State of the State: Colorado

Beware of governors bearing enterprise designations.

When Governor John Hickenlooper gave his state of the state address to the Colorado legislature, he touted the strong relationship among business, nonprofits, and state government, Hickenlooper reported that Colorado is “one of the top states for economic growth.”

It’s true that Colorado has enjoyed solid and fairly consistent economic success. Since 2009, Colorado has received a top ten ranking for economic outlook five times in the Rich States, Poor States ALEC-Laffer State Economic Competitiveness Index, twice reaching as high as second place. Between 2004 and 2013, Colorado was also among the nation’s ten best states in terms of non-farm employment growth rate and net domestic migration, with more than 270,000 new residents from across the country.

However, Colorado has not seen economic growth consistent with an otherwise top ten state. Additionally, since being ranked second overall for economic outlook in the third edition of Rich States, Poor States, Colorado has been trending downwards, and today rests at 21 in the nation.

While its growth comes from a friendly tax environment, Colorado’s budget woes come from an increase in spending.  The governor’s propositions include more spending, including funds for the Colorado Water Conservation Board, REDI Grants, ReHire Colorado and initiatives to increase tourism.

Hickenlooper decried the $20 million dollar decrease in education spending for his new budget saying, “This is not the direction we want to be moving, but it’s a direct result of conflicting budget mandates that are forcing painful choices like this one.”

Colorado’s Taxpayer’s Bill of Rights, also known as TABOR, is the gold standard of fiscal responsibility. This constitutional amendment produces measurable success and helps to establish trust between the legislature and residents of Colorado. TABOR controls the state government’s spending by placing a limit on how much tax revenue it can collect.

Of late, Colorado legislators and executive officials have made repeated pushes to define governmental activity as “enterprises” to circumvent TABOR restrictions. By designating the Hospital Provider Fee as an enterprise, hundreds of millions of dollars would be exempt from TABOR limits. This essentially would allow the governor to bypass the people’s approval on excessive spending.

Coloradans have historically been generous when asked if the government can keep excess TABOR funds. In 2005, Coloradans passed Referendum C, suspending TABOR for five years to pay for “education; healthcare; roads, bridges, and other strategic transportation projects; and retirement plans for firefighters and police officers.”  Last fall Proposition BB passed, allowing for tax revenue brought in from marijuana to be exempt from TABOR.

All of this points to the strength of TABOR, which is to allow government to collect enough revenue to fund core services, but requiring government to essentially ask taxpayer permission to take more of their money. The governor spoke of “the art of compromise,” but the only thing he seems to want to compromise is TABOR itself.

This is an entry in the ALEC Center for State Fiscal Reform series, “State of the States 2016,” which will perform analysis of tax and budget issues raised in every state of the state address delivered by America’s governors. Check back frequently over the coming weeks to see the results for your state.