Colorado voters can choose to terminate the so-called Taxpayer Bill of Rights that is expected to provide nearly $40 million of tax refunds this year, the state’s high court has ruled.
The Colorado Supreme Court
"The initiative could not be written more simply or directly," the court's majority opinion by Justice Richard Gabriel said. "It essentially asks voters a single question: Should TABOR be repealed in full?"
Like the 1992 Tabor initiative, the repeal measure known as Initiative 3 was submitted for the ballot by public petition.
Earlier efforts to petition for repeal of Tabor were ruled to violate another constitutional amendment called the single-subject rule. That rule, approved in an election a couple of years after Tabor, required that ballot questions "must be limited to a single subject, which must be clearly expressed in its title."
After the state Title Board that oversees ballot initiatives ruled that Initiative 3 violated the rule, the Colorado Fiscal Institute led by Carol Hedges
The court’s opinion "clarifies voters' role in making changes to their state constitution,” Hedges said in a prepared statement following the announcement. “I'm thrilled that those options include a full repeal of a provision that has made Colorado an outlier on state tax policy for nearly 30 years."
Another proposal known as Proposition CC was placed on the ballot by the Democratic-controlled General Assembly. The proposal would allow the state to retain excess revenue it is currently required to refund under Tabor. Retained funds would be used for education and transportation. The measure would require the state auditor to hire a private entity to conduct an annual financial audit regarding use of funds.
The ballot proposals come in a year when Colorado’s economic strength is expected to bring Tabor refunds to taxpayers.
When revenue collected by the state exceeds the Tabor limit, refunds to taxpayers are automatically triggered. Tabor requires voter approval for the state to retain revenue above the limit, which is based on a formula derived from population growth plus inflation.
Tabor was amended by voters in 2005 under Referendum C, which allows the state to retain and spend money from existing revenue sources above the Tabor limit each year beginning in FY 2005-06. From FY 2010-11, the state could spend revenue above the TABOR limit up to a capped amount known as the "Referendum C cap."
In 2017, Senate Bill 267 changed how revenues subject to Tabor are calculated.
For fiscal year 2018-19, roughly $39.8 million could be refunded to taxpayers, according to state
The state’s general fund is expected to see a $270.7 million increase so far in 2018-19, according to the Office of State Planning and Budgeting revenue forecast.
“The FY 2018-19 surplus is expected to exceed the amount that can be refunded via FY 2019-20 reimbursements for property tax expenditures, triggering both a temporary income tax rate reduction and sales tax refund on 2019 tax forms filed in the first half of 2020,” according to a report from the Legislative Council Staff.
Gov. Jared Polis’ office estimates that single filers will average a $40 refund in 2019-20, a $69 refund in 2020-21, and an $89 refund in 2021-22. Joint filers would average a $79 refund in 2019-20, a $139 refund in 2020-21, and a $246 refund in 2021-22.
“Even though this forecast shows strong growth in revenue, Washington’s misguided tariffs and trade wars could negatively impact key Colorado industries like agriculture and manufacturing,” Polis said. “We must continue to stand against policies that threaten our state's economic growth.”
Colorado’s employment and wage growth are factors that have encouraged consumer spending, leading to the increased revenue for the state fund, but growth is expected to moderate in the coming years, according to state economists.
General Fund revenue was projected to grow 7.1% in FY 2018-19 and 4.7%in FY 2019-20. The General Fund revenue forecast for FY 2018-19 was revised up from the March forecast by $270.7 million, or 2.2%.
The forecast for FY 2019-20 was increased by $114.4 million, or 0.9%. The General Fund reserve is projected to be $274.8 million above the required statutory reserve amount of 7.25% of appropriations in FY 2019-20.
FY 2018-19 cash fund revenue is projected to grow 6% from the prior fiscal year, while FY 2019-20 cash fund revenue is forecast to decrease by 1.9%.
Forecast cash fund revenue for FY 2018-19 is $11.4 million, or 0.5%, lower than March projections. Cash fund revenue collections for FY 2019-20 are $29.8 million, or 1.2%, also lower than March projections.
Revenue subject to Tabor is projected to be above the Referendum C cap by $295.6 million in FY 2018-19 and $412.2 million in FY 2019-20. TABOR refunds of $39.8 million will be paid out in FY 2018-19.
While conservatives generally support Tabor as an effective check on government growth, opponents say the law prevents state and local governments from keeping up with growth and the cost of maintenance.
Opponents primarily object to the drop in spending on both K-12 public schools and higher education. According to the College Board, Colorado has fallen from 35th for college and university spending as a percentage of personal income to 47th since Tabor was enacted.
Tabor is also often criticized for limiting the state’s spending on highways and transportation.
Colorado carries issuer credit ratings of Aa1 from Moody’s Investors Service, and AA from S&P Global Ratings with stable outlooks. The state does not issue general obligation bonds but finances infrastructure through lease debt and certificates of participation.
S&P revised its outlook to stable from negative a year ago based on passage of pension legislation.
Moody’s identified Colorado’s complex Tabor rules as a “credit challenge” in a 2018 report and said that “significant and sustained increase in financial reserves” or a “trend of state voter actions that enhances the state's fiscal health and flexibility” could lead to an upgrade.
