Spending caps do work
SOME CALIFORNIANS may be under the impression that the state spending cap in Colorado -- our Taxpayer Bill of Rights -- is dead. To paraphrase Mark Twain, the reports of its demise are greatly exaggerated.
In our election a few days ago, Colorado voters fixed a glitch in the spending cap law; they didn’t overturn it, as some reports might have you believe. There was no “up or down” vote. I believe that a majority of Coloradans support the law, and when the election dust settles, other states will see how well spending caps can work and more will adopt them.
California voters will have the opportunity to do exactly that in a few days by voting for Proposition 76.
The spending cap in Colorado is a success story. Added to the state Constitution by referendum in 1992, it helped keep the reins on Colorado’s budget, primarily by using a formula based on population growth and inflation. If taxes provided surpluses above that budget, the money was returned to the taxpayers.
This has meant that our budget could grow, but only at a prudent pace. So when the recession hit, the resulting drop in tax revenue meant serious belt-tightening, but it did not lead to the cataclysmic cuts seen in other states.
The recession did, however, uncover an unintended glitch in the law. As the economy recovered, the law didn’t allow for the budget to return to earlier levels, even though the revenue was available. Any future budget growth had to be calculated by using the lowest point hit during the recession as the base. That was too restrictive.
Compare the budget to a reservoir.
During a drought, the water recedes. Then, when the rain returns, you should be able to refill the lake. But instead, because of the glitch, the reservoir had to stay dry. In Colorado, our budget was being kept too low by the rules even though state revenue was increasing.
Last Tuesday, the voters -- by approving our Referendum C -- fixed the glitch. The voters gave the state permission to retain all surplus revenues for five years, allowing the budget reservoir to return to pre-recession levels. The measure also allows for similar flexibility in the future if an economic downturn again drains the reservoir.
In the few days remaining before the vote in California, if you hear opponents of Proposition 76 claim that Colorado voters decimated the spending cap because they decided it wasn’t working, don’t believe it. The taxpayer protections that originally were part of the law are still in place -- the same formula for figuring the budget, a requirement that tax increases be voted on and, after the general fund is replenished, the return of tax surpluses to taxpayers.
Placing appropriate limits on the growth of state spending makes sense. The name given to Proposition 76 in California -- the “Live Within Our Means Act” -- says it all. Why shouldn’t government, just as a business or a family, be required to live within its means? Why should government spending grow at a rate faster that the growth of the economy in general? The answer is easy. It shouldn’t.
Proposition 76 sets up a different way for California to measure growth than Colorado does. Instead of a formula based on inflation and population, the California measure uses average revenue growth over the three prior years as a base. But the differences in the formula are irrelevant as long as, at some point, you apply the brakes.
There is simply no reason that state spending should exceed available revenue.
Gov. Arnold Schwarzenegger and I first discussed Colorado’s taxpayer rights’ law shortly after his election. He realized then that a constitutional restraint on spending was imperative. I applaud his courage in taking his plan to the voters.
The governor is finding that it is not always easy to put state government on a diet.
However, for its own health, it is essential.