Stop Digging: Testimony in Opposition to HB 18-1203
The following testimony was delivered by CFI Executive Director Carol Hedges in the House State Affairs committee on March 8, 2018:
Good afternoon. My name is Carol Hedges. I am the Executive Director of the Colorado Fiscal Institute and I am here today to testify in opposition to HB 1203 that, among other things, reduces the state income tax rate from 4.63% to 4.0%. The estimated cost of the bill – that is the amount it would reduce the General Fund – is $1.15 billion in FY 18-19.
This reduction in revenue would have drastic, deeply damaging effects on communities across the state.
It would close hospitals since the amount of this reduction in state revenue would be roughly equal to the all health care spending from the General Fund.
Or it would close colleges and prisons since the reduction is roughly equal to the entire General Fund allocation for colleges and universities, corrections, and human services…combined.
Put another way, it would be equal to more than a quarter (27%) of the state share of the K-12 education budget at a time when reductions from the Budget Stabilization Factor have already put K-12 funding $828 million in the hole.
Some folks like to believe that no one would notice but cuts like these would have serious consequences for all Colorado families. Student debt would increase drastically. More families would struggle to pay for housing and child care. More communities would have to reduce school weeks and there would be even more pressure on local governments to increase property taxes.
It is dangerous, magical thinking to believe that slashing public investments will be offset by each taxpayer paying a little less in taxes. Each Coloradan paying slightly less in taxes simply cannot supplant the toll of closing hospitals or colleges or prisons – as this bill would necessitate.”
And please don’t misunderstand the situation we are in, our public investments are not keeping up with our needs. We have yet to recover from the cuts made in the last recession and population growth and deferred maintenance are catching up with us.
We are currently in an investment hole:
For example:
-Funding for our kid’s schools is $828 million below where we were in 2000, if we consider inflation.
-There are only 4 states that invest less than we do in postsecondary education.
-We have more than $9 billion worth of need for transportation funding over the next decade.
How did we get here? How can we have a great economy that is generating more revenue and still be so behind in investing in our communities?
Since those who don’t remember the past are doomed to repeat it, I want to remind us of some of the past tax cuts decisions that have contributed to the hole Colorado is already in.
In 1999, the General Assembly was in a similar position, facing a growing economy and a growing general fund. That body yielded to the temptation to cut the income tax rate, cutting the rate from 5.00% to 4.75% at a cost of $ 300 million. They further reduced the tax rate in 2000 from 4.75% to 4.63%. In 2001, the first of two recessions in a decade struck reducing general fund revenue by nearly 16% triggering a downward spiral in public support for higher education, pushing more of the cost of education beyond high school to parents, students and employers. No part of the state was exempt from the impact of cuts. The combined effect of the tax cuts and the early 00s recession led to voters approving Referendum C.
Just two years later, a second recession rocked the country. The Great Recession reduced general fund collections by $1.3 billion in just two years. Those reductions gave rise to the Negative Factor in public school funding, caused the closing of many state sales and income tax credits and deductions and squeezed every bit of possible revenue for transportation out of the General Fund.
Growing General Fund revenue tends to create renewed enthusiasm for tax rate reductions and 2018 is no exception. And, yes, the current revenue projections suggest that the state will collect more revenue this year than last. But that is not a reason to reduce revenue. Rather, it provides an opportunity to make wise decisions that can help our current economic expansion become more sustainable.
In this time of a growing economy in the Front Range, a prudent approach would be to use the new resources to address challenges statewide, to invest in a foundation of public structures that can sustain front range prosperity while also spurring more growth in our rural communities. This is also a great time to increase the state’s budget reserve. You have been making progress in increasing our savings account, which is our communities’ protection against savage cuts prompted by unexpected economic downturns. But we can still do better, as a 8-10% reserve would be one worth pursuing.
I can’t help but wonder, where the sponsors of HB 1203 would cut, were this bill to become law?
I find it incredibly ironic that the amount of revenue lost from the tax cuts in the late 90s would more than pay for the current $3.5 billion in “shovel ready” transportation projects. They would just about finance the cost of the $9 billion of transportation needs, particularly if those investments could have been made in the 18 intervening years rather than ignoring those needs.
If those cuts had not been made, we would have had the ability to make the transportation investments we have neglected PLUS we would not have had to make such drastic cuts to our schools and colleges. Tax cuts mean cuts in investments and in a time when so many Coloradans will already be seeing increased paychecks, those foregone investments seem like opportunity lost.
At this point in Colorado’s struggle to address the needs linked to our growing population, rapidly changing technology and regional economic disparities, I think it is time to resort to some old fashioned common sense: What is the first thing you should do when you find yourself in a hole? Stop digging.
I ask you to vote no on HB 1203. Thank you.
