Fiscal folly? Colorado can't claw its way out of a severe fiscal crisis because of its TABOR amendment, which has the state slashing programs while refunding taxes. Although it has its supporters, others say it has to change. And with new party control, it just might.

• Author: Frates, Chris
• Position: Taxpayer's Bill of Rights

Three years after Colorado's budget began to sink, revenues have started to come back bigger than expected. That should be good news. But in Colorado, budgeting has little to do with logic, thanks to two conflicting constitutional amendments that have hamstrung state spending.

Over the last four years, officials have slashed about $1.1 billion from the state budget and are facing an additional $263 million in cuts when they return to Denver this month.

Legislators have a number of options to balance the budget, none of them pleasant. They include removing some elderly patients from nursing homes, closing state parks or imposing huge college tuition hikes. Lawmakers could also try to generate cash using methods like selling state buildings and leasing them back. But that kind of Band-Aid solution would leave the underlying reasons for the shortfall untouched.

Like most states, Colorado's economy took a hit during the recession. In March 2001, Colorado's economic growth was second in the nation only to Nevada. In 2004, Nevada still topped the list, but Colorado dropped to No. 40, according to the June issue of State Policy Reports.

The topple from a top performer to barrel bottom wreaked havoc on the state's budget as lawmakers desperately plugged holes caused by sinking revenue. This was exacerbated by the permanent tax cuts the legislature made in the booming years of the late '90s. Economists estimate those cuts alone cost the state $480 million this budget year.

But by late 2004, state economists released figures that would, at first blush, seem to indicate Colorado's fiscal recovery--larger than expected growth in state tax collections. But that doesn't mean the state can spend the money. In fact, Colorado will refund more than $459 million to taxpayers while it will likely cut $263 million in programs and services.

Sound strange? Welcome to The TABOR Zone.

TABOR, or the Taxpayer's Bill of Rights, is a voter-approved, constitutionally imposed tax limitation that, among other things, prevents state revenue from bouncing back after a recession. Instead, it can create situations where lawmakers are forced to make cuts while giving money back to taxpayers.

ALONG CAME AMENDMENT 23

The state's fiscal crunch is further complicated by another voter-passed constitutional provision--Amendment 23, which requires annual spending increases in primary and secondary education. So while TABOR has locked in recession-level spending, Amendment 23 requires lawmakers to spend an increasingly larger share of available money on education.

Lawmakers are left to balance the budget on the backs of programs not protected by constitutional requirements, like public colleges and universities and Medicaid.

The crunch had gotten bad enough by 2003 that four college presidents warned leaders that expected state funding would be so insignificant by 2009 that public colleges and universities would either be forced to close or privatize.

"If something is not done through legislation or creation of a new funding mechanism, public higher education as we know it today in Colorado will become an endangered species," University of Colorado President Betsy Hoffman said at the time.

During the 2004 legislative session, lawmakers passed a plan that allows colleges and universities to raise tuition to cover expenses, something they were unable to do under TABOR. But, the law doesn't provide more money for higher education. In the words of the bill's prime sponsor, it just "keeps our higher-ed system alive."

The collision of TABOR and Amendment 23 has lawmakers in both parties worried. In July, Republican Governor Bill Owens called it "the most critical challenge facing us fiscally." Republican state Treasurer Mike Coffman and a bi-partisan group of legislative leaders have talked of impending fiscal disaster.

Republicans, who tend to favor TABOR, and Democrats, who generally support Amendment 23, spent much of 2004 trying to find a solution that would garner support from two-thirds of the state's lawmakers--the requirement needed to put constitutional reform on the ballot. But state leaders failed to find a compromise for myriad reasons including philosophically entrenched partisans, a factious Republican Party and a lack of leadership.

DEMOCRATS TO TAKEOVER

But those power dynamics were shattered on Election Day when Colorado voters gave Democrats the...