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September 01, 2011 06:42 PM UTC

Once Again, You Can't Cut Your Way Out Of This

  • by: Colorado Pols

The Durango Herald’s Joe Hanel reports on yesterday’s release of the second part of a study by the University of Denver on the state of Colorado’s long-term fiscal stability.

Or lack thereof.

Legislators will have to make a nearly permanent 20 percent cut to the public school budget through 2025 and all but eliminate state support for colleges, according to a study released Wednesday by DU’s Center for Colorado’s Economic Future.

To avoid the cuts, Colorado voters would need to agree to a variety of tax increases on just about everyone, including a statewide property tax for schools, a sales tax on services and a graduated income tax that would impose higher rates on people making at least $100,000.

Charlie Brown, director of the DU center, acknowledged that it will be very difficult for lawmakers to take his advice…

Cuts, new taxes or a mix of both will have to fill the gap, the study said.

“We think the problem is of a sufficient magnitude that the solutions are going to be very difficult. It’s going to be very tough to either cut our way out of this or tax our way out of this,” Brown said.

Although the state’s General Fund will grow as population grows over the next fifteen years, Colorado’s tax structure–amounting to a total tax burden for citizens and businesses well below the national average–is expected to continuously fall short of the required income just to maintain services at current levels. Again, we’re talking about amounts that already hover near the bottom of state rankings. Meaning that without tax increases, even more service cuts, or a combination of the two, we can’t balance the budget at any point in the foreseeable future.

By 2025, it’s a gap between need and income of $3.5 billion.

Charlie Brown of the DU Center for Colorado’s Economic Future is absolutely right about the political difficulty of any solution, cuts, taxes, or both, to the structural and inevitable budget shortfalls that lie ahead. The only thing we can say is that in a state where funding levels are already so low, directly related to the state’s low total tax burden…balance suggests a particular direction things need to head in. If the DU study’s numbers prove accurate, we’re going to arrive at a day soon where conservatives who apoplectically freak out over the small five-year stopgap proposed by Sen. Rollie Heath in Proposition 103, or any suggestion for solving this long-term problem other than more cuts, are in a politically untenable position.

Because if the signposts on the road to ruin don’t motivate voters, the pain to follow just might.


43 thoughts on “Once Again, You Can’t Cut Your Way Out Of This

  1. expect stuff like logic or working together with these people? Time to put all the energy and focus, money and messaging into getting rid of  GO(T)P state and federal level legislative majorities and executives, not into fantasies of bi-partisanship. Wisconsin Dems are showing us the way.

  2. This relates to the conversation Republicans in the legislature have been trying to start for several years. Colorado needs to figure out what the core functions of government are that we need to pay for, and then figure out a way to do that. What the DU study says is that government must shrink, beyond what is conceptualized today, in order to balance the budget.

    Of course, the people have repeated rejected tax increases, and approved TABOR to give them the final decision. So in some ways, we have guidance from the people, and it’s not in favor of taxing our way out of the hole. Government must tighten its belts like every family in Colorado.

    1. Nearly all of the state budget goes to Medicaid, k-12 education, higher education and prisons. Our current tax structure cannot sustain all four of these. So which of these do Republican legislators suggest we get rid of?

      And the People have not repeatedly rejected tax increases. The reality is that the People really haven’t been asked to pay more in taxes.

      TABOR was repeatedly rejected and got lucky once, 20 years ago. If anything, the passage of Ref C showed that the People are open to reforming TABOR and the state’s tax structure

      1. Diverting even more money from the private sector sucks the life out of economic growth. That kills jobs and the tax revenues they produce.

        Growing new programs and extending tired old handout schemes puts you into a death spiral, heck you can see it today within the DU study.

        The fact is Amendment 23 has failed k-12, worse it lead Colorado to believe nothing more then throwing money at education would fix the problems. The graduation rates and outputs are worse, even with all the money diverted without real reforms.

        Gallagher is a failed experiment, however, what homeowners and renters will vote to increase their taxes without any real reform of government itself? Worse businesses will get crushed with any increases in this area.

        What was it Thatcher or Reagan said about liberals and their big government policies …. Eventually you run out of other people’s money?

        I guess you’re left with hiking income taxes, a millionaires surcharge and extending sales taxes onto services. Good luck.

