By: Esther Turcios and Abbey Pizel

A complete and accurate 2020 census count matters

The US Constitution requires the federal government to conduct a census every ten years in order to generate an accurate count of all persons living in the United States, Puerto Rico, and all other US territories. A precise count is vital to guaranteeing each state receives the appropriate number of seats in the House of Representatives, it influences how states draw their legislative districts, and, equally as important, it ensures communities across the country receive proper funding for a host of important services families and local economies rely on. Unfortunately, the upcoming 2020 census is in jeopardy as inadequate funding and an unprecedented and untested citizenship question threaten participation, and an accurate count of all people – particularly residents in hard-to-count communities.

With as much as $600 billion in federal funding at stake, several states have appropriated funds and created Complete Count Committees (CCC) to ensure an accurate count in 2020. Trusted CCCs are volunteer groups created by state and local governments, community groups, and/or organizations focused on increasing awareness of and participation in the census through “trusted community messengers.” With an already difficult task of counting millions – especially hard-to-count communities including immigrants, people of color, Coloradans who earn low incomes, Native Americans, Coloradans living in rural communities, people who speak and understand limited amounts of English, and many others – the state of Colorado should invest in these trusted community groups so they can expand their outreach efforts to ensure all Coloradans are counted in 2020.

In order to ensure they can accomplish this goal, the Colorado Fiscal Institute (CFI) recommends state lawmakers invest $12 million in this year’s budget for 2020 census outreach efforts aimed at the hard-to-count population.

State funding can ensure a complete count    

A $12 million-dollar investment would allow the state to allocate resources to each of the 64 counties based on each county’s hard-to-count population (refer to Figure 2). Using Census Bureau data to determine the total hard-to-count population in the state, CFI was able to estimate the costs of doing basic, moderate, and intensive outreach for the 2020 census. Figure 1 below details the level of outreach that can be made to the approximately 1.5 million hard-to-count Coloradans at an average cost of $2 per person. The state could also reach about 147,000 Coloradans with moderate-level outreach at $25 per person, and about 73,000 Coloradans at $75 per person. Outreach needs will differ across the state depending on geographic location and the makeup of each community. To aid policymakers as they allocate resources, CFI’s analysis includes a breakdown of the dollars that can be allotted to community groups for 2020 census outreach in each county based on the share of hard-to-count residents:

In Denver County, community groups would receive $1.5 million to reach 176,155 residents. About $350,000 would go to basic outreach to the entire hard-to-count population, $440,000 would be used to follow up with moderate outreach to 17,616 people, and $661,000 would go to intensive outreach to 8,808 people.

In Adams County, community groups would receive $1 million to reach 125,792 residents. One quarter would go to basic outreach to the entire hard-to-count population, $314,000 would be used to follow up with moderate outreach to 12,579 people, and $472,000 would go to intensive outreach to 6,290 people.

In Weld County, community groups would receive $628,000 to reach 76,158 residents. Roughly $152,000 would go to basic outreach to the entire hard-to-count population, $190,00 would be used to follow up with moderate outreach to 7,616 people, and $286,000 would go to intensive outreach to 3,808 people.

In Montrose County, community groups would receive $103,000 to reach 12,535 residents. $25,000 would go to basic outreach to the entire hard-to-count population, $31,000 would be used to follow up with moderate outreach to 1,254 people, and $47,000 would go to intensive outreach to 627 people.

A complete count will help our communities thrive

For almost 230 years, the census has played a critical role in counting all people in the country, citizens and non-citizens alike, ensuring residents in each state are properly represented in Congress. However, less is known about the incredible importance of accurate census data in securing funding for everything from transportation and health care, to tools for reducing the amount of people experiencing poverty. A study by the US Department of Commerce found 132 programs used census data to distribute over $675 billion dollars to states in fiscal year 2015.[ The following sixteen programs are some of the largest and more commonly known programs that help Coloradans and residents across the country make ends meet:

From services that help struggling families put food on the table or see a doctor, like SNAP (formerly food stamps) and Medicaid, to lesser known but equally important programs like the Hazardous Waste Management State Program; Rural Business Enterprise Grants; and the Water Pollution Control, State, Interstate, and Tribal Program, the census funds a variety of public investments that help build the kind of communities Coloradans of all races and backgrounds want to call home. In fiscal year 2015, Colorado received more than $8 billion in census-based federal funds for these and many other important public services.

