WESTERN SKIES - October 25, 2005

*** REFERENDA C AND D ***

STEPHEN RAHER: If you live in Colorado and read the newspaper, watch television, or have a mailbox, chances are you've been exposed to escalating campaigns for and against Referenda C and D over the past weeks.

In order to understand the C and D debate, one must first understand the Taxpayers Bill of Rights, or TABOR, which was passed by voters in 1992. TABOR contains several provisions, the most popular of which requires voter approval of new taxes. The section of TABOR at issue in this year's election is the complicated revenue limit, which caps the amount of tax revenue that governments can keep in any given year. This limit has always been controversial, but many politicians, especially Republicans, argue it's a responsible way to keep government growth under control. In 2001, however, a recession swept the nation, hitting Colorado particularly hard. It was at this time that some people started talking about TABOR's unintended consequences.

Douglas Bruce, now an El Paso County Commissioner, wrote the TABOR amendment. He strongly disagrees with any talk of unintended consequences.

DOUGLAS BRUCE: I have no regrets about what the voters approved. There's no unintended consequences. There's some consequences that the opponents of TABOR weren't smart enough to read, see, interpret, project. But TABOR's worked like a charm and everything that I've said would happen, happened.

RAHER: It helps to remember the historic context in which TABOR was passed. Allan Wallis is a professor at the University of Colorado's Graduate School of Public Affairs. He says TABOR (much like Douglas Bruce himself) was a product of the 1970s anti-tax movement that arose in California. But there's an irony, according to Wallis, that the tax cutting message gained so much traction in Colorado.

ALLAN WALLIS: We were already one of the lowest taxing states in the country. And even though Colorado was not a high taxing state, people thought "You know, we'd like to have that." And that's my best guess as to what happened. It was not people feeling an excessive pinch, but believing that the message that government is spending too much was a credible one.

RAHER: Would-be TABOR reformers frequently point to the so-called "ratchet effect," which is at the root of Referendum C. Each year, TABOR allows government revenue to grow over the previous year's income by an amount equal to inflation plus population growth. But when the recession hit, tax receipts plummeted. And since TABOR limits are based on the prior year's actual revenue, this means that a bad year ends up lowering the revenue cap for all future years. Allan Wallis says now that Coloradans have seen the ratchet effect in action, they might be open to changing it.

WALLIS: I think that people are quite happy, when times are good, to receive a refund and still feel that they're supporting government services. When times are poor, the idea that they can't be taxed to make up the differences, also seems equitable. My guess is that what does not strike the voters today as equitable is the idea that when times get good again, in other words the state's private economy turns around, that the public economy cannot move with it.

RAHER: The idea of addressing the ratchet effect first surfaced in the state legislature in 2003. For numerous reasons, no solution made it onto the ballot that year or the next. Many political observers, particularly Democrats, say this failure to craft a solution is why Republicans lost their majority in the state House and Senate for the first time in forty-four years. Now the majority party, Democrats entered the first week of the 2005 session promising a TABOR reform measure for November's ballot. The charge was lead by Speaker of the House Andrew Romanoff, a Democrat from Denver.

REP. ANDREW ROMANOFF: We can balance our budget without raising taxes. In fact, we can afford to reduce the tax rate if voters allow us to use the money we are already collecting. That's the heart of this solution. It can be summarized in a single sentence: Cut and invest. Cut the state income tax rate and invest the revenue that results.

RAHER: TABOR author Douglas Bruce, however, was unyielding.

BRUCE: I've coined the phrase, last December, "the Romanoff Rip-off." That's what it is. It's an attempt to lie, cheat, and steal and get an unlimited amount of money in the next five years.

RAHER: Some, but not all, Republicans in the legislature opposed Referendum C as addressing only part of the problem. They point to Amendment 23, passed by voters in 2000. This amendment requires funding for K-12 education to increase each year. Since K-12 education makes up over forty percent of the state general fund, Amendment 23 makes it much harder to comply with TABOR revenue limits. Senate Minority Leader Mark Hillman, who is currently serving as acting state Treasurer, reminded his colleagues of the inherent conflict between the two constitutional provisions.

SEN. MARK HILLMAN: In passing TABOR, the voters told us "Always limit spending." In passing Amendment 23, they said "Always increase spending." Rather than frustrate the will of the voters by taking shortcuts around either, we now ought to ask them what to do when we can't do both.

