Our view: Tackling TABOR

Lawmakers say they will call a rare opening-day joint session of the state House and Senate to tackle the budget crisis when the Legislature convenes this morning.

The fix was needed last year to prevent this year's quagmire. But last year was an election year, and partisan squabbles prevented legislators from developing a reform plan they could pitch to voters.

Gov. Bill Owens appears ready for a bipartisan effort to overhaul the restrictive Taxpayers Bill of Rights.

Owens, a longtime TABOR champion, acknowledges that it must be tweaked. He has offered a budget reform plan, including ideas that Democrats proposed last year.

TABOR has taken most of the heat for the state's fiscal crisis. The citizen initiative was approved in 1992 and effectively has kept state spending in check for most of the past decade. But there are aspects of TABOR that voters likely did not anticipate, most notably, the ratchet effect.

The ratchet effect kicks in during recessionary times when revenues fall short of allowable spending. TABOR allows the state to increase spending over the previous year based on inflation plus population growth. During a recession, state spending declines, as it should. But when the economy recovers, state spending still is limited to recession-year spending, plus inflation and population growth.

The state endured a recession in 2001 and 2002, forcing deep cuts in state spending. Since 2001, the state has cut more than $234 million from its budget, and absent reform, legislators will have to cut $286 million during the next two years. That's more than $500 million for the state's roads, colleges, seniors and health-care system that impoverished residents and others can ill afford to do without.

The state recovered slightly in 2003 and enjoyed a relatively healthy economy in 2004. But because of TABOR, spending can't rebound, and legislators are forced to cut more services while returning millions in refunds to taxpayers.

"We've had significant cuts driven by less revenue," Owens told reporters in Denver last month. "This is the year, though, when we're going to have more revenue than TABOR allows us to keep." Colorado voters added TABOR to the state constitution in 1992. But changes must be approved by voters. The need for a bipartisan solution can't be overstated.

Under Owens' plan, the state would:

n Ask voters for permission to retain $500 million in state revenue surpluses that usually would be refunded,

n Cut the state's income tax rate from 4.63 percent to 4.5 percent,

n Amend TABOR to eliminate the ratchet effect during and immediately after recessions,

n Sell off future income from the state's tobacco settlement for an estimated $800 million to $900 million, and

n Invest $100 million annually in transportation, allowing the state to bond for up to $1.7 billion in projects.

Some lawmakers want to broaden the solution to include changes to Amendment 23, which requires increased spending for public education, and the Gallagher Amendment, which limits residential property taxes to a percentage of total property tax revenues.

Critics say Owens' proposal would balance the budget through 2006 but is not a long-term solution. But we need to start somewhere, and Owens' plan has bipartisan features and gives legislators a framework for reform. They have six months to mold it into a plan that voters can support.

The question is not if but when lawmakers will offer something to voters. We just hope voters can understand the ramifications: a state government with little or no wiggle room on discretionary spending unless TABOR is weakened.

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