee on Monday, it is being proposed that a five-year average of personal income become the benchmark.
The CPI, advocates point out, is composed of everyday items that a household purchases: food, clothing and cellphone charges, for example, and that those items are not reflective of what the state buys, or needs. The state funds highway construction and health care, for example, and those costs have risen far faster than the CPI. Since 1993, the CPI has climbed 64 percent, while the cost of road construction has doubled and health care is up 122 percent, according to arguments for the legislation. Education has jumped a little more than 200 percent since 1993.
And, better to base funding for the state’s needs on personal income, which is a more accurate measure of how well Coloradans are doing financially and thus able to support the state’s needs. And to apply a five-year average, rather than a single year, or two, provides needed consistency and predictability.
Those wary of the impact on their wallets of the possible change in the TABOR spending formula are probably thinking yes, but just how much more tax money will this mean for the state?
For fiscal year 2015, using personal income would have meant an additional $140 million, which was almost equal to the $154 million which was returned to taxpayers because of the excess revenue over population growth and the CPI.
For the upcoming fiscal year 2018, the state would have an estimated additional $513 million to spend in a year in which $256 million is projected to be returned to taxpayers.
That estimated fiscal 2018 increase is the sort of amount that begins to cover the additional needs for highways, and perhaps a start for education, two critical components for any state.
Personal income has been climbing, and that would better position the state to cover today’s needs and to make infrastructure investments for the future. No need to count population with this change, as an aggregate personal income amount would consist of population as well as wages and unearned income.
Moving from tallying consumer spending to personal income, with a five-year average, could establish a more meaningful cap on state spending. Think of this as modernizing TABOR, as proponents argue, while maintaining TABOR’s fiscal discipline.
We look forward to the legislative debate.