$12 million will provide a big return on investment due to the major and long-lasting effect census-based services have on the individuals and families who rely on them, and the stabilizing effect those same services have on the state’s economy—particularly during recessions and economic downturns. If the state does not invest in outreach efforts, hard-to-count communities will be underrepresented, hundreds of thousands of Coloradans may have a tougher time making ends meet, and local economies will suffer.

Of additional interest to those who want to ensure an accurate and complete count: because Colorado has joined 15 other states by taking action to count all citizens – especially hard-to-count communities – there are opportunities to pitch in. Colorado’s Complete Count Campaign is currently seeking volunteers to support the 2020 census.

Methodology

Colorado’s hard-to-count population was calculated by determining the percent of people in each county who did not participate in the 2010 Census. That percent was multiplied by the total population of each county to estimate the number of hard-to-count Coloradans in 2017. These estimates were used as a baseline to project how much Colorado needs to invest in outreach in order to have a full and accurate count of all Coloradans in the 2020 Census.

To estimate the average per-person outreach cost for hard-to-count communities in Colorado, we use a study completed by the New York Fiscal Policy Institute (FPI) as a proxy.5 In the study, FPI utilized a survey of community groups expecting to do outreach for the 2020 Census to estimate the per-person outreach costs for hard-to-count communities. The survey returned 32 responses. The responses were divided into three groups based on the level of outreach and the cost per person:  

• Basic Outreach: $2 per hard-to-count person
• Moderate Outreach: $25 per hard-to-count person
• Intensive Outreach: $75 per hard-to-count person

Of the 32 responses, twelve groups said they would use basic outreach meaning some level of broad outreach like public forums or providing information to individuals who come into an office. At the basic level, these groups proposed spending $10,000 and to reach 10,000 people, another said $15,000 and 8,500 people, and one said $78,000 and 12,000 people. This results in an average cost of $2 per hard-to-count person for basic outreach. 

Eleven groups said they would use moderate outreach that includes both broad outreach like public forums as well as specific outreach like in-person discussions. At this level of outreach, groups estimated spending $120,000 to reach 10,000 people, $500,000 to reach 20,000 people, or $20,000 to reach 500 people. This results in an average cost of $25 per hard-to-count person for moderate outreach.  

Nine groups would employ intensive outreach. This type of outreach is focused on communities that have the largest barriers to being counted. Outreach at this level can include in-depth discussions to explain the process, assistance for people who do not have access to the internet or who are not familiar with computerized forms, in-language discussions for families with limited English, and outreach to people and communities experiencing homelessness. With this type of intensive outreach, groups estimated spending $75,000 to reach 1,500 people, $250,000 to reach 5,000 people, and $100,000 to reach 1,000 people. This results in an average cost of $75 per hard-to-count person for intensive outreach. Because of cost variations and limited resources, community groups are not expected to employ each level of outreach to all of the hard-to-count populations. For example, intensive outreach is a substantially larger task for community groups and resources for this type of outreach would need to be specific and targeted. Following the structure outlined in FPI’s study, estimates assume that all of Colorado’s hard-to-count population, or 1.5 million people, will receive at least a basic level of outreach. Ten percent, or 147,000 people, will receive moderate outreach. Five percent, or 73,000 people, will receive intensive outreach.

The Colorado Fiscal Institute used these estimates to calculate the total amount Colorado should invest for 2020 Census outreach to hard-to-count communities.

Proposed State Funding for Census 2020 Outreach by County

Figure 2: Outreach cost estimates derived from New York Fiscal Policy Institute census study.

For printable verison, click here.

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Impact of an income tax rate reduction from 4.63 percent to 4.49 percent

The wealthiest see the greatest reduction

Reducing the Colorado income tax rate from 4.63 percent to 4.49 percent, the amount proposed in recently introduced legislation at the state capitol (SB19-055), will mean $280 million less for essential public investments. That’s because the income tax is the largest revenue source for the General Fund – the part of the state budget responsible for funding schools, Medicaid, colleges, courts, prisons, and human services. This retreat of state support would affect the budgets of all Colorado families, making it more difficult for them to make ends meet. And while proponents of tax cuts claim they provide “relief” to Coloradans, the top 1 percent would see the amount they pay in taxes fall by a greater amount than the dollar amount of the reduction for the bottom 70 percent of taxpayers.

