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Friday I am hosting a Student Legislative Education Day (SLED) at the Capitol. Since so many people who see me in Colorado on a weekday think I am playing hooky from my job in Washington, I thought it would be useful to explain to young people the difference between the State and Federal government. We are expecting nearly 200 high school students from around the state. Legislative leadership and the Governor are among the speakers. The students will do a mock committee hearing and a budget exercise as well.
I was talking to the young people on my staff. "We need someone young and cool to speak to the students. How about the new Speaker of the House, Romanoff?"
"Well, he is young," they admitted.
What, after all, is wrong with TABOR? I have been talking to groups about why we need to change the 92 Budget Amendment and Senator Tochtrop, from Adams County, asked me to write up my remarks because she thought they would be useful to others who are trying to explain the problem. This explanation may be something you want to forward to your lists.
When we passed the Budget Amendment in 1992, most people understood it as creating a provision that required a vote of the people before taxes could be raised. This is true, and no one wants to change this part of the Amendment.
Another part of the Amendment, though, was less well understood. This part has come to be known as the "ratchet" and it says that every year a governmental entity, let's say the state, can spend what it spent the previous year plus inflation and population growth.
This provision has a surface credibility to it because it sounds like government spending can stay the same in real dollars per capita. It can't go up, but it sounds like it won't go down either. This ends up not being true and this is why.
Let's say that in year one (1) the state can spend $100. From this we buy education, roads, prisons, health care, our judicial system. everything we need, and it is enough. $100 comes in in tax revenue. We spend it.
In year two (2) we can spend $106. (For the purposes of this example $6 is the population and inflation adjustment.) $106 is collected in tax revenue and we spend it.
In year three (3) we can spend $112. This is what we need to stay in the same place in real dollars per capita as we were in year one (1). But in year three (3) we are in a recession. Maybe there was a terrorist attack, or a SARS epidemic, or forest fires or maybe it is just part of the business cycle. In any case, we only collect $80. That is what we spend. It is all we have.
In year four (4) the recession is over. We collect $118. This is what we need to provide the same services that we did in year one (1). We can spend $86.
We can spend what we spent the previous year plus inflation and population growth. We refund the other $32 and at the same time cut services to the people of the state.
This is where we are right now. In the 2006 budget year we will be cutting $181 million dollars from our budget and at the same time refunding over $336 million dollars.
This is insane. No other state has this kind of spending limitation. It brings an element of irrationality into our budget decisions. Decisions on the budget are not made because of a reasoned weighing of our resources or our needs. The budget is set because of calamities like terrorist attacks, recessions or forest fires. And it is set not just in the year that the calamity occurs, but in every following year, because the ratchet effect has put us on a lower line on the graph.
Everything that we spend money on will eventually be affected by these forced cuts. Health care, transportation, education, prisons, but the first to be hit will be higher education. This is because everything else is protected in some way.
K-12 education has some protection from Amendment 23. Corrections is driven by sentencing laws. Medicaid is a Federal program with matching funds. Highways have a dedicated source of funding from gas taxes and licensing fees. Only higher education has no protection.
If we don't make a change to our Constitutional budget knot there will be no state money going into higher education by the end of the decade. We will be the first state to defund higher education. You have heard of something called "in-state tuition." That is something they will have in other states. Our best professors will go to other states and our best students will follow them.
This will be bad for all of us whether we have students in college or not. Businesses will go to states that can do a better job of providing an educated work force. The synergy between a research institution and the high-tech businesses that locate near it will be gone.
We will still have institutions of higher education in this state but they will be charging private school levels of tuition. If you are very rich you might not notice the difference in cost.
After we have defunded higher education the other services that our community has provided will be hit next. These are Medicaid, roads, prisons, K-12 education and so on. And all of these cuts will be made without anyone having ever rationally considered whether we need these services in our state or not. These will be automatic cuts made by the inexorable language in our Constitution working through the ratchet effect and the business cycle.
This is bad.
In my next email I will tell you how you can help make a change.
Sincerely,
Ken Gordon
Senate Majority Leader
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