TABOR: What Was Said vs. What Really Happened

by Todd Hollenbeck

IP-8-2008 October 2008

13952 Denver West Parkway • Suite 400 • Golden, Colorado 80401-3141 www.IndependenceInstitute.org • 303-279-6536 • 303-279-4176 fax

Introduction

The Taxpayer’s Bill of Rights1 (TABOR or Amendment 1) was predicted by opponents to cause economic Armageddon, destroy the education system and the arts, even put the Pope at risk, and let criminals back on the streets. Its author, Douglas Bruce, was a greedy, slick, interloping, terrorist from California who wanted to pass TABOR to save money and cause the same catastrophes California was experiencing. With all of these predictions and accusations, why did TABOR pass? The simple answer: all of these predictions were obviously hysterical, and none of them came true.

I. What is TABOR?

The Taxpayer’s Bill of Rights (TABOR) was added to Colorado’s Constitution in 1992. It contains three main provisions:

1) Voter approval of tax increases. TABOR defines a tax increase as, “a new tax, a rate increase, an increase in a property assessment value ratio, extension of an expiring tax, or a tax policy change requiring a net tax revenue gain.” TABOR also bars four types of taxes: New or increased real estate transfer fees, local income taxes, state property taxes, and surcharges on state income taxes.2

2) Revenue growth limit. Most annual growth in state revenue is limited to inflation and population growth. The Denver- Boulder-Greeley Consumer Price Index is the measure used to determine the level of inflation. The U.S. Bureau of Census measures the population growth. Within school districts, TABOR revenue growth is limited to increases for inflation and pupil enrollment.3

3) Weakening existing revenue, spending, or debt limitations requires voter approval. Called the ‘weakening provision,’ TABOR constitutionally protects statutory tax and spending limits, such as the Arveschoug-Bird Amendment and the Gallagher Amendment. 4

TABOR’s restrictions on the growth of government spending apply to most, but not all, government revenues. Not included are revenues from government enterprises, federal funds, gifts, collections for another government, employee pension contributions, pension fund earnings, damage awards, and property sales.5

When ordinary government revenues grow faster than inflation plus population, the excess revenues must be refunded to the taxpayers. The surplus must be refunded to Colorado’s taxpayers within one year. There are 19 different ways to refund the surplus, but income tax refunds and tax credits are the most common.6 If the government wants to keep the extra money, it can ask the voters via a referendum. In Colorado, voters have often, but not always, given governments permission to keep surplus revenues.

2 A. Groups that favored TABOR: • National Federation of Independent Business • Colorado Farm Bureau • National Taxpayers Union • Colorado Union of Taxpayers • Cato Institute • Americans for Prosperity Foundation7

Arguments that were made for TABOR

1. It makes the government more accountable by forcing discipline over budget and tax practices. 2. It makes governments more efficient by making them think of creative ways to generate revenue. 3. It controls the growth of government. 4. It enables citizens to vote on tax increases and determine their desired level of government service. It also forces government to evaluate and prioritize services.8 5. It forces governments to limit revenue and therefore to spend within their means. Prior to TABOR, Colorado governments could increase mill levies and state taxes at their discretion. 6. It is “tightly written” and therefore the government would not be able to counteract its intent. 7. It reduces the power and influence of special interests and their lobbyists because they would need the support of the people to expand programs and government activities. 8. It curbs Colorado’s expanding debt. Certificates of participation and lease-purchase agreements were allowing state and local governments to go into debt without voter approval. 9. Taxes had been increasing significantly. In 1981, state and local taxes were 8.6% of per capita income. In 1990, the state and local tax burden had risen to 10.2%.9

B. Groups that opposed TABOR: • No On One Committee • Rocky Mountain Farmers Union • Colorado Education Association • Colorado Municipal League • Colorado Ski Country USA • Colorado Municipal Bond Dealers • Colorado Association of Realtors • Greater Denver Chamber of • County Sheriffs of Colorado Commerce • League of Women Voters of • Colorado Arts Coalition Colorado • Colorado Commission on Higher Education10

Arguments that were made against TABOR

1. It reduces elected representatives’ ability to make fiscal decisions. 2. It causes disproportionate cuts for general revenue fund programs and does not account for disproportionately greater growth in elderly and youth populations that require intensive government service.