RAHER: A modification to Amendment 23 can only be voted on in even-year elections, so Democrats in the legislature focused on changes to TABOR, which can go on any year's ballot. The resulting measure, which eventually became Referendum C, was introduced as House Bill 1194.

PRESIDING OFFICER: Will the clerk please read the title of House Bill 1194.

READING CLERK: House Bill 1194, concerning an adjustment to the amount of state revenues in excess of the limitation on state fiscal year spending in Section 20(7) of Article X of the state constitution [fade under]

RAHER: Referendum C suspends TABOR refunds for five years. TABOR refunds are theoretically a rebate of sales taxes. In budget surplus years, taxpayers receive a TABOR refund in addition to any income tax refund that they might be entitled to. After the five year suspension of TABOR refunds, Referendum C would allow the income tax rate to be lowered in years when revenue is good.

READING CLERK: ...to its current level and to eliminate the state's authority to retain and spend such excess state revenues.

RAHER: By most accounts, Governor Bill Owens was actively involved in crafting Referendum C, insisting that certain fundamental aspects of TABOR remain untouched. Owens has always been known as a fiscal conservative, but some Republicans denounced his support of a TABOR modification, saying the governor had abandoned the core principles of his party. The eleven Republican legislators from El Paso County all opposed Referendum C, including Senator Doug Lamborn.

SEN. DOUG LAMBORN: I'm sick and tired of everyone blaming TABOR for all the problems in the state. We had TABOR since the early 1990s and we didn't have any problems in Colorado until Amendment 23 was passed.

RAHER: Lamborn and other conservatives repeatedly attacked Referendum C as a tax increase. Others strongly disagreed, like Senator Norma Anderson, a Republican from Lakewood.

SEN. NORMA ANDERSON: And is this a tax on people? It's the tax they're already paying. Now, it's whether they want a portion of it back or not, in a refund. It doesn't effect their tax status. Not at all. Not at all. And I am tired of hearing that it's a tax increase, because it is not.

RAHER: Referendum C passed through the General Assembly in April. A month later, the legislature approved Referendum D, a companion measure which asks voter permission to issue up to two billion dollars in bonds, backed by Referendum C revenue, to fund roads and other public works projects.

[sound of heavy construction equipment]

RAHER: Supporters of the referenda now faced the challenge of explaining the state's budget crunch in a way that didn't bore voters with arcane fiscal policy issues. In late June, Governor Owens came to Colorado Springs for the groundbreaking ceremony for COSMIX, the Interstate 25 improvement project. Using the opportunity to campaign for C and D, Owens tried to explain Colorado's system of transportation funding.

GOV. BILL OWENS: Next year, we anticipate the gas tax revenue in the state of Colorado is going to go down almost three percent. While the inflation rate for construction in highway projects is expected to go up about five percent [fade under]

RAHER: Another Republican voicing support for C and D at the groundbreaking ceremony was Colorado Springs Mayor Lionel Rivera. Instead of talking numbers, Rivera emphasized specific projects that would benefit from passage of C and D.

MAYOR LIONEL RIVERA: I too want to add my encouragement to the citizens of El Paso County to support Referendum C and D. More than anything else, it's going to bring improvements to State Highway 16 and I-25 [fade under]

RAHER: But state Senator Andy McElhany, from Colorado Springs, spoke for many Republicans who are unhappy that Owens has been aggressively campaigning for the ballot measures.

SEN. ANDY McELHANY: You know, the governor and I agree on almost everything, but this is one of the things that we don't agree on. I'm very concerned about transportation funding whether the referendums pass or they don't pass. There is some bond money, it's a very minor part of Referendum C, less than ten percent. It's a high price to pay to fund ninety percent other things through a tax increase, to get less than ten percent into transportation.

RAHER: The disagreement among Republicans played out in city councils, county commissions, and local Republican Party organizations throughout the state. Colorado College political science professor Bob Loevy says lasting impact of the Republican disagreement should not be underestimated.

BOB LOEVY: It really is an issue that's splitting the Republican Party, and above all, the big-money Denver Republicans from the Colorado Springs Republicans, who are the ones that turn out the big Republican vote. I don't see how you could get a worse split than that over a major statewide issue.

