Colorado voted to take a time-out from its 13-year experiment with squeezing the growth of government, making strict spending caps a tougher sell in the numerous states where the limits are expected to be a major 2006 election issue.
To promote smaller government and lure conservative voters to the polls, national anti-tax groups are launching campaigns in nearly half the states to put strict constitutional spending limits before voters next year.
Already, Ohio is slated to vote on a ballot measure in 2006 that copies the restraints of Colorado's rigid spending cap, and supporters in Maine have collected enough signatures to seek a similar vote. Spending limits are expected to be debated in almost half the states, with Arizona, Kansas, Maine, Ohio, Oklahoma, Oregon, Nevada and Wisconsin seen as chief battlegrounds.
California will vote in Nov. 8 on a spending limit measure that would give more budget-cutting power to Gov. Arnold Schwarzenegger (R), but surveys show support is lagging.
Critics of Colorado's constitutional spending constraint -- by far the nation's strictest -- claimed a major victory Nov. 1 when 53 percent of Coloradans voted to lift temporarily portions of the state's landmark Taxpayers' Bill of Rights (TABOR), forfeiting an estimated $3.7 billion in tax refunds over the next five years.
"The only state that has had to live under TABOR wants to suspend parts of it. That sends an important message to other states. ... I think it may send the message that people don't want rigid government," said Iris Lav, deputy director of the Center on Budget and Policy Priorities , which focuses on policies that affect the poor.
Although Colorado's vote gave TABOR opponents potent ammunition to try to defeat measures in other states, TABOR's setback in Colorado may not be the death knell it might seem.
"Win, lose or draw, this strategy is already on the map for the other side. They're not going to slow down. ... This train has left the station for 2006," said Kristina Wilfore, executive director of the Ballot Initiative Strategy Center , which supports progressive state ballot measures.
Grover Norquist, president of Americans for Tax Reform , recently told the National Journal that limiting government spending -- in part through state initiative campaigns -- is a central aspect of Republican political strategy.
Norquist told Stateline.org that Colorado's vote would not impede efforts to install strict spending limits in other states. He said TABOR opponents were able to capitalize on a unique set of circumstances in Colorado to claim a narrow victory. "If they think they can get that perfect storm in other states, they're kidding themselves," Norquist said.
The newest proposals were written to avoid the unforeseen pitfalls that forced Colorado to make deep budget cuts to popular programs while issuing refund checks to taxpayers.
"The version of TABOR being promoted around the country now is an improved version of what they have in Colorado," said Ed Frank, spokesman for Americans for Prosperity , another national anti-tax group that is pushing TABOR.
Model legislation developed by the American Legislative Exchange Council , a membership organization of conservative state lawmakers, would allow states to store one-fifth of excess revenue in a rainy day fund that the state could tap during tough economic times rather than make the severe budget cuts lawmakers were forced to make in Colorado.
Colorado's TABOR amendment since 1992 has constitutionally limited increases in state revenue to population growth plus inflation. Excess revenue -- about $3 billion to date -- is refunded to taxpayers. Colorado also limits annual increases in the state operating budget to 6 percent and requires voter approval for all tax increases.
A companion measure on the ballot Nov. 1 that would have authorized the state to borrow $2.1 billion failed by a margin of less than 1 percent.
Colorado's measure was intended to pace the growth of state government with the economy but has had the unintended consequence of actually shrinking Colorado state government relative to the economy.
In 10 of the states where spending and revenue cap proposals are expected next year, citizens are empowered to enact law through the initiative process. Spending cap supporters in several of those states (Alaska, Arizona, Idaho, Maine, Michigan, Missouri, Ohio Oklahoma, Oregon and Nevada) are working to bypass the legislative process and put the proposals to a direct vote this year.
Twenty-seven states already place some sort of ceiling on revenue or spending, according to the National Conference of State Legislatures , a Washington-based bipartisan organization of state lawmakers. But Colorado's limit is by far the strictest.
The wave of spending and revenue cap proposals is coming at a time when states are just beginning to claw their way out of the budgetary red. After four years of severe budget crisis, 23 ended fiscal 2005 with a surplus, according to the NCSL. State budget officers, who have closed a $235 billion budget gap since 2001, now expect 2005 surpluses totaling $35.7 billion.
The fiscal crisis hit Colorado particularly hard because of the state's strict limits on state government revenue. In Colorado, fallout from the economic decline included a 16 percent drop in state revenues from 2001 to 2003, resetting the base from which TABOR's refund mechanism is triggered so low that some questioned whether the state could ever dig itself out of the hole.
"It amounts to an annual tax cut," said Brad Young, a former Republican member of the Colorado House who chaired the Legislature's Joint Budget Committee. "Taxes are never low enough."
That's why the model legislation ALEC has developed includes a "budget stabilization fund." Instead of refunding all surplus revenue to taxpayers, 20 percent would be diverted into a special fund that the state could tap during a fiscal downturn. The refined proposals also would change the triggering mechanism to make refunds less likely during economic crises.
"The idea is you can both constrain the growth of government and at the same time stabilize the budget over the business cycle," said Barry Poulson, an economics professor at the University of Colorado who developed ALEC's model legislation.
But critics say the stabilization fund would do little to help states maintain services. Had such a proposal been in place in Kansas since 1993, $8.4 billion still would have been cut from state services, according to a recent report from the Center on Budget and Policy Priorities.
In part because it borders, Kansas already is shaping up as a likely spending cap battleground. Colorado Gov. Bill Owens (R) personally visited Kansas last year to tout the merits of TABOR amendments as a mechanism for controlling government growth.
Although he still supports TABOR as a whole, Owens broke rank in 2005 with his Republican counterparts and began pushing for the temporary relaxation of some of its provisions after Democrats won control of the Colorado Legislature in 2004.
Lawmakers in 23 states considered proposals similar to Colorado's Taxpayers' Bill of Rights in 2005, according to the Center on Budget and Policy Priorities. Those states are Alaska, Arizona, California, Idaho, Kansas, Maine, Maryland, Michigan, Minnesota, Missouri, Nevada, New Hampshire, New Mexico, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Virginia and Wisconsin.
Although last year's proposals all died committee, nearly all are expected re-emerge this year. States require voters to approve changes to their constitutions, so state lawmakers would have to refer the proposed amendments to statewide ballots.