In 1992, the Colorado legislature passed a constitutional amendment locking in restrictive budget and tax provisions. This amendment, known as the Taxpayer Bill of Rights (TABOR), has resulted in a structural cycle of drastic disinvestment in public services across the state. This result is not unique to Colorado and if TABOR amendments are adopted in other states -- as could happen in 18 states across the country -- the effect would no doubt be similar. TABOR is a complex law, but is based on two very simple concepts: cut taxes when there is a surplus, and cut the budget when there are deficits. It was adopted in Colorado to codify strict tax and spending limitations in the state constitution, thus making it harder for the legislature to respond to the constantly changing economic and budgetary health of the state. The Colorado amendment:

• Requires voters to approve all increases in either taxes or state debt
• Limits growth in state revenue to a formula based on population growth plus inflation rate
• Places separate revenue limits on school districts and local government
• Mandates that all taxes above those limits be refunded to taxpayers.

There is widespread agreement among economists and budget and tax experts that the amendment has a) made the economic cycle of state revenues and spending extremely volatile and b) made social investment by the state government very difficult in Colorado by constitutionally enforcing both tax cuts and stringent spending levels. This structure prevents the state from adopting a rainy-day mentality as it does not permit coffers to expand during "boom" years to give the legislature flexibility to cope with increased need and unexpected crises during "bust" years. By instituting tax cuts during times of surplus, and then requiring reduction in services as the only solution to reducing deficits, TABOR fundamentally hinders the ability of the legislature to respond to evolving state priorities and unforeseen needs. TABOR essentially institutes a habitual cycle of reductions in public investments. TABORs are also bad policy because they treat problems within complex economic systems with simple, "one size fits all" solutions. By forcing tax cuts during surpluses and spending cuts during deficits, TABORs ignore the complexities of communities and economic environments and ties the hands of legislators in their ability to innovate. In continually promoting balancing the budget as the sole priority in constructing the state's economic policy, it ignores and undermines one of the fundamental roles of government: serving the greater good. The tangible effects of the TABOR law in Colorado have been felt across the state. After the law was instituted, a booming Colorado economy triggered the tax limit and sent $3.25 billion in refunds to Colorado households over five years (about $3,200 per family). However, in 2002 when the state was hit with a terrible recession and the state budget went into deficits, TABOR prevented the legislature from responding to increased need caused by the economic downturn. The deficits caused stringent budget cuts, especially on social services. (This is made even more complicated by limits on growth within programs; in essence, locking services into levels that do not fit current needs.) This only aggravated the difficulties citizens in Colorado faced due to a struggling economy. The results of this cycle are devastating for Colorado. It ended $55.6 million in annual property tax credits for elderly homeowners, drained $128 million of aid from public universities and community colleges, and cut $550 million in extra aid for highways. Feeling the financial pressure, the state also placed limits on the number of poor children covered by state-subsidized health care. Many social service and community investment programs, particularly education programs, have never recovered from these cuts. Budget policies mandated by TABOR have had the net effect of leaving behind the state's most vulnerable citizens. It ranks 47th in K-12 education funding as a share of state income. It ranks 48th for state funds invested in higher education and 44th in the nation in terms of the share of low-income individuals enrolled in Medicaid. In 1991-1992, 15 percent of low-income Colorado children lacked health insurance. In 2002-2003 that figure rose to 27 percent. And since 2001, Colorado has eliminated all state support to local and regional health agencies. This is just a glimpse of how public services have eroded in Colorado over the past decade under TABOR. For more detailed information on the impact of program cuts in Colorado, see the following reports: "Public Services and TABOR in Colorado" and "Is Colorado's TABOR Creating Jobs?" The problems caused by the decreased role of state government have not gone unnoticed. Colorado state legislators agree overwhelmingly that TABOR has been devastating to state services and in turn, the citizens of Colorado. In fact, they spent much of their time in 2004 discussing possible reforms. State Sen. Ken Gordon (D) is one critic of the amendment. "TABOR has been a disaster for this state," he said. "If we don't change it, we will be the first state to de-fund higher education." Although they spent significant time discussing TABOR reforms, state politicians were not able to come up with any solutions, and thus TABOR still exists in full force, quietly continuing the cycle of de-funding government. The experiment with TABOR in Colorado illustrates the dangers of putting untested fiscal constraints directly into state constitutions since changing these binding amendments later is much more difficult. Despite the myriad problems experienced in Colorado, other states are considering adopting state tax and expenditure limiting amendments (TELS) similar to Colorado's TABOR into their constitutions. In the first two months of 2005 alone, 13 state legislatures introduced 17 different TELS bills. Other states, such as California, have coalitions of organizations and state politicians sponsoring initiatives either to limit spending or to restrict appropriations through changes to the state constitution. These states are blindly moving forward despite the fact Colorado legislators are still struggling 13 years later to find a fix for the problems caused by their TABOR constitutional amendment. Some public figures, including Colorado Gov. Bill Owens (R), are perpetuating this trend, touting TABOR as a low-tax, limited-government success story. Yet it is the people of Colorado who have absorbed the negative consequences of the TABOR amendment. Efforts across the country to install TABORs at the state level come when states are already suffering through fiscal crises. Twenty-six states are struggling to reduce budget deficits while continuing services in a less than robust job market (news coverage | analysis). As Bert Waisanen of the National Conference of State Legislatures said in March 2006, "Governors have to run programs like Medicaid, No Child Left Behind, homeland security. But there is less and less money coming from Washington to pay the bills." The fiscal strain on states will continue to grow as President Bush and congressional leaders are pushing policies to reduce the huge federal deficit by severely cutting domestic discretionary funding, including funding going directly to states -- all while passing trillions of dollars worth of unpaid-for tax cuts. As Washington is cutting spending, entitlement liabilities are increasing every year and are predicted to explode as baby boomers begin to retire in 2011. These factors will further squeeze state budgets and make it far more difficult to continue current service levels. The unfortunate trend is one of states shouldering an increasing percentage of the fiscal burden, and often finding they are unable to meet the demands of these programs. The result is millions of people who rely on Medicaid, Medicare, and other government programs are being left behind, cut off from services. Some states, such as Indiana and Washington, are exploring policies to deal with their budget crises while still providing essential services. Even though this is a welcome change to the current accepted thinking about tax and budget policy, the fact so many other states are contemplating adding TELS to their state constitutions is alarming, especially in light of Colorado's negative experience with TABOR. This trend does have a silver lining. Various state and national groups are forming coalitions to fight TABOR-like bills and initiatives. In Oklahoma, for example, the coalition was able to mobilize strong public opposition to TABOR through promoting awareness of problems in Colorado under TABOR. This helped to diminish enthusiasm for instituting TABOR amendments in Oklahoma. Based on Oklahoma, educating the public and state legislators about the effects of these provisions is key in stopping the expansion of harmful state tax and expenditure limiting laws. For more information on TABOR, check the following websites:

• Center on Budget and Policy Priorities
• Milwaukee Journal Sentinel (JSOnline)
• The Bell Policy Center
• coloradobudget.com