2018 Fiscal Forum
Friday, January 12, 2018

CFI is excited to announce that our keynote speaker for the 2018 Fiscal Forum is noted author, political analyst and historian, Thomas Frank. Frank is the author of numerous books, including “Listen Liberal” and “What’s the Matter with Kansas.” A former columnist for the Wall Street Journal and Harper’s, Frank is the founder of The Baffler magazine and today writes for The Guardian.

We’ll also have economists from Colorado Legislative Council Staff and the Governor’s Office of State Planning and Budgeting to give us the lowdown on the state budget and local economy, as well as national experts from the Center on Budget and Policy Priorities to explain what’s happening in Washington D.C. and how it will affect Colorado.

You won’t want to miss this year’s Fiscal Forum. Get your tickets today!

Fiscal Forum
Friday, January 12, 2018
8:30 a.m. – 1:30 p.m.
History Colorado Center
1200 Broadway
Denver, CO 80203

You won’t want to miss this event, RSVP today!

On Thursday November 2^nd the House Ways and Means Committee introduced the Tax Cuts and Jobs Act in the House of Representatives. It contained the same major flaws as prior GOP tax plans and frameworks. The House GOP tax plan prioritizes tax cuts for the wealthiest households and profitable corporations, it would dramatically increase the deficit, which would likely force future budget cuts to programs like Medicaid, Medicare and safety net programs, and it offers no benefits to most low-income working families: instead, it hurts many.

This plan would be detrimental to our nation as a whole and to communities across the states, including Colorado communities. The Institute on Taxation and Economic Policy (ITEP), recently released state specific data that looks at the impacts of this plan on Coloradans. The data includes:

• The share of tax cuts in Colorado going to each income group in 2018 and 2027.
• The average tax cut for each income group in those years, in dollar amounts.
• The average tax cut for each income group in those years as a share of income.
• The fraction of taxpayers in Colorado who would pay higher taxes under the bill.

Additionally, ITEP released a full report which found that the richest Americans benefit most from the Tax Cuts and Jobs Act.

Click here to read about Colorado specific data.

Click here to read the full report. 

by Carol Hedges, Executive Director

Twenty-five years ago today, Colorado voters approved adding Article X Section 20 to the state constitution, known to us as the Taxpayer Bill of Rights (TABOR).  That same year, Motorola introduced one of the first handheld digital mobile phones. 

At the time, the phone was an important – and innovative – step for mobile technology. But it was bulky, heavy, and shaped like a brick. It couldn’t send or receive text messages. There was no internet and you couldn’t get directions from Google Maps. Charging the battery took five hours, and it only lasted for an hour or so of talk time.

If you got your hands on one today, that same phone would still work on certain networks. But faced with an option of that over one of today’s smartphones, with all its capabilities built for modern life, what would you choose? What would you want to rely on to communicate and connect with the world today and into the years ahead?

Colorado is facing a similar predicament when it comes to TABOR – an outdated idea that’s outlasted its questionable usefulness. Twenty-five years after its passage. TABOR remains a dominant influence in Colorado’s fiscal landscape. But is it really the governing policy that we want to move forward with into the next twenty-five years?

Over the last two and a half decades, we’ve talked a lot about TABOR – how it severely limits Colorado’s ability to invest in ourselves or benefit from economic growth, how it’s made our economy easier to bust when recessions hit and harder to boom when they end, and how it provides an easy avenue for elected officials to abdicate their responsibility to make decisions about investing in schools, roads, health care, and jobs.

Many who live in Colorado today – which is nearly 2 million more than in 1992 – may not be familiar with all the ramifications of the controversial constitutional amendment that barely passed on its third trip to the ballot. But understanding the last 25 years of fiscal policy in Colorado is not nearly as important as looking ahead to the next 25 and figuring out what kind of state we want and how we’re going to support that endeavor.

As we look ahead and try to sort out how to best keep Colorado awesome, we need to have honest debates about changing technology, an evolving economy and dramatic growth if we are to develop better systems and structures that can help our state and everyone in it thrive in the decades to come.

The Colorado of the future needs fiscal policy that actually supports our way of life in Colorado, by making sure we don’t keep kicking costs for things like infrastructure down the road, by making sure we’re actually paying for ourselves as we see waves of new population growth, and by making sure we can shift and adapt in smart ways as the economy evolves.