        1. Find one country, just one, that became an industrial power without a strong well funded public educational system. The biggest problem the high-tech industry faces is not taxes, it’s a lack of qualified people to hire.

        2. It was VooDoo Economics then and its VooDoo Economics now, as Reagan’s one time budget director acknowledged, Poppy Bush acknowledged and the last three decades have demonstrated.

          Why is the only sector in the nation making money (still hand over fist) the Owner Class?  And, no, I don’t mean that little bungalow your Mommy owns, with your special basement room  …I mean the 20% that own 50% of our nation’s wealth, or–even more so–the 5% who control 20%…  I mean, as your beloved sacred ‘job creators’ they kind of suck, right?  They have been building wealth and profit these last few troublesome years…but where are the jobs?  Oh wait, I know!  Our desire for clean air and water is preventing them from creating them!  If ONLY we had labor laws like Burma…

          You are OK with relegating ever increasing numbers of a once vibrant middle class into serfdom?  That is what Reaganomics and its batshit crazy antecedent “Drown-it-nomics” have wrought.    

          Like poor Orrin “I’m a Tea Partier Too!” Hatch–now angrily demanding more federal money to build a water project first sketched out in the bad ol’ Dominy Days, or poor drenched Christie learning that the mindless, knee jerk rhetoric is not only l,limited to Obama…as they say: what goes around, comes around.

          Enjoy your time polishing Bill Koch’s wild west riding boots…

        3. You argue that raising taxes reduces tax revenues. But, that would mean that no taxes would maximize tax revenues. Explain how that works?

          I agree that taxes take money out of the private sector that could otherwise go toward a private company’s profits. And, IF there was sufficient consumer demand that company MAY use the extra money to hire more staff. However, the company receives economic benefits for the taxes it pays such as maintained roads for transporting products, police protection against thieves, anti-trust enforcement to prevent price gauging by suppliers, an educated labor pool, intellectual property rights, etc. All of these government-provided services increase a company’s productivity.

          You act as though we have some authoritarian dictator robbing us of our wealth and property. You ignore the fact that our Constitution gives the People the power to set tax rates through our representative government. A majority of voters continuously finds value in paying taxes and the government services they pay for. Otherwise, they would elect representatives to eliminate taxes and government programs.  

          1. Money spent to hire employees is an expense and therefore is deducted pre-tax.  If an employer wants to hire someone, lower taxes won’t affect their decision.  In fact, higher taxes might encourage the company to actually spend their money.

            1. I’m not saying this to argue for lower taxes because I’d much prefer we adequately fund education. But my company has a rule that we have enough cash on hand to cover 6 months of costs with no revenue. So hiring another person means we need to put some additional after tax profit in the bank.

              But the bottom line is as you said – it not only has little impact on reinvestment but encourages it more than discourages it. The problem most companies face is not lack of cash, it’s lack of demand.

              1. The problem most companies face is not lack of cash, it’s lack of demand

                Just because a company’s taxes go down doesn’t mean they will be adding employees. Companies add employees because their customers are demanding increased productivity and supply. If there is no unmet demand a tax cut will only add to overall profits. It won’t create additional jobs.

    2. TABOR lost 9 times before it won.

      So, according to you , :the people” who voted yes in 1992 speak for us forever.

      Sure, let’s have a conversation about what are the necessary functions of gov’t and to what level we prefer they be funded, and how to generate that revenue.

      SIlly one liners about tighter belts are meaningless. In fact, it implies that in periods of rising revenues, gov’t should expand the budget and scope. Whoops, except not in Colorado where 53% of the voter turnout in 1992 have already decided for us.

      Votes have rejected tax increases. And they have also  approved spending increases. – A2 for example.

      But ok- let’s have the  conversation about the necessary functions of gov’t.

      You write the diary, I’ll use my FPE alum status to get it front page.

      – public schools: P-20

      – disaster relief

      – roads and bridges

      – prisons

      – water

      – parks and rec

      – libraries

      – open space

      – police

      – fire

      – paramedics

      – courts

      – welfare: SNAP, unemployment, medicaid, etc

      – Invesco MH

      – RTD

      – etc, etc, etc

    3. Government must tighten its belts like every family in Colorado.

      My family tightened its belts and we went from a size 32 to a size 28 – just like that!  It was really exciting to see how easy it was to trim the fat.