3 3. It makes it difficult for states to raise new revenue, especially in hard economic times, and result in long term declines in government service levels. 4. It would be hard to refund excess revenues in an equitable or cost-effective way. 5. It shifts the state tax base away from the income tax to a regressive sales tax or to narrowly defined sources like lotteries and user fees.11 6. The wording contains “confusing provisions” that would cause administrative problems and lawsuits. 7. Fees are not included in the revenue limit, so governments would develop a “system of fees.” 8. The debt restrictions would hinder the government’s ability to provide for long- term capital outlays, like airports, highways, mass transit, prisons, and higher education buildings. 9. Federal databases for population and inflation were included in the wording of TABOR. Opponents pointed out that put the “composition of these databases” is “in the hands of federal bureaucrats.” The inflation index in TABOR is based on federal data for Denver-Boulder-Greeley, and thus is not accurate for rural areas of the state. 10. Federal money is excluded from the TABOR revenue growth limits, but non- federal matching programs are not. Thus, governments might need to ask voter permission to keep money from non-federal matching programs. 11. The tax rates in Colorado have been reasonable. Per capita state and local taxes in Colorado has usually been below the U.S. average. Colorado’s ratio of taxes to income has also been below the U.S. average.12

II. What Was Said and What Really Happened

Former State Representative Betty Ann Dittemore, former Congressman Ray Kogovesek of Pueblo, former Congressman Jim Johnson of Fort Collins, and John Lay, Director of Ski Country USA, led an anti-TABOR group called the No on One Committee. They warned that TABOR would cause “total chaos.” Dittemore said TABOR was like a big piece of chocolate with a sour lemon inside. Lay said, “The name of the game here is we are communicating chaos.”13

Lobbyist Wally Stealey ran television ads predicting that TABOR would “make it tough to educate kids, put out fires and arrest criminals.”14

TABOR’s author Douglas Bruce responded, “They’ve proven they’ll say anything.”15

4 A. Education

What Was Said An anti-TABOR brochure said the measure “limits school spending growth to the rate of inflation and growth in student population. Experts fear this will make it difficult for schools to keep up and create further impetus for cuts.”16

What Really Happened Revenue for education has continued to increase. TABOR does not shrink government, but only slows its growth. Rocky Mountain News editorial page editor Vincent Carroll wrote: “Who are these experts who cannot do basic arithmetic? Since when does spending growth that accommodates inflation plus enrollment equal ‘cuts’?”17

From 1988-89 to 2002-03, total per pupil spending grew by more than 17 percent.18 After adjusting for inflation, Colorado has had three years of total per-pupil spending decreases since TABOR. These decreases came in 1993, 1994, and 2000. The increases that occurred during other years more than made up for the three decreases. In 2000, Colorado voters approved Amendment 23, which requires state per-pupil spending on K-12 education to be increased at least one percent annually. Over the eight years, between the enactment of TABOR (in 1992) and Amendment 23, per-pupil spending in Colorado increased by 2.7 percent in real dollars.19 So rather than leading to education “cuts,” TABOR had been followed by increased spending on education.

B. Bond Rating

What Was Said Colorado could see a “long-term deterioration” of its credit rating, claimed Ditmar Kopf, an Assistant Vice President of the bond rating firm Moody’s. He made the prediction based on his analysis of California, where voters had enacted some tax and spending restrictions in the 1970s and 1980s. TABOR specifies suspending the limits if payment of bonds and pensions is necessary. Kopf argued that the suspension provision would not help because the school district’s entire financial picture determines the bond rating.20

What Really Happened Moody’s prediction of “long-term deterioration” was wrong. According to the Colorado Department of the Treasury, since 2003 (earliest year available) the Moody’s rating for Colorado has been MIG 1 for every year. That is the highest rating available from Moody’s. The ratings for the same period for Standard and Poor’s and Fitch Ratings have also been at the highest level, SP-1+ and F1+ respectively.21

Vincent Carroll wrote in 1992, “Moody’s, of course, is the bond-rating firm that is supposed to be above the political fray. But if you believe that, perhaps you also think that American Medical Association has no interest in defending the prosperity of doctors. The largest single contributor to the anti-1 campaign happens to be the Colorado Municipal Bond Dealers.”22

5 C. California Comparisons

What Was Said Opponents tried to draw comparisons between Colorado’s TABOR and California’s Proposition 13 and Gann Limitation. These two measures were blamed for California’s economic troubles.

