What is TABOR?
A set of restrictions on state legislators' ability to deal in a responsive
and pragmatic manner with Colorado's problems and opportunities
Made a part of the state constitution by a citizen's initiative in November, 1992
Based on the notion of government-is-too-big-taxes-are-too-high
"TABOR" is an acronym for 'Taxpayers Bill of Rights'.
TABOR provisions are specified in Article X, Section 20, of the Colorado Constitution.
TABOR provisions were included as amendments to Article X via a citizen's initiative in November, 1992.
TABOR provisions mandate a set of restrictions on state legislators' ability to manage the annual budget for Colorado, the primary instrument of legislative policy implementation in Colorado.
These restrictions are primarily ideological in nature (derived from the idea that 'government-is-too-big-taxes-are-too-high') and are unconnected to the actual economic circumstances existing at any given time in the State of Colorado.
TABOR states its purpose as:
The "preferred interpretation [of TABOR] shall reasonably restrain most the growth of government."
Colorado Constitution, Article X, Section 20(1)
TABOR restrictions directly affect the legislative activities of the Colorado General Assembly, and the Assembly's ability to deal in a responsive and pragmatic manner with Colorado's problems and opportunities.
The result is that the real needs of the people of Colorado at any given time are not the basis for the formulation of state legislative policy, it is the dictates of government-is-too-big-taxes-are-too-high that govern.
Several states have looked into adopting a TABOR-like budget regime, but no other state has done so.
TABOR's effects in Colorado have been far-reaching and stark. No discussion of K-12 education, higher education, health care, social services, corrections, infrastructure or transportation occurs in Colorado without consideration of the restrictions imposed by TABOR.
Specific TABOR provisions include the following:
- a yearly state spending cap
- refunds to the public of revenues taken in over and above the spending cap ("TABOR refunds")
- mandatory state elections for any state tax or debt increase
- mandatory ballot language for those mandatory elections
- a flat income tax requirement
- provisions directly affecting property taxes
- creation of a new type of quasi-governmental entity: the "enterprise"
A Closer Look at TABOR Provisions
A Yearly Spending Cap
Colorado already has a constitutional requirement for a balanced budget each year.
This requires that the state may not spend more money than it takes in.
Colorado Constitution, Article X, Section 16.
Appropriations not to exceed tax - exceptions.
No appropriation shall be made, nor any expenditure authorized by the general assembly, whereby the expenditure of the state, during any fiscal year, shall exceed the total tax then provided for by law and applicable for such appropriation or expenditure, unless the general assembly making such appropriation shall provide for levying a sufficient tax, not exceeding the rates allowed in section eleven of this article, to pay such appropriation or expenditure within such fiscal year. This provision shall not apply to appropriations or expenditures to suppress insurrection, defend the state, or assist in defending the United States in time of war.
The TABOR spending cap is significantly more restrictive than the balanced budget requirement.
The TABOR spending cap is an arbitrary limit on the amount of money the state may spend in a particular year, determined without regard to the amount of money taken in by the state, without regard to the state of Colorado's economy and without regard to the needs of the people of Colorado.
TABOR offers a specific formula for how the spending cap is to be calculated:
Section 20(7) SPENDING LIMITS.
(a) The maximum annual percentage change in state fiscal year spending equals inflation plus the percentage change in state population in the prior calendar year,
(d) Initial district bases are current fiscal year spending and 1991 property tax collected in 1992.
(2) TERM DEFINITIONS. Within this section:
(f) "Inflation" means the percentage change in the United States Bureau of Labor Statistics Consumer Price Index ["CPI"] for Denver-Boulder.
Refunds to the Public of Revenues Beyond the Spending Cap ("TABOR refunds")
If more revenue is received than the cap allows to be spent for a particular year, that 'extra' money must be refunded to Colorado taxpayers, even if that extra money would still be within a balanced budget. So the spending cap also functions as a revenue cap. In times of a good economy, extra revenue over the spending cap may not be put aside in a 'rainy day fund', it must be refunded.
Section 20(7) SPENDING LIMITS.
(d) If revenue from sources not excluded from fiscal year spending exceeds these limits in dollars for that fiscal year, the excess shall be refunded in the next fiscal year unless voters approve a revenue change as an offset.
Mandatory Elections for any State Tax or Debt Increase
TABOR requires approval by the people, via an election, for any new taxes, any increase in existing taxes or any increase in state debt.
This provision takes away from state legislators, and transfers to the voters of Colorado, the ability to set new taxes and debt.
Section 20(4) REQUIRED ELECTIONS.
Starting November 4, 1992, districts must have voter approval in advance for:
(a) Unless (1) or (6) applies, any new tax, tax rate increase, mill levy above that for the prior year, valuation for assessment ratio increase for a property class, or extension of an expiring tax, or a tax policy change directly causing a net tax revenue gain to any district.
(b) Except for refinancing district bonded debt at a lower interest rate or adding new employees to existing district pension plans, creation of any multiple-fiscal year direct or indirect district debt or other financial obligation whatsoever without adequate present cash reserves pledged irrevocably and held for payments in all future fiscal years.
Mandatory Ballot Language for the Mandatory Elections
For the voter-approval elections mandated in section 20(4), TABOR also mandates very specific language to be used for the new ballot measures, including the use of capital letters.
Section 20(3) ELECTION PROVISIONS:
Titles shall have this order of preference: "NOTICE OF ELECTION TO INCREASE TAXES/TO INCREASE DEBT/ON A CITIZEN PETITION/ON A REFERRED MEASURE."
Ballot titles for tax or bonded debt increases shall begin,
"SHALL (DISTRICT) TAXES BE INCREASED (FIRST, OR IF PHASED IN, FINAL, FULL FISCAL YEAR DOLLAR INCREASE) ANNUALLY...?" OR
"SHALL (DISTRICT) DEBT BE INCREASED (PRINCIPAL AMOUNT), WITH A REPAYMENT COST OF (MAXIMUM TOTAL DISTRICT COST), ...?"
A Flat Income Tax Requirement
This provision prohibits the use of a progressive income tax in Colorado.
Section 20(8) REVENUE LIMITS
(a) . . . Any income tax law change after July 1, 1992 shall also require all taxable net income to be taxed at one rate, excluding refund tax credits or voter-approved tax credits, with no added tax or surcharge.
Provisions Directly Affecting Property Taxes
Specific restrictions on real estate taxes.
Section 20(8) REVENUE LIMITS.
(a) New or increased transfer tax rates on real property are prohibited.
No new state real property tax or local district income tax shall be imposed.
Creation of a New Type of Quasi-governmental Entity: the "enterprise"
Section 20(2) TERM DEFINITIONS.
Within this section:
(d) "Enterprise" means a government-owned business authorized to issue its own revenue bonds and receiving under 10% of annual revenue in grants from all Colorado state and local governments combined.
(b) "District" means the state or any local government, excluding enterprises.
(7) (d) Qualification or disqualification as an enterprise shall change district bases and future year limits.
No further definition of 'enterprise' is given in the amendment. This provision has been interpreted to mean that revenues of an enterprise are not counted against the state revenue cap, and so do not count toward revenues that may be subject to a possible TABOR refund.
The effect of these provisions taken together was a huge transformation of state budgeting procedures, and so a huge transformation of how the State of Colorado operates.
TABOR was added to the constitution without any legislative-type hearings or economic studies of the consequences of these changes or public town hall meetings.
Any single one of these provisions would normally require close and careful scrutiny.
Yet this package was presented to voters in a simple yes-or-no vote for the package as a whole.
This is the first of a series of articles on TABOR and its effects on Colorado.