De-Brucing is the Least We Can Do
By Carol Hedges
Although it was painfully slow at times, the economy has finally rebounded from the Great Recession. The discussions at the state capitol about funding public investments like K-12 education, transportation, and health care are full of words like “excess” and “surplus.” And yet, even with a slowdown on the horizon according to the most recent forecasts from state economists, Colorado isn’t able to fully take advantage of the best of times.
Confused yet? Colorado’s unique constitutional tax and budget constraints tend to have that effect on people.
You don’t need to be an economist to know the economy grows and contracts over time, and those ups and downs affect everything from the price of groceries to the number of available jobs. Those fluctuations also mean the government collects more money in taxes when the economy is healthy and less in taxes during recessions. But people still need public services supported by those tax dollars even when the economy is struggling. In fact, that need usually increases during economic downturns because more people are out of work and can’t make ends meet.
At the end of the day, the revenue increases generated in good economic times are the only resources available to offset the cuts that have to be made during bad times.
For most states, this is a problem, but a solvable one. During good times, investments increase to help offset cuts from bad times, and state reserves grow so the eventual cuts are less painful. But in Colorado, where an arbitrary formula added to the constitution 1992 determines how much revenue the state can keep, lawmakers find their hands tied.
The law embedded in the constitution to restrict spending and saving tax revenue during good times relies on a formula that neither reflects economic growth nor measures increases in the costs of providing the public services that help our communities thrive. Unfortunately, this is by design. The formula is intended to shrink government over time by limiting revenue when the economy is growing. This, despite the fact that the only time government can save for potential downturns is when the economy is growing.
Here’s a practical example of how recent economic cycles have affected Colorado’s budget: In FY 2009-2010, tax revenue fell by 13 percent. At the same time, the number of kids in Colorado schools went up 1.7 percent, the number of people on Medicaid went up by 14.2 percent, and the number of students enrolled in higher education went up 10 percent. Colorado’s population grew by over 76,000 people and the number of vehicles on our roads increase by 23,000. Because the state is required to produce a balanced budget every year, funding for public schools fell, funding for colleges and universities fell (causing tuition to rise), and the state postponed scheduled maintenance for highways.
Thankfully, it’s now 2019, and state revenue is growing (this is reflected in the budget lawmakers passed and Gov. Polis signed last week). The growth in revenue is being used to pay back some of the cuts made to K-12 education, a tab that still amounts to over $600 million this year alone. New dollars appropriated for higher education will be enough to avoid additional tuition increases but they will not be enough to lower tuition. The state will invest more money in transportation, as it usually does when the economy is expanding, but it will barely make a dent in billions of dollars in backlogged projects.
And still, despite these obvious and widely supported needs, over the last few years millions of dollars in revenue was rebated to taxpayers in one form or another. The state constitution prevents all the revenue collected during good times from being used to offset cuts or even save for the next downturn. In other words, we make our communities feel the brunt of bad times without the benefit of the good times.
Fortunately, a commonsense, bipartisan effort is moving forward in the legislature to give voters an opportunity to weigh in on whether it still makes sense to prevent ourselves from using all the revenue collected for critical investments. HB19-1257 and HB19-1258 will allow voters decide whether or not to invest that revenue in K-12 public schools, state colleges and universities, and transportation projects.
This effort (Sometimes called “de-Brucing”) would give the state the same authority voters in many local communities have already given their school boards, county commissioners, and city councils. Voters in most school districts, counties, cities and special districts have decided to eliminate the arbitrary cap on revenue like the one the state is still required to use.
Think about it like this: Without de-Brucing, when the next economic downturn arrives, state government will be like a worker who loses their job and is out of work for a while, but after finally finding a new job, they can only keep a portion of their income. That wouldn’t make sense for a worker and it doesn’t make sense for governments that work to support our communities.
One thing this proposal will not do, however, is result in full funding of our schools. It will not provide enough resources to allow our colleges to decrease tuition. Our state highways, bridges, and public transit systems will still need billions of new dollars to pay for every needed project. De-brucing is a small step we can take to keep schools, transportation, and higher education from falling even farther behind.
While de-brucing is not a silver bullet to take care of all the state’s fiscal woes, it is a necessary, prudent, and commonsense step towards more responsible fiscal policy. It will mean the state will have options during good economic times for how to deal with cuts that occur during bad economic times. It will mean the pool of money that can be used to offset cuts will not be artificially reduced. It will mean that the folks we elect to manage our public finances will have a bigger toolbox. It’s the least we can do.
Take action with CFI and ask your legislator to support HB19-1257 and HB19-1258 and take a necessary step in supporting our communities priorities.
Take Action Today