Steve Kaplan, a representative for the No on One Committee and former Denver City Attorney, claimed that the California tax and spending limits had disastrous impacts on education. “One of the finest public universities systems has virtually been destroyed by this.”23

What Really Happened In 1978, California passed Proposition 13, which stabilized property taxes, but did not restrain expenditures, as TABOR does. In order to continue increasing spending, the California legislature increased other taxes. California raised the income tax, sales tax, and taxes on beer, wine, and cigarettes; the Governor even proposed raising taxes on snack foods.24

Eighteen months after Proposition 13 passed, 74 percent of California voters approved the Gann Limit. The Gann Limit was intended to slow the growth of government spending. It was similar to Colorado’s TABOR, though it was not as effective. Gann was able to keep spending relatively in check. According to Michael New in Investor’s Business Daily, between “1980 and 1991, California’s rank in state per-capita expenditures fell from 7th to 16th.” In 1987, the state refunded $1.1 billion in surplus revenues to the taxpayers.

The surplus revenue refund angered the teacher union lobbyists who felt the money should have gone to increased education spending. The lobby was then able to evade the Gann Limit by passing Proposition 98 in 1988. Proposition 98 required the state to compensate for lost education spending that occurred when revenues declined. Even though the state collected less money because of economic recession, it had to spend the same amount on education. This forced California to take funds from other areas in order to pay for education. In response, the transportation lobby blamed Gann (instead of Prop. 98) for lost transportation revenue and pushed to pass Proposition 111 in 1990.

Proposition 111 made the gas tax exempt from the Gann Limit. The Proposition also tied spending to per-capita personal income growth instead of inflation. This was a substantially higher limit. Michael New explained what happened after Proposition 98 and 111 weakened the Gann Limit:

Since the state obtains much of its tax revenue through a progressive income tax, receipts tend to increase sharply during times of prosperity, then crash during recessions. That happened during the tech boom of the late 1990s as the Gann Limit was powerless to prevent the 48 percent increase in spending that occurred during Gray Davis' first three years in

6 office. When the tech bubble burst in 2000 and 2001, the end result was a $38 billion shortfall and budget deficits that persist to this day. Indeed, California taxpayers are still paying the price for weakening the Gann Limit.25

As New summarized in another article: “This vicious cycle of spending and taxing is the root cause of California’s current fiscal mess.”26

D. Economy

What Was Said In 1992, then-Governor Roy Romer predicted that TABOR would result in “economic Armageddon,” and warned of signs posted on the state line saying, “Colorado is closed for business.”27

What Really Happened No signs were posted, and there has been no “Armageddon.” Lower tax burdens attract businesses.

In 2006, Colorado was ranked 8th on the Tax Foundation’s State Business Tax Climate Index. 28 Between 1995 and 2000 Colorado was the first among states in gross state product growth and according to the National Association of State Budget Officers, Colorado was one of only five states that did not run a deficit during the 2002 fiscal year.29

Table 1. Changes in Colorado’s Prosperity Rankings after TABOR30 Rank Among the States Economic Indicator 1980-1992 1993-2006 Population Growth 13 3 Per Capita Income 18 9 Per Capita Income Growth 34 6 Economic Growth 26 3 Per Capita Income 12 8

E. Cops and Crime

What Was Said In an anti-TABOR television ad summarized by the Denver Post, “Arapahoe County Sheriff Pat Sullivan points to a section of the tax-limitation initiative that he says ‘cuts cops and puts criminals back on the street.’ …Proponents of the measure ‘don’t want you to see that part,’ Sullivan says in the spot.” Sullivan said that a sheriff’s revenue is tied directly to the property tax base, and that personnel cuts would be necessary to cover rising costs such as health insurance and worker’s compensation premiums.31 Sullivan

7 claimed that if TABOR passed he would have to cut the equivalent of two deputies and one patrol secretary.32

Sullivan also said that he would try to cut detectives rather than uniformed officers. This cut in personnel would lead to overworked detectives. They would not be able to charge suspects within 72 hours and would have to release them.33 Then-Arapahoe County District Attorney Bob Gallagher did radio commercials during the campaign predicting that DA’s offices around the state would only prosecute the worst crimes, dismissing the other cases and putting criminals back on the street.34

Pope John Paul II visited Denver in the summer of 1993, as part of World Youth Day. In October 1992, Rita Kahn, president of a private investment analysis company, declared that TABOR would strap the police to a point where they would not adequately be able to protect the Pope.35 Likewise, Denver Mayor Wellington Webb announced that the Pope’s visit was an important reason why people should vote against TABOR.36

What Really Happened Despite Sheriff Sullivan’s claim, TABOR has no specific language about law enforcement funding or criminals getting out of jail.37 Sheriff Sullivan claimed that if his budget grew at the rate of population growth plus inflation, his budget would be “cut”, and that would force him to fire people and let criminals out of jail. Of course, if the people of Arapahoe County felt the need to increase funding for the sheriff’s department, they could vote to allow that increase.38 Indeed, since 1992, voters in several jurisdictions have voted to increase taxes or spending for law enforcement, when specific, well- formulated proposals have been offered. None of the scenarios about criminals walking away from jail unprosecuted have come to pass.