Put another way, because an across-the-board income tax rate reduction reflects the current concentration of the incomes of Colorado taxpayers, those earning $1 million will see their tax bills fall by around $1,250 while the tax obligation for a worker earning the minimum wage will be reduced by just $6.

Reduces taxes paid by corporations

Despite Colorado ranking third-lowest among states with a corporate income tax, SB19-055 would shrink taxes paid by corporations by $24 million. The reduction would also come at a time when corporations’ tax bills were slashed by recent changes to the federal tax code. Research recently published by Harvard Business School found reducing corporate taxes actually ends up exacerbating income inequality and doesn’t help workers who earn less than $200,000 per year.

25% of Coloradans won’t pay less in taxes

In addition to the income inequality issues mentioned above, because a portion of Colorado taxpayers have higher deductions than taxable income (and thus zero income tax liability), an income tax rate reduction has no effect on fully 25 percent of Colorado taxpayers. The income tax rate doesn’t matter to a taxpayer with zero income tax liability because the rate is applied to zero dollars; meaning they owe no income tax. Of those 672,000 taxpayers with no income tax liability, more than half have incomes below $25,000, and 80 percent of them make less than $46,000.

Cutting the income tax rate increases the upside-down nature of Colorado’s tax code

The wealthy pay a smaller percentage of their income in taxes

In addition to income taxes, Colorado taxpayers also pay sales and property taxes. The sales tax is the most regressive part of Colorado’s tax code. A household making $32,000 a year pays 5 percent of their income in sales tax, whereas a millionaire pays sales taxes totaling less than 1 percent of their income. Coloradans earning low incomes also pay a high rate of their income in property taxes compared to wealthier households. Overall, people in households earning $32,000 pay 9 percent of their annual income in state and local taxes. Compare that to households earning $400,000 a year, who pay around 6 ½ percent of their incomes in state and local taxes.

Reduces funding for important priorities

The tax rate reduction proposed in SB19-055 also jeopardizes resources to fund current priorities such as full-day kindergarten. The price of that important enhancement is approximately $227 million. If a reduction in the income tax rate was to pass, the resources for paying for tuition-free kindergarten would be wiped out of future budgets. This would needlessly pit budget priorities – like paying for the salaries of kindergarten teachers or paying for other public school teachers – against one another.

The health and well-being afforded to us by living in Colorado, along with our ability to enjoy the outdoors – key parts of the Colorado way of life – are at risk. At least that should be the takeaway from the Fourth National Climate Assessment released last month by the U.S. Global Change Research Program, a coordinated federal effort created to analyze how the environment affects people living in the United States. If we fail to act, researchers found everything from Colorado’s water, ecosystems, health, and economy will all face drastic, negative consequences in the not-too-distant future. Now is the time for us to act. If the Colorado we know today is truly worth protecting now and for future generations, what can we do to change the future?

While Colorado voters acted more than a decade ago to address the importance of becoming less reliant on fossil fuels, the private sector has lagged in setting plans for bold action. That changed in December when Xcel Energy, one of Colorado’s largest utilities, took a stand for a cleaner energy future. Xcel announced their trailblazing goal of delivering 100 percent carbon-free electricity to Colorado customers by 2050, becoming the first major utility company in the country to do so. As part of their clean energy goals, Xcel also plans to reduce carbon emissions by 80 percent below 2005 levels by 2030 in Colorado and the seven other states in which they operate. Illustrating that combating climate change isn’t just a challenge for Xcel but for all of Colorado, other local utility companies, including Holy Cross Energy and Platte River Power Authority, have sets similar targets. These goals set the stage for Colorado to be a leader fighting against climate change.

100 percent carbon-free electricity is a goal many skeptics say is unfeasible – and with current technology, it’s probably not – but Xcel set this goal knowing the potential for new technology developments. It’s also important to remember the 100 percent carbon free electricity goal is different from 100 percent renewable energy, meaning Xcel is likely to pursue the development of a process of collecting and storing carbon, known as carbon capture. In the end, it will take a combination of new technologies, renewable sources like wind and solar, storage capacity, and even policy changes to make this goal a reality.

