The Road Colorado Needs to Take
By Josh Mantell, the Bell Policy Center
Colorado is stuck in a fiscal hole and we just can’t seem to stop digging deeper. This hole has created significant challenges when it comes to funding important public services like transportation, housing, health care, and education. As it turns out, a lot of these problems can be traced to important policy decisions made nearly two decades ago. In spite of harsh lessons learned, some want to follow this same road again in 2018, regardless of the consequences our state has dealt with as a result.
As the national economy boomed in 1999 and 2000, many of Colorado’s legislators chose to react to TABOR rebates by cutting income and sales taxes. Because TABOR prohibits the legislature from increasing taxes without a vote of the people, those tax cuts were permanent. What happened next was predictable.
Shortly after Colorado cut taxes, the national economy cratered, and Colorado entered a deep recession, driving down state revenues on two fronts. In addition to less revenue because of tax cuts, there was even more lost due to the recession as jobs were lost and people pulled back on consumption.
What looked like a healthy economy just a couple of years prior became one in dire straits without enough money to fund important public services.
In fact, our General Fund revenue dropped by 17 percent from 2001-2003 — compared to the national average of 4 percent. Also, we had a deficit of $802 million, which in percentage terms was the second highest proportion in the country. What did that look like for Coloradans in the real world? Here is a non-comprehensive list that gives a glimpse of the problems Colorado faced:
- $133 million cuts in Medicaid in FY 2002-2003, including rate cuts to local health providers, leaving tens of thousands of low-income Coloradans without access to health care or lost access to many important services, such as pharmaceutical reimbursements
- 15,600 children lost health care coverage due to freezing Medicaid enrollment
- Between April 2001 and October 2002, Colorado was forced to suspend its requirement that students be fully vaccinated against diphtheria, tetanus, and pertussis (whooping cough) because Colorado, unlike other states, could not afford to buy the vaccines
- 100,000 seniors did not get relief from property taxes because of the suspension of homestead exemption
- During the fiscal years between 2002 to 2005, General Fund higher education appropriations per resident full-time equivalent (FTE) student fell by 30 percent, resulting in tuition hikes, school closures, higher student loan debt, and lost teacher pay
- Delayed or canceled transportation and infrastructure projects and deferred highway maintenance left our roads, bridges, tunnels, and public transit crumbling and in need of expansion
Colorado was unable to meet the growing needs of the state when dealt the double whammy of tax cuts and a recession. In fact, in 2002, General Fund spending as a percentage of the state’s economy hit a then historic low of 3.6 percent. Only recently have our revenues exceeded these levels.
Our economy came back from the recession in 2004, but TABOR required the people to vote to allow our state’s revenues to rebound with the recovery. In November 2005, Colorado voters passed Referendum C through the ballot box. Referendum C was a crucial measure designed to lift revenue caps put in place because of TABOR. While it didn't tackle the underlying problems with TABOR, Referendum C did give the state the needed short-term relief from the worst parts of it. With the massive budget cuts following the 1999-2000 tax cuts and the subsequent recession, there was a necessity to allow the state to keep more revenue in order for the state to spend to help the people of Colorado and provide basic services.
Then the Great Recession hit in 2008. Revenues as a share of the economy hit new historic lows. Revenues dropped by $1 billion from 2008 to 2009, forcing massive cuts in public services. We're nearly a decade removed from the recession, and while the broader economy has mostly recovered, Colorado is still significantly under investing in public services.
In 2017, Colorado's spending was at 3.7 percent of the overall economy, just barely above where we were when the 2002 recession hit.
So, here we are — at possibly the peak of a booming economy, and yet Coloradans wonder why so many publicly funded services we all benefit from aren’t in better shape. Half of our school districts have downgraded to four-day school weeks. Our transportation infrastructure is in disrepair. Student loan debt is skyrocketing because we haven’t put enough money toward postsecondary education, shifting the burden to students and their families to pay tuition that is hard to afford.
We believe now is the time to stop digging our fiscal hole deeper. We stop digging by resisting efforts to permanently tie up future money we don’t have with bonds or complicated formulas in state law. We stop digging by resisting bumper sticker bills that propose we make even deeper cuts to taxes, despite every data point suggesting we haven’t recovered from the first time we took that route.
We should be investing in our people and making economic growth happen for everyone in our state, not just some. The road to a Colorado that works for everyone lies in investing when the economy is going well. That’s the road we need to take.