After returning to the Vatican, Pope John Paul II called Denver, “a lively image of the vineyard that the heavenly father is cultivating… It was noted that during those days people spontaneously acted in an exceptionally nice way, there were no episodes of violence or aggression, things which happen rather often. There were no abuses.” There were over 350,000 people at the papal mass on August 15, 1993, at Cherry Creek State Recreation Area.39

F. Small Communities

What Was Said Some politicians predicted that TABOR would destroy small communities. The Mayor of Palmer Lake, Bob Radosevich, claimed that TABOR “threatens the existence of the small communities in Colorado. For example, an election in our town costs approximately $700…This amendment will not even allow us to raise dog tag fees without voter approval. If the people don’t trust their officials that much, it’s time to change officials, not how they spend tax dollars.”40

8 What Really Happened The Mayor was wrong. TABOR does allow governments to raise fees, without asking the people in a vote. In 1988 and 1990, Colorado voters had defeated tax limitation proposals that did apply to fees. The 1992 version of TABOR, which the voters approved, does not apply to fee increases.41

G. Arts

What Was Said Gully Stanford, a spokesperson for the Denver Center for the Performing Arts, warned, “Inside this sugarcoated amendment is a bitter pill indeed. The arts would be damaged severely.” Another local art leader quoted by the Rocky Mountain News said the passage of TABOR would have a “devastating effect on arts and culture in Colorado.” “Supporters of arts and culture in the metro area have said funding for nearly 200 organizations could be in jeopardy if Amendment 1 passes,” reported the Rocky Mountain News.42

In the Denver area, the zoo, museums, and the arts are funded by a special sales tax which the voters approved in 1988.43 (Notably, the voters approved the tax in a landslide even though the regional economy was in a deep recession.) The tax revenues pay for the Scientific and Cultural Facilities District (SCFD), which grants the revenues to various organizations. Under TABOR, the SCFD would have to return revenues which were growing faster than population plus inflation—unless the voters chose to let the SCFD keep the excess. Again, TABOR would not “cut” arts funding; it would simply slow the growth of tax collections for the funding.44

What Really Happened From 1989 to 1999, the revenue for the SCFD grew from $14.9 million to over $33 million. In that same time period, the institutions receiving funding increased to more than 300.45

As Vince Carroll wrote, “This nonsense is an apparently creative reference to the fact that the (SCFD) may have to refund any tax collections that exceed the rate of inflation plus growth. Then again, the district might not have to, since voters, if asked, would almost certainly permit it to keep the extra revenue. In either case, Amendment 1 doesn’t cut arts funding, so no group is ‘jeopardized.”46

H. Spending Increases

What Was Said The Mayor of Lakewood, Linda Morton, tried to turn the tables on TABOR by announcing that it would force governments to spend more: “No local government will dare allow spending to fall below what it spent the previous year. One year of low spending would then become the new lower ceiling with Amendment 1.” She added,

9 “Public services must occur concurrently with growth. Amendment 1 represents the worst example of slow, reactive government. And by slow I don’t mean a year or so.”47

What Really Happened In the 10 years prior to TABOR, Colorado’s state government spending increased more than double the rate of population plus inflation. After TABOR, spending increases were slightly above population and inflation. Thus, TABOR successfully restrained the growth of government to about half of what it otherwise would have been.