Between now and 2040, another 2 million people are estimated to move to our state. That’s a staggering number to think about when we’re not even keeping up with the demands of our growth now. How can we realistically expect to do so going forward, without some significant changes?

Over the coming weeks, CFI will be publishing a series of blog posts that explore details on how TABOR constrains our ability to adapt to economic and cultural changes that threaten our future.

The 25th anniversary of the passage of TABOR is not a cause for celebration, it is a call for a smarter, better way forward in the next 25 years.

We better make sure we have a phone that works.

By Ali Mickelson

“Trickle-down” economics is an archaic theory that suggests that providing tax cuts for the wealthy eventually seeps down to middle-class Americans and creates jobs, raises wages and increases economic development. Despite extensive evidence that this type of tax policy is unsuccessful, conservative lawmakers are still advocating for the elimination or reduction in income individual income taxes as a way to spur economic growth.

The most recent and visible example of the failure of trickle-down policies occurred in the Kansas, where Governor Sam Brownback dramatically reduced personal income tax rates, claiming that these changes would “act like a shot of adrenaline into the heart of the Kansas economy.”

Unfortunately, the opposite was true. Promises of immediate economic improvement failed to materialize and state revenues plummeted, resulting in cuts to services, delays to road projects, and underfunding in schools. Recognizing that the tax cuts had created a financial and budget crisis, a group of bipartisan lawmakers reversed the tax cuts earlier this year.

A new analysis by the Institute on Taxation and Economic Policy (ITEP) further proves that tax cuts aren’t the solution to thriving economies. The report, titled “Trickle-Down Dries Up” finds that states with the highest income tax rates actually experience higher economic growth than states without individual income taxes. Furthermore, states with higher individual income tax rates have higher income growth rates, increased employment and fairer tax systems.

The study looks at the nine states with the highest top marginal income tax rates and compares them to the states with no personal income taxes. Examining ten years of data shows that states levying the nation’s highest income tax rates performed better in economic growth rates, per capita and disposable income growth and employment than states without an income tax.

The analysis also shows that states without personal income taxes rely more heavily on revenue from regressive sales and excise taxes, which has resulted in higher tax rates for low-income families, and lower overall tax rates on the wealthy.

ITEP notes that while tax policies contribute to economic growth, states also need tax revenue to provide good public schools and to support public health, public safety and infrastructure. All of these things fuel economic growth. Cutting personal income taxes is an ineffective and single-minded approach to a complex issue.

Carl Davis, director of research and author of the report summarizes the findings, stating “while proponents of income tax cuts often point to the states without personal income taxes as a model to strive for, these states have actually been less successful in fostering economic growth than states with relatively high-income taxes. The track record of states not levying income taxes suggests that the rhetoric of economy-boosting income tax cuts does not match the reality.”

For more information and to read the full report, click here: https://itep.org/trickle-down-dries-up/

By Elizabeth Cheever and Michael Wu

The Census Bureau released state-level economic and poverty numbers for 2016 last month. Colorado’s data follow the trends seen nationwide: increases in household income, decreases in poverty, and more people with health insurance. At CFI, we can’t let a juicy set of numbers go by without crunching them, so here are five takeaways from the latest Colorado Census data.

This analysis includes a sample of counties across Colorado. These counties were selected to show a broad range of economic and demographic factors.

1. The basics have improved since the recession, but too many people still live in poverty.

In 2016, median household income in Colorado was $65,685. The overall poverty rate in the state is 11%, and the child poverty rate in Colorado is 13.1%. Broadly speaking, that means Colorado is doing better than it was before the great recession. In 2007, the overall poverty rate was 12% and the child poverty rate was 15.9%. Below you’ll see it’s a little more complicated than that: counties along the Front Range and I-70 corridor have bounced back, but many rural areas are struggling. And let’s not forget: the 2016 poverty rate means nearly 600,000 state residents – including 162,000 children – live below the poverty line in our state.

2. The Affordable Care Act (ACA) and Medicaid expansion have helped thousands of Coloradans get health care.

The numbers speak for themselves: expanding Medicaid in 2014 made it possible for hundreds of thousands of Coloradans to get access to health care. Nearly 1.4 million people in our state are covered by Medicaid, and 40% of children in Colorado rely on Medicaid for medical care.

People in counties with high median incomes are still more likely to be insured, but the ACA has helped shrink that gap. Living in poverty means basic needs often go unmet. Under the ACA, health insurance is one less thing struggling families need to worry about.

