State facing financial trouble/ Cuts blamed on Amendment 23

The state is in a financial bind, and no one wants to accept responsibility for creating it.

Since Nov. 7, Gov. Bill Owens and various state officials have announced millions in proposed state budget cuts, largely affecting new building construction, such as a $35 million science building at the University of Colorado at Colorado Springs, and expansion of Interstate 25 on the Front Range.

Owens and other state officials blame the cuts on Amendment 23, the initiative passed Nov. 7 that requires education to be funded at inflation plus 1 percent for 10 years using tax surplus dollars.

Its passage will force lawmakers to make some tough calls when the Colorado General Assembly convenes Jan. 10.

"We have these terrible choices, and no matter what we do, it is going to be bad," said Rep. Bill Sinclair, R-Colorado Springs.

Whether cuts ultimately come in transportation, new construction or other programs, it is widely accepted that Amendment 23 creates a cash flow problem. Some may call it a timing problem, depending on who is explaining it, but the effect is the same.

Amendment 23 requires lawmakers to put $321 million into an education lock-box immediately, money that lawmakers and Owens were planning to spend on other things.

Nancy McCallin directs Owens' budget office: "It's a timing problem. We have an obligation to put money in an education fund immediately."

Who created the problem is hotly debated.

"Amendment 23 was an error and a mistake," Sinclair said, adding that voters didn't do their homework when they voted for the measure.

Cary Kennedy, a Boulder resident who helped draft Amendment 23, said state lawmakers caused the cash flow problem because of financial restructuring that lawmakers set up in 1998.

"There is a one-year cash management problem for the state," she said. "Amendment 23 didn't make the problem and didn't make it any worse. (The Legislature) delayed repaying excess (tax) revenues back in 1998."

Kennedy is referring to House Bill 1414, passed in the waning hours of the '98 legislative session. It let the government delay paying tax refunds so it could free up millions for roads and construction.

But the story of the money management conundrum actually starts in 1992, when voters passed the Taxpayers Bill of Rights, or TABOR amendment, to the state constitution.

TABOR caps the state's tax revenues with a formula based on inflation and population growth. TABOR requires any surplus to be returned to citizens in the form of a refund.

For the 2000-01 tax year, the state estimates the TABOR surplus to be $1.06 billion, with an average refund of $265 per adult.

The only way money above the revenue cap can be kept and spent by government is by a vote of the people. Amendment 23, passed Nov. 7, authorized money to be set aside for public schools.

The amendment reduces the average TABOR refund for 2000-01 by $113 per adult. But it will pump an estimated $4.58 billion into public schools during the next decade.

If that is where the explanation stopped, it would be fairly simple. It's HB 1414 that makes it more complex.

In '98, state lawmakers owed taxpayers a $563 million refund. HB 1414 let the state spend $400 million of that refund - largely on new construction and expansion of the road system - and pay it back with tax revenues from the following year.

That pattern has continued until now. Amendment 23 requires lawmakers to put $321 million into an account for education, money the state was counting on to use for TABOR refunds.

The only way money can be put into the education fund is if money is cut from other items, hence the millions in budget cuts. McCallin said the budget cut hierarchy means transportation and new construction get cut first from the governor's proposed budget. Ultimately, the Legislature will have to approve state spending.

"First money is depleted from new capital (construction) and then it hits transportation," she said. "If it were to further impact the budget, then it would go into our operations budget."

So far, it hasn't gone that far, and no cuts have been announced for other state programs.

One day after the election, Owens blamed Amendment 23 for $200 million in proposed cuts to the state's construction budget.

Owens said any new construction projects from CU-Springs would likely be "dead on arrival" as a result of the amendment.

A week later, Colorado Department of Transportation Director Tom Norton blamed the amendment when he submitted a budget that would delay $246 million in highway expansion projects one year, including $55 million worth of projects in the Pikes Peak region.

State officials have said those who wrote Amendment 23 caused the problem because they didn't understand HB 1414 and TABOR. Before the election, State Treasurer Mike Coffman called Amendment 23 a "fiscal train wreck for Colorado."

That makes Jody Townsend mad. She blames state lawmakers.

"Two years ago, legislators chose to start borrowing against the surplus," said Townsend, who was the campaign coordinator for Amendment 23 in Colorado Springs. "They are blaming 23 for something that has nothing to do with 23."

HB 1414 has caused other problems in the past. The pre-spending policy has hampered legislative efforts for a permanent tax cut.

During the 1999 session, lawmakers figured out that they couldn't cut taxes, thereby reducing the massive tax surplus generated in recent years, because they were counting on the tax surplus to pay for tax refunds.

It could cause further problems if a downturn in the economy caused tax revenues to shrink.

The only way out of the vicious cycle, officials say, is to make cuts.

- Edited by Judy Isacoff; Headline by Stephanie Espinoza

Copyright 2000
Provided by ProQuest Information and Learning Company. All rights Reserved.