In the ten years period prior to TABOR (1982-1992): • Population plus inflation increase: 40.1% • State expenditure increase: 89.8% • State revenue increase: 104.7%

In the ten years after TABOR (1993-2002): • Population plus inflation increase: 62.6% • State expenditure increase: 63.8% • State revenue increase: 61.3%48

I. Personal Attacks

What Was Said Lobbyist Wally Stealey, the campaign manager for the No on One Committee, called TABOR proponent Douglas Bruce “a slick California lawyer” who did not know what he was talking about. Further, said Stealy, “Mr. Bruce, with his arrogant law school background from a California law school, feels that nobody has a right to participate in elections but himself.” Stealey also claimed that Bruce was trying to bring “the same social catastrophes that are presently occurring in California so he can save a few dollars on his property taxes in Pueblo, Colorado Springs, and probably north Denver. The issue here is Mr. Bruce’s greed.” Stealey felt that Bruce had no right to try to influence Colorado policy, because Bruce, unlike Stealey, was an immigrant to Colorado: “He’s been here as an interloper for six years. I’ve lived in this state for 58 years. My family homesteaded here in 1872.”49 Stealey also said, “Bruce’s tactic is that no matter what anybody says, they’re lying. He defines himself as Jesus and says ‘You don’t dare criticize me.’”50

Governor Roy Romer called Bruce “a terrorist who would lob a hand grenade into a schoolyard full of children.” Romer also said that defeating TABOR was the “moral equivalent of defeating the Nazis at the Battle of the Bulge.”51

What Really Happened The viciousness of the personal attacks on Douglas Bruce speak for themselves.

It was simply ludicrous to claim that Bruce was pushing TABOR in order to save himself money. To the contrary, he spent $130,000 of his own money on the campaign.52

10 Conclusion

Colorado has not become an economic wasteland. Colorado’s K-12 educational system is better now than it was before TABOR. The bond ratings for governments are strong. The Pope had a wonderful, safe visit. Funding for the arts has increased significantly. Government spending has also increased substantially—but the increase has been smaller than it would have been without TABOR. Now, when governments want to raise taxes, or accelerate spending increases, they simply have to ask the voters for permission. Oftentimes, the voters have said “yes,” when they felt that a good plan was presented.

Special interest groups, politicians, and lobbyists were willing to say anything to stop TABOR from passing. Their claims were grossly exaggerated, ridiculous and false. Some people who think that they are entitled to the taxpayers’ money seem to have no qualms about telling lies and concocting absurd doomsday scenarios to order to keep more and more of that money. In 1992, the voters of Colorado rejected the mean-spirited, dishonest claims of the opponents of the Taxpayer’s Bill of Rights. History has vindicated their good judgment.

11 Appendix : The Taxpayer’s Bill of Rights

Colorado Constitution, Article X, Section 20.

(1) General provisions. This section takes effect December 31, 1992 or as stated. Its preferred interpretation shall reasonably restrain most the growth of government. All provisions are self-executing and severable and supersede conflicting state constitutional, state statutory, charter, or other state or local provisions. Other limits on district revenue, spending, and debt may be weakened only by future voter approval. Individual or class action enforcement suits may be filed and shall have the highest civil priority of resolution. Successful plaintiffs are allowed costs and reasonable attorney fees, but a district is not unless a suit against it be ruled frivolous. Revenue collected, kept, or spent illegally since four full fiscal years before a suit is filed shall be refunded with 10% annual simple interest from the initial conduct. Subject to judicial review, districts may use any reasonable method for refunds under this section, including temporary tax credits or rate reductions. Refunds need not be proportional when prior payments are impractical to identify or return. When annual district revenue is less than annual payments on general obligation bonds, pensions, and final court judgments, (4) (a) and (7) shall be suspended to provide for the deficiency.

(2) Term definitions. Within this section: (a) “Ballot issue” means a non-recall petition or referred measure in an election. (b) “District” means the state or any local government, excluding enterprises. (c) “Emergency” excludes economic conditions, revenue shortfalls, or district salary or fringe benefit increases. (d) “Enterprise” means a government-owned business authorized to issue its own revenue bonds and receiving under 10% of annual revenue in grants fro all Colorado state and local governments combined. (e) “Fiscal year spending” means all district expenditures and reserve increases except, as to both, those for refunds made in the current or next fiscal year or those from gifts, federal funds, collections for another government, pension contributions by employees and pension fund earnings, reserve transfers or expenditures, damage awards, or property sales. (f) “Inflation” means the percentage change in the United States Bureau of Labor Statistics Consumer Price Index for Denver-Boulder, all items, all urban consumers, or its successor index. (g) “Local growth” for a non-school district means a net percentage change in actual value of all real property in a district from construction of taxable real property improvements, minus destruction of similar improvements, and additions to, minus deletions from, taxable real property. For a school district, it means the percentage change in its student enrollment.