3.  A population boom and a more diverse state affect who thrives in our economy.

Colorado’s population rose by more than half a million, or 14%, between 2007 and 2016. Along with the major population influx, our state’s racial makeup continues to diversify—a trend that is expected to continue. White Coloradans made up 70% of the population in 2016 (compared to 72% in 2007) and Latinos are 22% of Coloradans in the most recent census, up from 20%. More than ever, it is crucial that our economy works for everyone. The children in Colorado’s schools today will be the workers and taxpayers supporting our aging population in the future. Investing in children of color, making sure they have access to quality education and economic opportunity, is an investment in prosperity across the state.

4.  Colorado’s county poverty numbers tell a more complex story.

Comparing poverty rates among counties reveals significant differences in prosperity and economic well-being across Colorado. Examining county-level data is important, because state totals can obscure the struggles of rural communities. All Coloradans have an interest in seeing statewide economic prosperity, not just concentrated wealth in certain areas.

5.  Racial inequality persists throughout the state.

The census data show stark racial inequality in Colorado. People of color face significant barriers on the road to economic security. Latinos in our state are more than twice as likely as whites to be poor, and nearly a quarter of Native Americans live below the poverty line. When opportunity is limited for any Coloradan, our state economy misses out on prosperity, innovation, and growth.

1. The devil is in the details

The budget that legislators will begin writing this January (FY2018-19) is projected to be $666 million (or 6 percent) larger than this year’s budget (FY2017-19).  Not all the increased revenue is from economic growth, as $116 million comes from accounting adjustments in this year’s budget, resulting in more money in carryover from FY 16-17.  About $350 million of the increase will be needed to keep pace with growth in students and growth in mandated Medicaid expenses.

2. SB17-267 created some flexibility for the General Fund

SB17-267, which exempted the Hospital Provider Fee revenue from the TABOR revenue cap, reduced the FY 2018-19 TABOR rebate obligation by $180 million making that money available for General Fund investments. With the passage of SB17-267, there are no TABOR rebates projected though FY2019-20.

3. Colorado’s tax code is amplifying the urban-rural divide

Many rural areas in Colorado aren’t benefiting from the same rapid growth happening in the Front Range. Rural districts have a harder time funding local governments and schools because their property value isn’t growing like it is in the metro area. The Gallagher amendment, a constitutional component of our tax code, aggravated the problem by requiring an automatic drop in the state residential assessment rate (the portion of housing property that is subject to property tax) from 7.96% to the 7.2%.  The rapid growth in property value around Denver is constraining local governments whose area hasn’t seen the same growth.

4. Colorado’s economy is booming, but wage growth hasn’t kept up

Unemployment in Colorado is 2.4 percent—2 percent lower than the national average and a clear sign of our state’s strong labor market. Colorado workers are in high demand, but salaries and wages aren’t growing as expected. Employers have not yet started to increase wages, despite huge gains in profit. Corporate profits in the U.S. are at historic highs while employee compensation as a portion of the economy is at a historic low. Jobs are more readily available than ever in the Front Range, but a high cost of living and stagnant wages mean making ends meet is still a challenge for many Coloradans.

5. The aging population continues to have a larger and larger impact on the state budget

As more Baby Boomers continue to age and leave the workforce, Colorado’s budgetary and employment landscapes change. The Medicaid caseload increases, which means more spending just to maintain current levels of service. Costs associated with an aging population mean more state revenue is spoken for, and that $666 million shrinks. The cost of Colorado’s homestead property tax exemption alone, a property tax break to seniors, is growing at 8.5% from FY 17-18 to FY 18-19, creating a General Fund obligation of $145 million for next year. Aging demographics may also explain some of the sluggish wage growth in Colorado. Older, higher-paid employees are leaving the workforce and being replaced by an influx of younger, lower-wage workers. This trend can contribute to lower average wages and constrain growth.

Business rankings have long been used as a method to examine which states are implementing policies that court and help thriving businesses and ultimately the state’s overall economic prosperity. Chambers of Commerce, elected offiicials, and economic development agencies often use such rankings to tout their states. But do these rankings truly reflect what helps workers, business, and state economies flourish? We’re not so sure.

