TABOR was enacted in Colorado in 1992 and took effect in fiscal 1994. It established a low limit for revenue growth and mandated immediate rebates of all surplus revenues to taxpayers. Starting in fiscal 1997 state revenues began to exceed the TABOR limit, and between 1997 and 2001 Colorado taxpayers received $3.2 billion in tax rebates. This tax relief was an economic boon. Between 1995 and 2000 Colorado led the country in both Gross State Product growth and personal income growth.
It is true that starting in 2001 Colorado began to face some fiscal pressures. However, an honest analysis of Colorado’s recent fiscal history indicates TABOR was not the catalyst for Colorado’s recent budgetary woes. Indeed, the Sept. 11 terrorist attacks hit Colorado’s economy especially hard because the attacks occurred right before the start of ski season.
The first part of the 2001–2002 ski season saw visits to slopes decline substantially. An even more aggravating economic stress arrived in the form of a severe drought in 2002. For the first time since the 1970s, each of Colorado’s 64 counties was declared a federal disaster area, and by some historical measures it was the worst statewide drought since the 1500s. Not surprisingly, this drought had an adverse effect on Colorado’s agriculture and tourist industries. Overall, the combination of the terrorist attacks and the drought caused tax revenues to decline by more than $1 billion between 2001 and 2003. This is approximately 15 percent of Colorado’s general fund.
Making matters worse, another strain on taxpayers had already been baked into the budget cake. In 2000, teachers unions in Colorado succeeded in passing Amendment 23. This mandated large annual increases in state spending for K‑12 education — even if revenue declined — and exempted this spending from the TABOR cap. This led to an increase in education spending of $450 million between 2001 and 2003, at a time when state revenues were declining dramatically.
Overall, it seems that the Sept. 11 attacks, a drought and a poorly constructed education spending mandate are responsible for the fiscal pressures in Colorado, not TABOR.
Contrary to the belief of many commentators, Colorado voters did not choose to abolish TABOR when they voted for Referendum C. They simply voted to allow the Colorado Legislature to spend rather than rebate a projected $3.7 billion in excess revenues over the next five years. While some are disappointed with the outcome, Colorado voters doubtless appreciate the fact that the choice to increase spending was in their hands, and not the hands of state legislators.
Referendum C is only the most recent and most ambitious of several attempts by the Colorado Legislature to obtain voter approval to spend over and above the limit mandated by TABOR. Every year from 1993 to 1999 there was a measure on the Colorado ballot to either raise taxes or spend in excess of the TABOR limit. All of these measures lost. Overall, despite consistent opposition from the media, unions and much of the Legislature, TABOR has proven to be both a popular and durable fiscal limit for the past 13 years.
Overall TABOR-style revenue limits merit support in Minnesota and across the country. Colorado has outperformed Minnesota economically for the past 10 years, and TABOR’s experience demonstrates that similar legislation in Minnesota would generate tax relief and help spur the state economy. Perhaps even more importantly, it would go a long way toward providing the lean and efficient government that Minnesota taxpayers deserve.