Our View: TABOR needs tweaking

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Colorado legislators return to work Tuesday with an agenda that has never been so sharply focused.

Having allowed desperately needed budget reform to fall apart amid partisan, election-year squabbles in 2004, legislators need a different approach in 2005. Forget party lines. Legislators must be willing to work together to develop a bipartisan budget reform plan that they can sell to the state's voters. Because if the Legislature can't get behind its own plan, you can be sure voters won't.

The state's budget problems are well-documented. Since 2001, the state has cut more than $234 million from its budget, and absent reform, legislators will have to cut $286 million in the next two years. That's more than $500 million the state's roads, colleges, seniors, health care system, impoverished residents and others can ill afford to do without.

The Taxpayers Bill of Rights, or TABOR, has taken most of the heat for the state's fiscal crisis. The citizen initiative was approved in 1992 and effectively has kept state spending in check for most of the past decade. But there are aspects of TABOR that voters likely did not anticipate, most notably, the ratchet effect.

The ratchet effect kicks in during recessionary times when revenues fall short of allowable spending. TABOR allows the state to increase spending over the previous year based on inflation plus population growth. During a recession, state spending declines, as it should. But when the economy recovers, state spending is still limited to recession-year spending, plus inflation and population growth.

The state endured a recession in 2001 and 2002, forcing deep cuts in state spending. The state recovered slightly in 2003 and enjoyed a relatively healthy economy in 2004. But because of TABOR, state spending can't rebound the way the economy has, and legislators are forced to cut more services while returning millions in refunds to taxpayers.

Republican Gov. Bill Owens, a longtime TABOR champion, now acknowledges that it must be tweaked. Perhaps sobered by watching Democrats take control of the House and Senate in November, Owens has offered his own budget reform plan including ideas Democrats proposed last year. Under Owens' plan, the state would:

n Ask voters for permission to retain $500 million in state revenue surpluses that usually would be refunded.

n Cut the state's income tax rate from 4.63 percent to 4.5 percent.

n Amend TABOR to eliminate the ratchet effect during and immediately after recessions.

n Sell off future income from the state's tobacco settlement for an estimated $800 million to $900 million.

n And invest $100 million annually in transportation, allowing the state to bond for up to $1.7 billion in projects.

Critics say Owens' proposal would balance the state's budget through 2006 but is not a long-term solution. We're not sure what the effect would be; however, Owens' plan is as good a place to start as any. It includes bipartisan features and gives legislators a framework for reform. They have six months to mold it into a plan voters can support.

For the past four years, Colorado legislators have been forced into a course of action of turning one of the wealthiest states in the country into one that does the least to fund transportation, higher education and human services. The 2005 legislative session will be judged on whether or not they're able to reverse that course.

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