Incoming Colorado Governor Jared Polis, who joined Xcel company officials at the announcement, pointed out a different benefit of eliminating carbon-emissions from electricity generation. “It’s not only about carbon; it’s also about cleaner air, which means people are healthier,” Polis said to those in attendance. Cleaner air and healthier people mean economic benefits to Colorado families and the state. Previous research from the Colorado Fiscal Institute estimated the economic value of health costs avoided as a result of better air quality based on the emissions reduction goals set in Colorado Energy Plan which will reduce Xcel’s carbon emissions 60 percent by 2030. Xcel’s new goals will also provide reduced emissions, meaning cleaner air, healthier people, and the economic benefits of fewer missed work days and fewer trips to the hospital for respiratory issues.

For Colorado, the outdoors is a huge part of what make Colorado a great place to live, work, and play. While Xcel’s goal takes a stand conserving and protecting Colorado now and for generations to come, it only reaches one portion of Colorado’s economy. In order to truly be leaders in fighting climate change, lawmakers and public policy experts need to do more. But in taking this step, Xcel has taken big steps towards a future with beautiful mountains, snow to ski on, and beer to drink. Colorado can be hot chocolate with the whipped cream too.

Being able to stay warm during the cold winters is something most of us take for granted. Unfortunately, for far too many people in our state, being able to maintain a comfortable temperature in their homes during winter is difficult. LIHEAP – the Low-Income Home Energy Assistance Program, known as the Low-Income Energy Assistance Program (LEAP) locally – helps keep families healthy and safe by aiding with the cost of heating their homes. But helping people pay the bills doesn’t just provide economic stability for those struggling to afford the basics. LEAP is an investment in Colorado.

And thanks to this investment, LEAP leads to some critical supports for the more than 70,000 Colorado families participating in the program annually:

• $41 million in direct energy assistance in 2018 alone.
• That translates to $389 per family, making a big impact on their energy bills.
• $27 million in direct economic impact and more than $100 million in economic ripple effects.

As renewed threats to LIHEAP (and programs like it) emerge at the state and federal levels, it’s more important than ever to establish a clear and common understanding of why it exists, how it is funded and administered, who is eligible to enroll, and how it impacts Colorado’s economy.

This issue brief highlights why utility assistance matters so much to Colorado families and communities. LEAP doesn’t just help those who are eligible to enroll in the program get the assistance they need, it also helps counteract the effects of economic downturns and recessions, which helps everyone who calls Colorado home.

This brief is part of a more comprehensive report detailing the expansive impact of programs, such as SNAP, TANF, Medicaid and Medicare. These critical tools for lifting people out of poverty are too often discussed in the context of funding cuts. At their core, they represent vital public investments helping otherwise struggling families make ends meet.

If you want to do your part to protect these important tools, there are three things you can do:

1. Follow the Colorado Fiscal Institute on Facebook and Twitter and share this report with your friends and followers there (be sure to tag us when you do).
2. Contact your Congressional representatives to tell them these programs matter for Colorado families. They should protect them both for Coloradans in need, and for the health of our economy.  
3. Find out when your member of Congress or your senators are holding a public forum where you can make your voice heard about this important issue.

1. Legislators will have (some) new money to spend

The General Assembly will have $1.22 billion (about 9.6 percent) more to spend or save in the upcoming budget than was allocated in the budget passed by lawmakers this year. That’s not all new money, though. Caseload growth in Medicaid, increase in K-12 student headcount, and inflation must come first. Keep in mind this extra budget flexibility probably won’t last as state economists expect the economy to slow in coming years.

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2. TABOR could still trigger a temporary income tax rate reduction

The state is projected to collect $380 million more than the TABOR revenue cap allows in the current budget year (FY 2018-19). This money will be returned via a property tax break for seniors and via the “six-tier sales tax refund” mechanism (the average Colorado taxpayer will get back about $60 when they file their taxes in 2021). If the revenue above the TABOR cap is $16.5 million higher, well within the forecast margin of error, it will trigger a temporary reduction in the income tax rate from the current 4.63 percent rate to 4.5 percent. The income tax rate reduction would give $1,100 to a millionaire and about $6 to a minimum wage worker.