Two large proponents of these rankings are the Tax Foundation and the American Legislative Exchange Council (ALEC). For example, ALEC’s Rich States, Poor States is an economic outlook ranking that ranks states based on 15 state policy variables. The overall argument in their reports is that states that tax and spend less see higher growth rates than do states that tax and spend more. However, relying solely on a state’s tax system is a poor indicator of whether or not businesses will locate in a specific state and will therefore help a state’s economy prosper. In fact, evidence shows productivity of workers and local economies, investments in human and physical capital, and many other factors play a much bigger role in leading states to a prosperous economy.

A well known example of a tax cut experiment gone wrong came out of our neighboring state, Kansas. In 2012, Governor Sam Brownback signed legislation which sharply cut income taxes across the board that leaned towards the wealthy, and that ultimately cut the state budget by 13 percent. The Brownback administration, much like ALEC members, believed that drastic cuts to state income taxes would generate thousands of jobs and encourage the growth of small businesses. However, not only did Kansas not see a growth in its economy, but its bond rating went down and they cut funding for vital services and programs including education.  Five years later, the experiment proved to be such a failure that the Republican-lead Kansas legislature voted to raise taxes overriding a Governor veto. Kansas has since served as a prime example of the negative effects of supply-side tax cuts as a method for measuring economic prosperity for the rest of the nation.

As Colorado enters its third longest economic expansion since 1900 and our unemployment rate – 2.3% – is at an all-time low (the lowest in the country to be exact), it is a good time to talk about what has really led our state to this time of economic prosperity. In particular, what strategies have worked, what policies have been passed, and/or what programs have been implemented that have allowed Colorado’s economy to continue to grow since 2009.

That is why we are creating a new blog series titled the “Real Path to State Prosperity.”  This six part series, beginning in October, will focus on six distinct areas that create long term shared prosperity, not just in Colorado but in all states. Within each blog we will highlight our work, as well as the work of our partner organizations whose commitment to economic prosperity has created a thriving Colorado.

Using framework from Peter Fisher’s, Grading the States, Business Climate Ranking and the Real Path to Prosperity, which is dedicated to explaining how states can truly promote long term growth and broadly shared prosperity, we will focus on the following topics:

1. The Importance of Productivity, Wages, and Shared Prosperity
2. How Education & Job Training Boost Productivity
3. Investments in Infrastructure Bring High Returns
4. Healthy Workers Are More Productive
5. Innovation and Entrepreneurial Activity are Key to Economic Growth
6. Making Sure Productivity Gains Lead to Higher Wages

It is our hope that the “Real Path to State Prosperity” blog series will provide us an opportunity to rexamine and redefine what investments in our communities actually lead to thriving businesses and broadly shared economic prosperity for all Coloradans, as well highlight the progress we’ve made in Colorado.

Stay tuned for our first report coming in October.  Follow us on Facebook or subscribe to our email list to receive updates about the blog as soon as it becomes available.

As Colorado celebrates Labor Day and the important progress made over time for working families here and throughout the country, it’s worth taking a fresh look at a central factor in employment growth and the economic well-being of workers: wages. More specifically, there’s a persistent need to examine the share of low-wage jobs in our economy, who holds those jobs, how Colorado compares to other states, and how low-wage employment affects workers’ ability to afford basic needs like housing.

As economic policy discussions inevitably turn to job and wage growth, this type of analysis can shed light on what trends are actually emerging with employment, what communities are most affected by low wages, and what that might mean over time for economic growth and equality. Rather than rely on assumptions, myths, and stereotypes to inform policy, we look to the data and facts.

In Colorado, the data and facts point to a few key insights. The first is that low-wage earners have regained some of what was lost since the Great Recession. However, these gains are a fraction of what the wealthiest 1% gained since then. The second is that women, Hispanics, and African-Americans are likelier to hold low-wage jobs, which reinforces the need to address systemic barriers such as racial discrimination, gender bias, and persistent pay gaps when considering economic and wage policies. The third is that while the portion of low-wage jobs is smaller in Colorado than in other states, the share of low-wage jobs has grown over the last 15 years. And the fourth is that stagnation in low-wage job is putting Colorado workers at a severe disadvantage when it comes to affordability of basic needs like housing.

While workers have made considerable progress over time across many indicators, the facts and data around low-wage jobs are essential to understand and critical in shaping policy decisions going forward. Because, while it’s important to celebrate past progress, there is no guarantee of future success without a fuller comprehension of how we got here.