      Of course, all our stomachs were displaced. Not a big deal for three of us, but my youngest got some pretty serious gastroenteritis because of it. He pulled through after some serious friggin’ pain – but, hey, tight belts!!

      Interestingly, soon after tightening our belts, our kidneys stopped working well. Weird side effect that we didn’t think of at the time of tightening. Our renal tubular acidosis and kidney malfunctioning is secondary though – tight belts!!!

      I could tell you more of the benefits of our tightening, but you have better things to do – like tighten your own belt!

      You are right, ArapaGOP. Tightening belts is good for everyone and once the government tightens their belts, things will work out just as well for them as it has for my family. Thanks for that. It helps to hear it from you and all the other believers in belt tightening.

      Without you I’d still be a size 32! Shameful really if you think about it too much…

      Anyway, God bless the tighteners.

      Tight Belts!! Rah, Rah!!


    4. Families don’t JUST tighten their belts. They may cut a few expenses, but many also find new sources of revenue like working extra hours or getting a second job. Some also take on a little extra debt now in hopes of having more income to pay it down in the future (an option Colorado doesn’t have).

      We’ve tightened our belts enough. Now it’s time for the state to get a second job. We need more revenue.  

    5. So, here’s what you got:

      When the people finally pass TABOR, they have spoken, and always shall it be so!

      When the people pass Amendment 23, they were misled.  RTD. Mile High. Gallagher. All misled.

      So all you got is disdain for voters,  no idea how to reduce gov’t nor how to define its core function.

      What if we defined the core functions – the necessary or desirable tasks and functions we want gov’t to perform and we still don’t have enough revenue?    Is there ever a time to increase tax rates?  When?

  3. Coloradoans face local taxation like no other State. This is often neglected by tax hungry at the State level.

    Also, why would we want to be more like other States? They suck.

    1. Every time I see one of those “Taxorado” bumper stickers, I realize that the Dem party is just as bad at messaging on the state level as the fed level.  Our taxes are nothing compared to other places, when you look at the total actual tax burden.  Texas may trumpet it’s no personal income tax, but they have higher sales tax.  Oregon has no sales tax, but higher property and income taxes. different states have different models, but any way you look at it, Colorado is near the bottom.

      Even at the local level, things are way different, even in Colorado.  When I lived in Jeffco, my property taxes on a 90,000 condo were about 900 per yer.  When I move to Salida and bought a $100k house, proeprty taxes were $453. per year.  Compare that to my new neighbor who had moved from Illinois, where his property taxes were at the $4k annual level.

      Yeah Colorado taxes sure are high…


  4. It would be interesting to see how much Tax Increment Financing is costing the state every year.

    Despite efforts to curtail abuse of urban blight designations on farm land, the Aurora City Council recently approved designating the Gaylord property near DIA as “blighted” to get $150 million (correct me if I’m wrong on the amount) of TIF to give to the developer.  Most of this comes from the school district property taxes which are backfilled by the state.

    This is just one example where communities enrich themselves at the expense of the state by doing questionable URA’s.  Other examples include Centerra in Loveland, the Town of Timnath, Broomfield/Westminster with their new malls and interchanges, the Lionshead redevelopment in Vail, the ski base area at Steamboat, etc.

    On Tuesday night, the Fort Collins City Council is voting on declaring a big chunk of College Avenue (the main drag) as “urban blight”, which when added to the existing North College URA and the Downtown Development Authority, would mean almost all of College Avenue would be designated as a “blighted” urban area.

    Of course, there isn’t any real blight such as inner city slums, but cities have learned to game the system to get their redevelopment efforts stimulated by taking tax revenues from counties and school districts (ultimately backfilled by the state general fund – reducing funds available for education, prisons, and other state services.

    I think the state legislature should pass legislation that would dramatically reduce the ability of communities to use Urban renewal or pass legislation that would eliminate the state backfill of TIF to school districts.  By doing so, school districts would object to the vast majority of shady urban renewal TIF schemes and the abuse would be eliminated.

    As it stands now, cities get all the benefit from URA’s without any downside and there is no one looking out for the interests of state taxpayers footing the bill for backfilling the school funding.  

    This is truly a system without any checks and balances that is helping to bankrupt the state.

    Colorado may have some of the lowest K-12 per pupil spending and lowest higher education funding, but we have some of the nicest TIF funded malls, interste interchanges, ski areas, and downtowns.

    Doesn’t that tell you where the states priorities lie?

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