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3. The Gallagher Amendment will continue to reduce revenue for local services…

The residential assessment rate is expected to decrease from 7.2 percent to 6.78 percent for 2019 – a 5.8% drop in the assessment rate on homes. The impact of this reduction will be felt differently across the state. For instance, the property tax base for fire districts, libraries, and partially for schools, counties and cities grew 11.8 percent in Metro Denver but only by 2.3 percent in Pueblo and 1.7 percent in the San Luis Valley. The reduction in the assessment rate will mean fewer dollars for local services in in areas of the state that haven’t experienced the same housing growth seen in the Front Range.

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4. …But that could end up meaning more state support for schools

Because Gallagher caps residential property taxes at 45 percent of statewide collections, the rate used to determine the value of residential property must be lowered if home values outpace the growth in value of non-residential property (e.g. real estate like shopping centers and office buildings). But Because of strong growth in oil and gas property values, the state will be able to reap more of the revenue generated by Colorado’s strong housing market. In fact, the growth in local money for schools can fully cover student enrollment growth and inflation for FY 2019-20 – this extra flexibility could be used to pay down some of the $672 million negative factor owed to schools.

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5. Global issues and tariffs are impacting Colorado’s economy – particularly the agricultural industry

Though Colorado remains at a historically low unemployment rate of 3.2 percent (still below the national average of 3.7 percent), job markets are not even across the state. For example, the 5 percent unemployment rate in Pueblo is still high compared to Boulder and Fort Collins, which both stand at 2.9 percent. Additionally, while business activity in Colorado remains strong thanks to high consumer confidence and solid industrial production, rising interest rates will dampen activity in the next several years. Finally, agriculture has been the sector of the state’s economy most impacted by global issues, including the tariffs imposed by the Trump administration and the ongoing trade war with China. So why does Chinese trade policy affect Colorado farmers? If China isn’t buying high-tariff soybeans produced by American farmers, there will be ripple effects on farmers who grow corn – one of Colorado’s biggest cash crops. The more trade uncertainty in the global economy, the harder it will be for local agricultural producers to plan for the future.

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The Trump Administration is seeking to change a regulation that would harm immigrant communities across the nation and would impact Coloradans and our economy.

Under federal immigration law, the term “public charge” is used to describe a person who is dependent on government funded long-term care (e.g. nursing home care) or cash assistance for the majority of their support. If it is determined that an individual is likely to become a “public charge,” their application to enter the U.S. or become a lawful permanent resident may be denied. On October 10th, the Trump administration published a rule broadening the definition of public charge to cover use of a wide range of programs that help families achieve and maintain economic security.

The proposed rule changes will harm Colorado communities, threaten our economy, and make it harder for families to make ends meet.

Under current law, the “public charge” test applies only when an individual is seeking to immigrate to the United States or get their “green card.” The test considers many factors including age, health, and family status, but no single factor is determinative. However, the proposed rule changes will allow the federal government to consider participation in a broader range of public programs, including Medicaid, food stamps (SNAP), housing supports, and subsidies for Medicare Part D that reduce the cost of prescription drugs.

The rule would also make a specific income threshold a central issue in immigration decisions for the first time in American history. Having an income under $15,000 for a single person or $31,000 for a family of four (equal to income below 125% of the federal poverty level) would be weighed negatively and could lead to a denial. Indeed, the rule proposes to weigh a range of factors negatively. The only factor weighed as “heavily positive” is if an applicant has an income or resources of over $30,000 for a single person or $63,000 for a family of four (equal to income above 250% of the federal poverty level). By way of comparison, the median household income in the United States is $60,000.

The Colorado Fiscal Institute, in collaboration with the Center on Budget and Policy Priorities and the New York Fiscal Policy Institute, recently conducted an economic analysis to model the impact of two of the biggest supports the Trump Rule would affect: SNAP and Medicaid. Key findings from the analysis show that more than 300,000 Coloradans, including 143,000 children, are at risk of being impacted by the proposed rule changes. Additionally, the state could lose upwards of $298 million due to the economic ripple effects of lost funding and reduced spending and experience a loss of more than 2,000 jobs.