Key Findings

• The bottom 20 percent of wage earners have seen their wages rebound in the last two years, regaining the loss from the Great Recession, though these gains are far outpaced by income growth for the richest 1%.
• Women, Hispanics, and African-Americans are likelier to hold low-wage jobs than other demographic groups.
• The portion of Colorado’s total jobs that are classified as “low wage” is smaller than most states, particularly when comparing cost of living and wages across states.
• For some of the largest low wage jobs, the cost of housing consumes more than half of the paycheck of those workers particularly in the Denver Metro Area and resort communities.

Read CFI’s full report here

By Esther Turcios, CFI Policy Analyst

It goes without saying that a federal paid family leave program is long overdue. Too many low-income families find themselves between a rock and a hard place, having to decide between losing their jobs or taking unpaid time off to care for themselves, a new child or an ill family member. So, when President Trump rolled out his 2018 budget, I was quite surprised to see a proposal for a paid parental leave program, given his huge cuts to many other programs that support working families. Clearly, I needed to break down his budget to see exactly what he was proposing.

Currently, under the federal Family and Medical Leave Act (FMLA) workers are provided with job-protected unpaid leave for qualified medical and family reasons. But, this is available to less than fifty percent of workers, most of whom cannot afford to take it, according to the National Partnership for Women & Families. In Colorado, sixty percent of employees don’t have access to FMLA. The unfortunate reality is that parents, most notably women, end up leaving their jobs to care for their families.

At the moment, five states (California, New Jersey, Rhode Island, New York, and Washington) and D.C have enacted statewide paid leave insurance programs. These states provide great models of paid family leave. A 2011 report revealed that after six years of implementing a state-wide program, both employers and employees in California reported positive effects of paid leave. During the 2017 legislative session, CFI worked with coalition partner, 9to5, to sponsor HB 17-1307, which would have created a statewide family and medical leave insurance program, providing partial wage replacement for employees who need to care for a new child, themselves or an ill family member. The bill passed out of a chamber for the first time in its history, but unfortunately it died in the Senate State Affairs committee.

Last month first daughter, Ivanka Trump, wrote an op-ed for the Wall Street Journal in which she showed her support for paid leave, stating that, “Providing a national guaranteed paid-leave program — with a reasonable time limit and benefit cap — isn’t an entitlement, it’s an investment in America’s working families.” She further supported her stance by highlighting her father’s budget proposal in which he included a national paid leave program.

So, who would be covered under this proposed program? How much would it cost? How much would families receive? Well according to Analytical Perspectives, an analysis of the president’s proposed budget, the paid parental leave program is a benefit within the Unemployment Insurance (UI) program that would provide up to 6 weeks of paid leave to mothers, fathers, and adoptive parents. The benefit is set to cost about $25 billion over the next 10 years according to a recent Vox article, which would be paid for by the states. Under the plan, states have broad power over the design and financing of the program, but they would be required to maintain a certain amount in their unemployment trust funds. This would mean that states below the minimum standard, would have to increase their UI premiums to build up their funds.

The president also included a bundle of reforms that, apparently, will help states fund this program. These reforms include eliminating improper unemployment payments; mandatory funding for reemployment services to get people back to work more quickly; and closing a loophole that currently allows individuals to receive both UI and Disability Insurance (DI) benefits for the same period of joblessness, forcing them to choose between the two programs.

However, still unanswered is how much states would have to raise unemployment insurance premiums, clearly placing the burden of cost on state governments. There is also no way of knowing how much families will receive and whether that amount will be enough for parents to take time off. It is particularly important to point out how the program neglects to include paid time off so employees can care for themselves or a family member when they are ill.

I agree with Ivanka Trump’s statement that a paid family leave program is an investment in America’s working families. However, it is ironic that the rest of the President’s budget also calls for $1.9 trillion in health care cuts, $193 billion in SNAP cuts, and $400 billion in cuts to discretionary programs for low-and moderate-income people, according to the Center on Budget and Policy Priorities. In total, this would amount to $2.5 trillion in cuts to programs that working families rely on.

Paid time off has shown to produce countless benefits. From improving health outcomes for children, ill adults and seniors, to strengthening a family’s economic stability and, ultimately, creating a stronger national economy. Support from any president for paid federal leave is welcomed, but this proposed program raises more unanswered questions than solutions. This coupled with the president’s cuts to SNAP, programs that reduce funding for job training and education, the Earned Income Tax Credit and the Child Tax Credit, are clear indications that President Trump’s proposed paid leave program will not benefit families. Instead, taken together with his other proposed budget cuts, the plan will have dire consequences for low and moderate-income families.