Let’s exempt state grants from TABOR revenue limits
Mesa County was recently put in the awkward position of having to refuse a $5 million grant it received for the Mind Springs Health psychiatric hospital expansion project.
Despite the fact that the county was just a pass-through for the grant, it would still count as revenue and trigger a refund to the taxpayers because of TABOR. I have a really hard time believing that this was what the voters wanted when they approved the Taxpayer’s Bill of Rights in 1992.
The fact that this particular grant is going toward providing better mental health services at a time when our community is having a mental health crisis makes it even more shocking. We really need this $5 million.
TABOR exists because we no longer trust the government — people we elected to represent us — to make sound decisions with our taxpayer money. And while TABOR is fairly complex to understand, the theory behind TABOR really is that simple. Voters approved this constitutional amendment in 1992 to restrain the growth of government spending. It puts all taxation and spending decisions into the hands of the voters and as a result, forces our elected leaders to prioritize their budget and spending decisions. It’s the most restrictive tax policy in the nation. And, for the most part, it has worked. According to multiple studies, our government has grown only moderately and when cities and towns have needed money, they’ve put it to a vote.
The anti-tax crowd claims that TABOR means “no new taxes” when in reality, that’s not the case. TABOR simply lays out a process where the government is forced to ask voters if they want to pay for things. Since the inception of TABOR, tax increases have actually been approved at a surprising level — 503 tax increases have passed statewide while 345 have failed. Keeping excess revenue for public projects instead of returning it to the voters has also proved successful 476 times across 272 municipalities since 1992. Successful campaigns require the government to lay out where the money is coming from, what it will be used for and how long it will last. And for the most part, it’s worked.
But I think most people would agree that it’s not perfect. The formula that ties spending to inflation plus population growth plus last year’s spending is burdensome and complicated and has put most municipalities in a tough spot during years when spending has declined due to poor economic activity. This reduction in spending at a time when most municipalities have heavier demands has become known as the “ratchet effect” and has resulted in multiple work-arounds. In 2005, voters approved Referendum C, which suspended TABOR limits for five years allowing the state to rebuild its coffers following the recession in the the early 2000s. There are hundreds of examples of “de-brucing” across the state — the act of exempting parts of the budget from the TABOR process and/or keeping the refund for specific projects instead of returning it to taxpayers. In 2012, the city of Denver completely de-bruced. Each year, we see more and more of the state budget transferred into enterprise funds — fee-based services that aren’t considered taxes and are therefore exempt. Parks and Wildlife and now the hospital provider fee are no longer counted toward revenue and are exempt for the TABOR formula. More than 60 percent of the state budget is now exempt from TABOR and lawmakers are looking for other exemptions as they get pinched by the Gallagher Amendment, which limits property tax increases, and Amendment 23, which increases K-12 funding.
Which brings me back to that $5 million grant that the county just turned down. County officials were actually hoping for a slowdown in revenue to make room for this grant. If we were $5 million down in revenues, we could accept this grant and not trigger a refund. Instead, revenues are higher than anticipated. In any other place, this would be considered a good thing. But in the complex world of TABOR, it’s actually a bad thing and therefore, the county cannot accept the $5 million from the Colorado Department of Local Affairs. So that $5 million will just go to some other county that has figured out how to tweak the formula better than we have, making us less competitive than our neighbors at a time when we are working so hard to actually compete.
Let’s be clear — this grant is coming from outside of the community and going towards a much-needed project that we are unable to pay for ourselves. The $5 million shortfall could put Mind Springs Health in jeopardy of completing the hospital. They could consider moving the hospital to a different city that has figured out how to pay for it. The inability to accept outside money to complete public projects puts us at a distinct disadvantage and will eventually prove to make us a less desirable community. This is just wrong.
There’s a fear among local politicians that any tweaking of TABOR is political suicide — especially in our fiscally conservative neck of the woods. But I think you’d be hard pressed to find many TABOR supporters who think rejecting a pass-through grant from the state to go toward a public project is a good idea. Federal grants are exempt from TABOR. State grants should also be exempt. This is a no-brainer. Let’s make it so.