The proposed changes to the “Public Charge” rule are unnecessary, will create administrative burdens, harm families and children—immigrant and U.S.-born alike—and hurt Colorado’s economy. Advocates, service providers, community members, and immigrant families have until December 10th at 9:59 p.m. Colorado time to submit comments. Take action now. Share your story. For more information and instructions on how to submit a comment, visit the national Protecting Immigrant Families campaign website.

Click here to read the full brief. To view the fact sheets that examine the economic and community impacts of the proposed rule changes on health click here and SNAP click here.

 

 

 

 

 

 

 

 

 

 

Open letter to the voters of Colorado

As economists that live and work in the great state of Colorado, we urge voters to reject Amendment 74 and avoid the unintended consequences it would bring to Colorado’s economy and the fiscal stability of our state and local governments.

Colorado is currently experiencing a high level of economic prosperity. Nearly 3 million people are employed, and our unemployment rate is the lowest it has been since 2000.Total wages and wages per employee continue to outpace the national average, and Colorado’s gross domestic product grew at 4.5%.

Amendment 74 will introduce an incredible amount of uncertainty and create a shock to Colorado’s economy, undermining the progress our state has made since the Great Recession.

Amendment 74 would embed a “regulatory takings” right in Colorado’s constitution. Whenever local, state, or quasi-governmental agencies enacted a code or statute, a person or entity could file a claim for the diminished value of their property – including projected future profits. In any governmental decision, there is always a winner and a loser no matter how trivial or important the decision. This includes basic decisions about zoning such as where to site pipelines or a strip club, where to zone commercial versus residential uses, or public health, air and water quality protections.

For instance, an oil and gas company could apply for a drilling permit to develop oil underneath someone’s property. If the permit was denied, the company could file a claim for lost revenue. If the permit was approved, the homeowner could file a claim for the diminished value of their home and ability to sell their property. No matter what decision a government entity made in this scenario, it would be vulnerable to a legal claim. This type of system could create utter chaos in how government operates and huge uncertainty in investments and the marketplace.

We only need to look at the experiment that voters approved in Oregon back in 2004. Oregon’s Measure 37 gave property owners the right to file claims against land use decisions. For the three years it was in effect, more than $19.8 billion in claims were filed. Local governments could not afford to pay all the claims and subsequently stopped enforcing land use codes. In 2007, voters rescinded the measure by a strong margin. The Oregon experiment was a clear failure.

Amendment 74 is actually much broader since it applies to both land use and general regulation at all levels of government. Local governments could become insolvent since they would be exposed to frivolous claims and lawsuits. Bonds approved by voters for infrastructure or school improvements could become high risk bets. Local and state governments could be hamstrung from making a decision to approve or deny a project for fear of liability from a takings claim. The very basic legal and physical infrastructure of our economy would be at risk.

Putting Colorado’s strong economy at risk to frivolous lawsuits and uncertainty makes no economic sense. We urge the people of Colorado to reject this radical and unsound measure.

Very sincerely,

Dr. Nicholas Flores
Professor of Economics & Department Chair
Department of Economics
University of Colorado Boulder

Douglas Jeavons
Economist
Managing Director, BBC Research & Consulting

Dr. Phyllis Resnick
Economist and Managing Director
R Squared Analysis, LLC

Jeff Romine
Urban/Regional Economist

Patricia Silverstein
President and Chief Economist
Development Research Partners

Chris Stiffler
Economist, Colorado Fiscal Policy Institute
Adjunct Professor, University of Denver

Dr. Jeffrey Zax
Professor of Economics & Associate Department Chair
Department of Economics
University of Colorado Boulder

By: Abbey Pizel, Natural Resources Policy Analyst

The 2018 election is a road trip, one where voters have to decide between two routes for addressing Colorado’s transportation funding woes. One of them, Proposition 109, is a worn-out shortcut riddled with pot holes. The other, Proposition 110, is the only way to get us where we need to go.

Make no mistake, our state’s traffic problems are a big deal. The Colorado Department of Transportation (CDOT) estimates there are roughly $9 billion in backlogged projects statewide. In fact, one of the few things both political parties tend to agree on is that we need to make investments in transportation.

While Prop. 110 uses a fiscally responsible funding mechanism to make a big dent in the problem, Prop. 109 is a poorly written plan that would create fiscal problems for decades to come.

