When the money runs out, lawmakers can’t pass much but ‘feel-goods’

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I spent a few minutes chatting with one of our state representatives early this week, and politely inquired what we might expect to come out of this year’s legislative session, which will begin Jan. 4.

“You can expect nothing,” he said. “We have no money.”

That might be an understatement.

The recession might be officially over, but it’s unlikely that state tax receipts will begin to rebound until 2011, or even 2012. Moreover, the massive infusions of cash from the American Recovery and Reinvestment Act might not be repeated during 2010.

Absent an unexpected spike during this holiday season, economists at the University of Colorado at Boulder’s Leeds School of Business predict that sales tax receipts will decline by 12 percent during 2009, but rise by 3 percent during 2010.

They also forecast that although the state might add some jobs, the unemployment rate will rise from 7.3 percent at the end of this year to 8.1 percent at the end of 2010.

Underlying that grim statistic is a simple, inescapable fact: the state’s economy has generated relatively few jobs during the last decade. Since 2000, the state’s population has increased by an estimated 900,000 residents, but fewer than 120,000 jobs have been created during the same period.

There’s a sad conflict between the socially desirable goal of full employment and the inescapable mandate that reality imposes upon business during recessionary times — reduce costs, maintain margins. And how do you reduce costs? Shed employees.

For state and local governments, falling tax receipts create essentially insoluble dilemmas. Unlike their counterparts in, say, New York or California, Colorado lawmakers have been relatively frugal, aided by tax-averse voters who have approved initiatives such as the Taxpayer’s Bill of Rights and the Gallagher amendment.

As a result, Colorado tax rates are among the lowest in the nation, a fact for which most of us are grateful.

But thanks to these same low rates, cutting government expenditures might be proportionately more difficult. Absent identifiable pork, lawmakers find themselves obliged to trim core functions.

Last year’s cuts were somewhat mitigated by the usual legislative sleight of hand. Reserve funds were tapped, special accounts and one-time revenue were raided, and our grateful state government backfilled the budget with ARRA’s largesse.

These sources are exhausted.

The constitution requires that the state budget be balanced each year, and legislators must cut where they may. We can expect substantial funding reductions that will affect corrections, higher education, K-12 and transportation.

That’s regrettable. As the impact of the cuts become evident, the unending debate between taxophobes and taxophiles will become even more spirited.

The basic question: would we have a healthier, more resilient and faster-growing economy if we consented to higher tax rates? Are we refusing to make crucial investments in our future? Are we on our way to becoming Mississippi in the Mountains — poor, backward and badly governed?

Or are we uniquely well-positioned for a dramatic recovery, thanks to our low taxes and pro-business regulatory policies?

That remains to be seen.

But it was interesting to note that, absent TABOR and Gallagher, K-12 education would now receive an additional $3 billion annually, according to a presentation made to the legislature’s Joint Budget Committee by the Colorado Department of Education.

And where would the money have come from? Local residential property taxes, which under such a scenario would account for 89 percent of school funding.

Total funding for Colorado Springs School District 11 during 2009-10 is budgeted at $202 million, of which $57.6 million comes from local property taxes. Our back-of-the-envelope calculations indicate that, absent TABOR and Gallagher, D-11 homeowners would have seen their school taxes increase nearly threefold compared to today’s level, reflecting a mill levy of approximately 120, up from today’s 42.331.

Owners of a $200,000 residence, for example, would be on the hook for $1,910, up from $674.

That’s astonishing — and might give pause to those of us who have long believed that TABOR and Gallagher are unwieldy, unduly restrictive constitutional provisions which should never have been approved.

On the other hand, it’s difficult to ignore the impact of next year’s proposed cuts on K-12 education. Gov. Bill Ritter’s proposed budget calls for a 6 percent cut in state funding, which would translate into an $8.7 million cut to D-11. That’s one of the reasons that public schools have traditionally received most of their funding from property taxes, which are far less volatile than sales and income taxes, from which the state derives most of its revenue.

Meanwhile, the nameless (at his request) state legislator revealed his personal legislative agenda.

“All of my bills might as well have the same title,” he said. “‘Concerning an act which will cost nothing and make a lot of people feel good.’ Like custom license plates, that kind of thing. It’s all we can afford.”

John Hazlehurst can be reached at john.hazlehurst@csbj.com or 227-5861.