Carol Hedges, senior policy advisor and director of the fiscal project of The Bell Policy Center, a nonpartisan research group in Colorado, made the following observations and recommendations regarding AJR 55 during a Feb. 11 appearance before the Wisconsin Counties Association’s Legislative Exchange.
Her advice:
- Avoid rigid formulas — everything always changes.
- If we must have a formula, link it to overall economic activity, not CPI.
- If we must have a formula, avoid a "ratcheting effect" that constantly reduces the revenue base of state and local governments.
- Keep it simple — don't tie your hands.
- Honor government commitments — don't tinker with any formula.
CPI, or the Consumers Price Index, is a poor index to control the size of government, she said, because it does not measure the economic activity that drives the cost of government services.
There is a difference between a formula and a cap, and a cap on the size of government is a more reasonable limit on government than a formula that ratchets government down, she said.
Hedges said AJR 55’s ratcheting effect is "nearly identical" to what has shrunk Colorado government 30%, from 7.35% of Colorado’s personal income in 1992 to 5.12% today.
A big problem with AJR 55, she said, is that it is more restrictive than Colorado’s "Taxpayers Bill of Rights" (TABOR), in requiring state government to reduce tax rates if revenue exceeds inflation plus population growth. In Colorado, the only requirement is that the state refund money collected over the limit.
Hedges said 72% of Coloradans support the right to vote on taxes, but 64% support changing TABOR. Her overall advice for Wisconsin: avoid the weaknesses of TABOR — upon which AJR 55 was patterned — that have become evident in Colorado.
There is no evidence that TABOR drove Colorado’s economic growth in the 1990s, contrary to the claims of supporters, and there is no reason to hope a Wisconsin version would have that effect here, she said.
The big shortcoming that TABOR and AJR 55 share, Hedges said, is that they create an artificial disconnect between taxes and the delivery of services.
| "A debate that separates what you pay
from what you’re receiving is not a very fair debate," Hedges said. While Coloradans are paying less for government under TABOR, they’re also getting much less, she said. Hedges said state government can’t shrink its prison system — though it has cut alcohol and drug abuse and other prison programs and transformed prisons from correctional institutions to warehouses. It also can’t shrink its already meager Medicaid program much further. And a recent constitutional amendment mandates 1% per year increases in state aid for K-12 education — 42% of Colorado’s state budget. As a result, public health, including childhood
immunizations, higher education and other programs that constitute 27% of Colorado’s
state budget have taken all the hits, she said. |
|
Other effects that Colorado has experienced that Wisconsin might mirror:
- Colorado state and local construction contracts were reduced $350 million as a result of TABOR.
"Guess what part of our economy is lagging? Heavy equipment and construction," Hedges said.
- Reduced bond ratings . Standard & Poors downgraded Colorado because of the ratcheting down of the state’s tax base.
- A 25% cut in spending for mental health.
"This is the path of Colorado. You can choose to follow it if you would like," Hedges said.
She said she supports the right of the public to vote on the level of taxation, but debate on the issue has to include discussion of state and local services.
"Have a conversation about how much service government should provide and decide on how large taxes must be to pay for those services," she urged.
"This shouldn't be about public opinion polls," she said. The discussion, Hedges said, should be about what people in Wisconsin want for the future of their state.
During a question and answer lperiod afterward, Marinette County board chair Mark Anderson got a round of applause by decrying the "sound bite politics of TABOR" and urging legislators to obey the letter and spirit of Wisconsin's Open Meetings Law rather than continue to redraft AJR 55 in secret.
"This isn't happening in the public eye," Anderson said. "We must request and demand that this debate take place in public."
— By Rich Eggleston