The need for change is clear
Colorado’s current, primary source of revenue for our transportation system is the gas tax. In 1991, the year Colorado raised the gas tax to 22 cents per gallon, the average price of gasoline was $1.14. In 2017, the average price of gasoline was $2.47. And the gas tax? Still 22 cents.

Not only has Colorado’s gas tax stayed flat for more than a quarter of a century, it’s also one of the lowest rates in the country, ranking 40th out of 50 states.

The gas tax might not have changed, but plenty of other things have. Because of inflation and other factors, the cost of building roads and bridges (measured by the Construction Cost Index) have outpaced revenue. One dollar’s worth of construction in 1991 was only worth 32 cents in 2015, meaning the state’s buying power has fallen significantly.

Also, thanks to improvements in technology, vehicles are much more fuel efficient than they were even just a decade ago. That means Coloradans are now paying less for every mile of wear and tear we put on our roads.

What does all this mean for our transportation funding? Even though the number of vehicle miles traveled has increased by more than 81 percent and the state’s population has grown by over 63 percent from 1991-2016, CDOT’s budget has only increased by 31.4 percent. Occasionally, the economy experiences the kind of growth that allows legislators to make deposits in the transportation fund (Highway Users Trust Fund, or HUTF) from the general fund (see figure 1 below). The years when those transfers don’t occur typically line up with bad or mediocre economic times, when resources for funding other state priorities are scarcer.

Clearly the gas tax, even when supplemented by occasional General Fund investments, has become ineffective at funding transportation needs as the state grows.

Transportation at a crossroads: Prop 109 or Prop 110?
Prop 109 requires CDOT to borrow of up to $3.5 billion for 20 years ($5.2 billion in total repayment). The bond revenue must be used exclusively for road and bridge expansion, construction, maintenance, and repair on the 66 projects identified in the measure. The proposed measure requires that bond repayment be paid from existing state revenue, specifically prohibiting the use of new taxes or new fees to pay the debt obligations.

Prop 110 allows CDOT to borrow up to $6.0 billion and pays for the bonds through an increase in the state sales and use tax rate from 2.9 percent to 3.52 percent starting in January 2019 and ending in January 2039. The measure also creates a citizen oversight commission that must annually report how the bond proceeds have been used and allocates the new revenue as follows: 45 percent for bond repayment and State Highway Fund; 15 percent for a Multimodal Transportation Options Fund and 40 percent for municipal and county transportation projects (meaning local governments will decide how to spend that portion of the money).

Proposition 109 and Proposition 110 both propose issuing Transportation Revenue Anticipation Notes—a type of bond, commonly referred to as TRANs—and using these bonds to make some of the much-needed upgrades to Colorado’s aging and outdated transportation infrastructure. But that’s where the similarities end.

Prop 109 mortgages the General Fund
While Colorado’s General Fund has not been the primary source of revenue for transportation (see above), it is the source of the funding for K-12 education, higher education, health care, senior services, and other critical public investments.

Colorado’s strong economy has generated hundreds of millions in new revenue in recent years, but the good times won’t last forever. Because Prop 109 uses the money collected from income and sales taxes at their current rates, when the next recession comes, lawmakers will be required to cut funding for ongoing state priorities in order for Colorado to pay for the bonds. That’s because when lawmakers are writing the budget, paying back the bonds will have to come first before other priorities are considered. The risks of non-payment are simply too high a risk for the state.

In many ways, Prop 109 is worse than doing nothing at all. Because Colorado’s economy relies so heavily on General Fund investments in health care and higher education to provide a stabilizing factor during economic downturns, cuts to those critical priorities will be especially painful when the next recession hits.

Additionally, Prop 109 assumes that roads are the only and best answer to addressing the state’s transportation needs. It prohibits the use of the bond proceeds for anything other than roads—and a specific set of roads at that. Regardless of whatever changes in the next 20 years, the only transportation projects that can be supported are the ones identified in 2018. That means projects to construct or improve alternate forms of transportation (like public transit, bikes, and pedestrian walkways) will languish.

Prop 110 is a responsible approach
There’s an old adage that’s especially true when it comes to tax and fiscal policy: you can’t get something for nothing. Without a new revenue source, or a permanently booming economy, transportation projects will always come at the expense of other priorities.