(3) Election provisions. (a) Ballot issues shall be decided in a state general election, biennial local district election, or on the first Tuesday in November of odd-numbered years. Except for petitions, bonded debt, or charter or constitutional provisions, districts may consolidate

12 ballot issues and voters may approve a delay of up to four years in voting on ballot issues. District actions taken during such a delay shall not extend beyond that period. (b) At least 30 days before a ballot issue election, districts shall mail at the least cost, and as a package where districts with ballot issues overlap, a titled notice or set of notices addressed to “All Registered Voters” at each address of one or more active registered electors. The districts may coordinate the mailing required by this paragraph (b) with the distribution of the ballot information booklet required by section 1 (7.5) of article V of this constitution in order to save mailing costs. Titles shall have this order of preference: “NOTICE OF ELECTION TO INCREASE TAXES/TO INCREASE DEBT/ON A CITIZEN PETITION/ON A REFERRED MEASURE.” Except for district voter- approved additions, notices shall include only: (i) The election date, hours, ballot title, text, and local election office address and telephone number. (ii) For proposed district tax or bonded debt increases, the estimated or actual total of district fiscal year spending for the current year and each of the past four years, and the overall percentage and dollar change. (iii) For the first full fiscal year of each proposed district tax increase, district estimates of the maximum dollar amount of each increase and of district fiscal year spending without the increase. (iv) For proposed district bonded debt, its principal amount and maximum annual and total district repayment cost, and the principal balance of total current district bonded debt and its maximum annual and remaining total district repayment cost. (v) Two summaries, up to 500 words each, one for and one against the proposal, of written comments filed with the election officer by 45 days before the election. No summary shall mention names of persons or private groups, nor any endorsements of or resolutions against the proposal. Petition representatives following these rules shall write this summary for their petition. The election officer shall maintain and accurately summarize all other relevant written comments. The provisions of this subparagraph (v) do not apply to a statewide ballot issue, which is subject to the provisions of section 1 (7.5) of article V of this constitution. (c) Except by later voter approval, if a tax increase or fiscal year spending exceeds any estimate in (b) (iii) for the same fiscal year, the tax increase is thereafter reduced up to 100% in proportion to the combined dollar excess, and the combined excess revenue refunded in the next fiscal year. District bonded debt shall not issue on terms that could exceed its share of its maximum repayment costs in (b) (iv). Ballot titles for tax or bonded debt increases shall begin, “SHALL (DISTRICT) TAXES BE INCREASED (first, or if phased in, final, full fiscal year dollar increase) ANNUALLY...?” or “SHALL (DISTRICT) DEBT BE INCREASED (principal amount), WITH A REPAYMENT COST OF (maximum total district cost), ...?”

(4) Required elections. Starting November 4, 1992, districts must have voter approval in advance for: (a) Unless (1) or (6) applies, any new tax, tax rate increase, mill levy above that for the prior year, valuation for assessment ratio increase for a property class, or extension of an expiring tax, or a tax policy change directly causing a net tax revenue gain to any district.

13 (b) Except for refinancing district bonded debt at a lower interest rate or adding new employees to existing district pension plans, creation of any multiple-fiscal year direct or indirect district debt or other financial obligation whatsoever without adequate present cash reserves pledged irrevocably and held for payments in all future fiscal years.

(5) Emergency reserves. To use for declared emergencies only, each district shall reserve for 1993 1% or more, for 1994 2% or more, and for all later years 3% or more of its fiscal year spending excluding bonded debt service. Unused reserves apply to the next year's reserve.

(6) Emergency taxes. This subsection grants no new taxing power. Emergency property taxes are prohibited. Emergency tax revenue is excluded for purposes of (3) (c) and (7), even if later ratified by voters. Emergency taxes shall also meet all of the following conditions: (a) A 2/3 majority of the members of each house of the general assembly or of a local district board declares the emergency and imposes the tax by separate recorded roll call votes. (b) Emergency tax revenue shall be spent only after emergency reserves are depleted, and shall be refunded within 180 days after the emergency ends if not spent on the emergency. (c) A tax not approved on the next election date 60 days or more after the declaration shall end with that election month.