RAHER: Tax-cutting activist Douglas Bruce was more direct, accusing any politician who supports C and D of undermining taxpayers.

BRUCE: They're just spendthrifts who will spend every dollar they get their hands on. The politicians have cheated and violated TABOR dozens and dozens of times. They just are never satisfied no matter how much they rip us off for, and so they're now trying for the big coup. Instead of chiseling a couple hundred million a year here and there, they're talking about billions. So they want to go to the big time.

RAHER: Both sides in the debate have employed various tactics to reach voters. Senate Majority Leader Ken Gordon organized a walk along the Front Range, marching from border to border in support of C and D.

SEN. KEN GORDON: If you want Colorado to be able to compete in a global business economy with students who can do math, do science, then we need to invest in these things. But it costs some money, it's true.

RAHER: Walking with Gordon on the shoulder of Highway 50 east of Penrose, was Pueblo Senator Abel Tapia, a Democrat and chair of the powerful Joint Budget Committee. If C and D fail, deciding what exactly to cut from the budget will be Tapia's responsibility.

SEN. ABEL TAPIA: We've just gotten a report that's available to anybody, that says that the current projection right now, is something like five hundred and forty million dollar deficit in the next fiscal year. That means we're going to have to make cuts of five hundred and forty. To put that in perspective, the whole budget on higher education is right about five hundred million dollars.

RAHER: Campaigns for and against C and D also took to the airwaves. Opponents of the measures have often relied on humor for their adds.

COMMERCIAL JINGLE: Hi ho, hi ho, it's off to tax we go. More for government, less for families [sound of cash register]

RAHER: The opposition has been lead by Jon Caldera, the President of the Independence Institute, a conservative think tank in Golden. The Institute has suggested many spending cuts, including reducing the state prison budget by shortening sentences or using alternatives to prison for non-violent drug offenders. These ideas were promptly attacked by the coalition supporting C and D.

COMMERCIAL VOICE OVER (with ominous music): The ivory tower bunch, controversial opponents of Referenda C and D. They draw huge salaries from taxpayer-subsidized think tanks, then sit around all day thinking up ways to make things worse for Colorado. Stop skyrocketing tuition? No, raise it even higher. Cut the state's budget even deeper? Oh yes, by releasing convicted drug dealers from prison. Massive tuition increases, more toll roads, and convicted felons running loose... [fade under]

RAHER: Caldera says this commercial distorts the true intent of the Independence Institute.

JON CALDERA: It really is silly. You know what the proponents are trying to do is to bend the truth as best they can. One of the ideas that the Independence Institute has long held, is that Colorado needs to take a closer look at sentencing reform. One of our suggestions was to take a look at the twenty-two percent of inmates in Colorado's prison system who are there for non-violent offenses and ask some simple questions. "Are there better ways to punish them, that cost less?"

RAHER: Moreover, says Caldera, he's concerned about what could happen to a variety of policy debates if C and D pass.

CALDERA: Should Referendum C pass, politicians don't have to take up the difficult issues that they have been wanting to avoid now for years. We don't have to talk about illegal immigration, because we'll have more money to pay for illegal immigration. We won't have to talk about Medicaid reform. We won't have to talk about Amendment 23. We won't have to talk about sentencing reform. We won't have to take on these issues that politicians are scared of taking on. And that's too bad, because Colorado is going to have to take on these issues sooner or later, and if Referendum C passes, those issues will begin to simmer on the back stove.

LOEVY: I've been glued to my television set.

RAHER: Colorado College professor Bob Loevy modern political marketing campaigns can have significant influence on voters.

LOEVY: I'm one of those who believes that election campaigns these days are fought on your TV set. They're very typical of the kind of advertising you get on complex ballot issues. They try to take complex ideas and turn them into very short slogans, very short ideas. Often in that process, the truth gets pushed aside, if not negated altogether. The reason we have so many ads, and the reason they're so direct and so bitter and oversimplify, is because of how high the stakes are in this election.

RAHER: Whatever the outcome of the vote, Loevy says it should go down as one of Colorado's historic elections, on par with the 1992 vote that enacted TABOR in the first place.

LOEVY: Oh I think this is one of the most important, hard fought ballot measures in the history of the state of Colorado.

RAHER: Recent opinion polls say the race is too close to call. Early voting is now underway in many counties. Election day is Tuesday, November first.