That means prudent investments for new transportation projects require new, sustainable, and dependable sources of revenue. When considering the source of the new revenue needed to fund transportation projects, without sacrificing other areas of the budget, two consumption taxes were considered: an increase in the state sales tax and an increase in the gas tax.

Although Colorado has historically relied on gas taxes, a sales tax is considered a better option in 2018 for two reasons. One, as discussed above, the gas tax is applied per-gallon of gas purchased and collections have not kept pace with needs. Second, because gas expenses are an unavoidable necessity in Colorado, it’s often a bigger part of budgets for people with low incomes than it is for wealthier people. That makes the gas tax more regressive than a general sales tax. The more regressive a tax is, the harder it will hit working families’ budgets.

The choice is stark
A new source of revenue provides a way to finance Colorado’s transportation needs without taking from existing activities supported by the General Fund. If voters approve the tax increase, Colorado would ensure our commitment to a 21^st century transportation system by charging an additional 6 cents for every $100 purchase of goods including by visitors to Colorado. It’s fiscally responsible.

Prop 109 sacrifices K-12 education, higher education, health care, senior services, and even good water and air quality. All of these are equally important to building the thriving communities we all enjoy.

Let’s all choose the right road going forward.

By: Chris Stiffler, Senior Economist

1. Colorado’s economy is firing on all cylinders

The state is seeing stronger than expected sales, individual income, and corporate income tax collections. The state’s GDP expanded by 3.0 percent in the first quarter of 2018, the fourth highest in the country, led by strong performances from the information, agriculture, and manufacturing sectors.  Colorado’s unemployment rate of 2.8 percent and underemployment rate of 6.1 percent are below the national average. The tight labor market is also moving wages higher—average hourly earnings increased 2.9 percent year-over-year which was the fastest increase during the current business cycle.

 

 

 

 

 

 

 

 

2. Brace yourselves, TABOR rebates are coming

The state collected more in taxes and fees than the revenue limit allows in last year’s budget (FY2017-18), in this year’s budget (FY2018-19), and is projected to do again in next year’s budget. In this year’s budget, revenue subject to TABOR is expected to exceed the Referendum C cap by $209.4 million, resulting in a TABOR refund in tax year 2019. The first $147 million of those rebates are returned via the reimbursements for property tax exemptions for seniors and disabled veterans. The remaining $62.4 million will be returned to all taxpayers using the six-tier method, which gives a sales tax refund to taxpayers based on their income. That $62.4 million in TABOR rebates means about $15 for the average taxpayer in Colorado, and they won’t see it until they do their taxes in April 2020. To put that number in perspective, $62 million could also be used to make an investment in a Colorado child tax credit, an expanded Earned Income Tax Credit for working families, or just paying down the debt we owe to our public schools.

 

 

 

 

 

 

 

 

3. Strong budget today means lawmakers must plan for tomorrow

The outlook for the General Fund is very optimistic. The state will have $1.16 billion more for next year’s budget above the current budget. However, that doesn’t account for caseload growth (more students, more patients, more clients) or inflation. After caseloads are factored in, the state has about $500 million in new money to spend in next year’s budget. Because state economists are already predicting a slowing economy in the next few years, legislators will have to be prudent with the budget commitments they make because they can’t rely on General Fund surpluses every year.

 

 

 

 

 

 

 

 

 

 

 

 

 

4. A Look at School Finance

To keep up with inflation and pupil growth, total program funding for schools will have to increase $295 million next year. Inflation expectations for 2018 have changed since the March forecast from 2.9 percent to 3.2 percent. Projections for local assessed values will grow by 3.9 percent, which will cover $109 million of that $295 million caseload increase. That spending level is still $672 million below the level of spending that voters thought they would be getting when they passed Amendment 23. To put it another way, funding for K-12 is actually lower now on an inflation-adjusted basis than it was before the recession.

 

 

 

 

 

 

5. TABOR mutes new online sales tax collections

The recent U.S. Supreme Court ruling in South Dakota v. Wayfair, Inc. could allow states to require out-of-state (including online) retailers collect and remit state taxes. This could mean an additional $110 million in sales taxes for Colorado, but that won’t translate to more revenue for the state budget.  Because we are already above the TABOR revenue cap, the additional sales tax from online retailers will just increase TABOR rebates. That means it can’t be used to make investments in public schools, roads and bridges, health care, or other priorities.