(7) Spending limits. (a) The maximum annual percentage change in state fiscal year spending equals inflation plus the percentage change in state population in the prior calendar year, adjusted for revenue changes approved by voters after 1991. Population shall be determined by annual federal census estimates and such number shall be adjusted every decade to match the federal census. (b) The maximum annual percentage change in each local district's fiscal year spending equals inflation in the prior calendar year plus annual local growth, adjusted for revenue changes approved by voters after 1991 and (8) (b) and (9) reductions. (c) The maximum annual percentage change in each district's property tax revenue equals inflation in the prior calendar year plus annual local growth, adjusted for property tax revenue changes approved by voters after 1991 and (8) (b) and (9) reductions. (d) If revenue from sources not excluded from fiscal year spending exceeds these limits in dollars for that fiscal year, the excess shall be refunded in the next fiscal year unless voters approve a revenue change as an offset. Initial district bases are current fiscal year spending and 1991 property tax collected in 1992. Qualification or disqualification as an enterprise shall change district bases and future year limits. Future creation of district bonded debt shall increase, and retiring or refinancing district bonded debt shall lower, fiscal year spending and property tax revenue by the annual debt service so funded. Debt service changes, reductions, (1) and (3) (c) refunds, and voter-approved revenue changes are dollar amounts that are exceptions to, and not part of, any district base. Voter- approved revenue changes do not require a tax rate change.

(8) Revenue limits. (a) New or increased transfer tax rates on real property are prohibited. No new state real property tax or local district income tax shall be imposed. Neither an

14 income tax rate increase nor a new state definition of taxable income shall apply before the next tax year. Any income tax law change after July 1, 1992 shall also require all taxable net income to be taxed at one rate, excluding refund tax credits or voter-approved tax credits, with no added tax or surcharge. (b) Each district may enact cumulative uniform exemptions and credits to reduce or end business personal property taxes. (c) Regardless of reassessment frequency, valuation notices shall be mailed annually and may be appealed annually, with no presumption in favor of any pending valuation. Past or future sales by a lender or government shall also be considered as comparable market sales and their sales prices kept as public records. Actual value shall be stated on all property tax bills and valuation notices and, for residential real property, determined solely by the market approach to appraisal.

(9) State mandates. Except for public education through grade 12 or as required of a local district by federal law, a local district may reduce or end its subsidy to any program delegated to it by the general assembly for administration. For current programs, the state may require 90 days notice and that the adjustment occur in a maximum of three equal annual installments.

Notes

1 Colorado Constitution, Article 10, Section 20 is included in Appendix A. It is also available online at http://www.i2i.org/Publications/ColoradoConstitution/cnart10.htm. 2 Barry W. Poulson, “Colorado’s TABOR Amendment: Recent Trends and Future Prospects.” July 2004, Americans for Prosperity, http://www.americansforprosperity.org/index.php?id=466&state=co, p. 4. 3 Ibid., at 4 and 5. 4 Ibid., at 5. 5 Ibid. 6 Ibid., at 6. 7 John Sanko, “Other Issues Diffuse Spotlight on Amendment 1: Cause of Tax Limitation Advocate Douglas Bruce May be Lost among 13 Ballot Initiatives,” Rocky Mountain News, October 12, 1992, sec. Local, p. 8. 8 Bert Waisanen, “State Tax and Expenditure Limits--2007,” National Conference of State Legislatures, September 2007, http://www.ncsl.org/programs/fiscal/telsabout.htm. 9 Dan Gibson, “Tax Limitation Revisited: Douglas Bruce is Back and Looking Stronger than Ever,” Rocky Mountain News, September 27, 1992, Sec. Editorial, p. 102. 10 Sanko, “Other Issues Diffuse Spotlight on Amendment 1,” Rocky Mountain News. 11 Waisanen, “State Tax and Expenditure Limits--2007,” National Conference of State Legislatures. 12 Gibson, “Tax Limitation Revisited,” Rocky Mountain News. 13 John Sanko, “Foes Call Tax-Limit Initiative ‘Sour Lemon,’” Rocky Mountain News, September 15, 1992, sec. Local, p. 14. 14 Sanko, “Other Issues Diffuse Spotlight on Amendment 1,” Rocky Mountain News. 15 Ibid. 16 Vincent Carroll, “Truth Takes Flight in Anti-1 Fight,” Rocky Mountain News, November 1, 1992, sec. Editorial, p. 126. 17 Ibid. 18 Benjamin DeGrow, “Counting the Cash for K-12: The Facts about Per-Pupil Spending in Colorado,” Independence Institute Issue Backgrounder 2006-A (March 2006), http://www.i2i.org/articles/IB_2006_A_web.pdf. 19 Ibid., at 11. DeGrow points out that research by Dr. Eric Hanushek of Stanford University found only 27 percent of 163 studies demonstrated a “statistically significant relationship between increased per-pupil

15 spending and student performance.” Two-thirds of the studies showed insignificant correlations, and the rest revealed a negative relationship. In Colorado, per-pupil education spending declined from 22nd nationally in 1991-92 to 26th in 2002-03. However, the National Assessment of Educational Progress (NAEP) rating increased: from 17th out of 41participating states and D.C. in 1991-92 to 15th out of all 50 states in 2002-03. From 1991 to 2003, only Delaware improved its reading test scores more than Colorado. 20 Berny Morson, “Tax Limitation May Threaten School Credit,” Rocky Mountain News, October 23, 1992, sec. Local, p. 26. 21 State of Colorado, Department of the Treasury, “GTRAN & ETRAN Treasury Short-Term Borrowings,” http://www.colorado.gov/cs/Satellite/Treasury/TR/1194345852967. 22 Carroll, “Truth Takes Flight in Anti-1 Fight,” Rocky Mountain News. 23 Fawn Germer, “Politicos Debate Local Initiatives Voters Who Gathered at Thursday’s Forum Hear Opposing Views on Ballot Questions,” Rocky Mountain News, October 16, 1992, sec. Local, p. 32. 24 Michael New, “Fiscal Trail Blazer,” National Review Online, November 4, 2002, http://www.nationalreview.com/nrof_comment/comment-new110402.asp. 25 Michael New, “The Gann Limit Turns 25,” Investor’s Business Daily, October 28, 2004, http://www.cato.org/pub_display.php?pub_id=2871. 26 New, “Fiscal Trail Blazer,” National Review Online. 27 Ibid. 28 Americans for Prosperity, “Fact Sheet: Kansas vs. Colorado,” http://www.americansforprosperity.org/index.php?id=359&state=ks. 29 New, “Fiscal Trail Blazer,” National Review Online. 30 Americans for Prosperity, “Fact Sheet: Kansas vs. Colorado.” 31 Jeffrey A. Roberts, “Crime Scare-tactics Ad Distorts Amendment 1,” Denver Post, October 17, 1992, sec. B, p. 1. 32 Mike Patty, “Tax-Limit Plan- Friend or Foe? Backers Say Agencies Will be More Responsible,” Rocky Mountain News, November 1, 1992, sec. Local, p.44. 33 Roberts, “Crime Scare-tactics Ad Distorts Amendment 1,” Denver Post. 34 Patty, “Tax-Limit Plan- Friend or Foe?” Rocky Mountain News. 35 Sanko, “Other Issues Diffuse Spotlight on Amendment 1,” Rocky Mountain News. 36 Carroll, “Truth Takes Flight in Anti-1 Fight,” Rocky Mountain News. 37 Ibid. 38 Ibid. 39 “Pope Raves about Denver WYD Meeting,” Denver Post, December 16, 1993, sec. B, p.2. 40 Bob Radosevich, “Tax Limits Threaten Small Communities,” Rocky Mountain News, October 23, 1992, sec. Editorial, p. 73. 41 Colorado Constitution, Article 10, Section 20, http://www.i2i.org/Publications/ColoradoConstitution/cnart10.htm. 42 Patty, “Tax-Limit Plan- Friend or Foe?” Rocky Mountain News. 43 Jane Hansberry, “Denver’s Science and Cultural Facilities District: A Case Study in Regionalism,” Government Finance Review, 1 December 2000, http://www.accessmylibrary.com/coms2/summary_0286-28745831_ITM. 44 Michael Mehle, “Amendment Would Harm Arts, Leaders Warn,” Rocky Mountain News, October 23, 1992, sec. Local, p. 18; Carroll, “Truth Takes Flight in Anti-1 Fight,” Rocky Mountain News. 45 Hansberry, “Denver’s Science and Cultural Facilities District,” Government Finance Review. 46 Carroll, “Truth Takes Flight in Anti-1 Fight,” Rocky Mountain News. 47 Patty, “Tax-Limit Plan- Friend or Foe?” Rocky Mountain News. 48 Fred Holden, “A Decade of TABOR,” Independence Institute Issue Paper 8-2003 (June 2003), http://www.i2i.org/articles/tabor2003.PDF. 49 John Sanko, “Bruce, Foe Exchange Salty Words Lobbyist Attacks ‘Greed’ of Author of Tax Limit Proposal,” Rocky Mountain News, September 11, 1992, sec. Local, p. 29. 50 Sanko, “Other Issues Diffuse Spotlight on Amendment 1,” Rocky Mountain News. 51 New, “Fiscal Trail Blazer,” National Review Online. 52 Carroll, “Truth Takes Flight in Anti-1 Fight,” Rocky Mountain News.

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