16 March 2006

Colorado's Flawed Constitution

The Problems.

The Colorado Economic Futures Panel, a group of sixteen state leaders (two DU deans, a small newspaper publisher, a hospital CFO, and senior executives of a dozen private businesses ranging from small to medium to Fortune 500 in size), funded by ten of the leading foundations in the state, working on a non-partisan basis established by the University of Denver, released its final report in January. In its view, the biggest barrier to Colorado's economic future is its constitution, which has lead to: "A tangled, haphazard fiscal policy process; the weakening of representative government; and an erosion of public trust."

What is wrong, in the panel's view?

1. Too much fiscal policy is frozen in the state constitution (e.g. the state debt limit, the Gallagher Amendment, TABOR and Amendment 23), rather than more flexible statutory law.

2. The initiative and referendum process, which primarily comes in the form of state constitutional amendments, has proven a poor way to make fiscal policy, yet there are few incentives not to go this route, in favor of more flexible statutory change.

3. Term limits for state legislators have actually increased the average tenure of state legislators (from 5.2 years to 6), and has left turnover rates virtually unchanged, while depriving the general assembly of seasoned legislators, and causing the Speaker and President of the State House and State Senate to change at least every two years since 1998, and has lead to similar churning in the important joint budget committee. It notes that four-fifths of those involved in the legislative process believe that as a result:

* Leaders are weaker;
* Partisanship is up;
* Civility and procedural order have suffered;
* The clout of lobbiests, staff and the governor has increased;
* Legislators are less inclined and able to address the state's major problems in a long term fashion.

4. A 20-1 disparity in per capita combined property and sales tax bases between counties, accompanied by the absence of revenue sharing measures, has produced destructive tax base competition (leading to annexation battles, poor land use planning, sprawl and lawsuits), while doing a poor job of funding services in areas with small tax bases.

In the view of the panel: "Essentially, the state is operating in a 21st century economy with a mid-20th century tax system. . . . A comprehensive analysis of Colorado's structure of state and local government and taxes has not been done in nearly 50 years." (Emphasis in original).

5. The sales tax involves a patchwork of 299 different taxing jurisdictions with different rules which are hard for businesses operating statewide to comply with, and the sales tax base has narrowed, while the economy has grown primarily in the non-sales taxes service sector.

6. The 4-1 disparity in tax rates between business and residential property under the Gallagher Amendment has lead to a reduced reliance on property taxes by municipalities, and the personal property element of property tax has discouraged equipment reliant industries such as manufacturing, in favor of a retail economy (since inventories are not subject to personal property taxes).

7. The income tax has proven a volatile source of state funds and by being based strictly on federal law, has ceded control of state fiscal policy to Congress.

This identification of the problems with existing Colorado public sector fiscal policy is on target.

Is A Solution Politically Possible?

The report doesn't take much time thinking about how to overcome these barriers in light of political reality, however.

Even with support from supermajorities in both houses of the General Assembly, Governor Owens and the Democratic party's legislative leadership (particularly the tireless work on the part of Democratic Speaker of the House Andrew Romanoff), and near unanimous backing from the non-profit sector for the compromise to address the bind constitutional limits on fiscal policy had placed on the state budget that was Referenda C and D in Colorado, voters just barely approved Referendum C (with 52% of the vote) and narrowly voted down Referendum D (50.62% of voters were opposed to the measure). Both of the Republican Party's gubinatorial candidates, Marc Holtzman and Bob Beauprez, both encouraged particularly by the anti-tax Independence Institute, opposed the deal. Holtzman did so fervently, and Beauprez did so quietly. Yet, the ultimately adopted Referendum C was a quite modest measure, merely tweaking TABOR and Amendment 23 on a mostly temporary basis.

The last 30 years of history shows considerable reluctance on the part of voters to overhaul the system to strengthen the role of elected officials in the system or promote good government, and considerable enthusiasm for ignoring legislative guidance on fiscal issues at the ballot box, while often implementing fiscal policy by initiative.

Every legislative referendum (letters are always referenda, numbers assigned to referenda are expressly noted below, other numbers refer to initiatives) has broad bipartisan backing, by definition, but many such proposals fail. In 2003 voters rejected a plan to issue bonds for water projects (A). In 2000 voters rejected a legislative proposal to use excess state revenue for math and science grants (F). In 1998 voters rejected a legislative proposal to retain state revenues for capital projects (B). In 1996 voters rejected a TABOR exemption related to unemployment insurance (D). In 1995 voters rejected a propose to give the state the power to enter into multiyear prison contracts without out of state firms (A). In 1993 voters rejected a proposed legislative reinstatment of a tourism tax (A). Other proposals have been approved, but the legislature does not have a great batting average with the public on fiscal issues at the ballot box.

Voters have set fiscal policy with initiatives in 2004 (#35) to pass increased tobacco taxes to pay for health care costs through a constitutional amendment, and in 2000 to mandate K-12 education spending (#23). In 1992 voters adopted TABOR (#1) (after defeating similar proposals in 1990 (#1), 1988 (#6), 1986 (#4) and 1976 (#10)) and using lottery revenues for parks and wildlife (#8). In 1982 voters passed the Gallagher Amendment (Ref. #1), and in 2003, voters soundly rejected an effort to limit the effect of the Gallagher Amendment (#32).

Term limits have been popular. In 1998 voters approved voluntary term limits for members of Congress,although this was held to be not binding (#18). In 1996 voters favored mandatory term limits for members of Congress, which were held unconstitutional, (#12), and in 1990 (#5) and 1994 (#17) voters adopted state term limits. Voters also rejected a referendum to end term limits for District Attorneys (A) in 2002. Campaign finance reform has also been popular and were adopted in 2003 (#27) and 1996 (#15). And, so have efforts to control the legislative process. In 1982 voters favored limiting the legislature to 140 days (Ref. #4), and this was further narrowed to 120 days in 1988 (C). Voters in 1988 also adopted a measure banning binding caucus votes and requiring that the committee process be observed (#8).

An effort to allow the largely ministerial office of county surveyors to be appointed rather than elected failed in 2000 (C). Likewise, personnel system reform, which in each case would give elected officials somewhat more authority to appoint officials has been rejected by voters in 2004 (A), 1986 (Ref. #1), and 1976 (Ref. #4), although in 1984 voters approved the political appointment of the insurance commissioner (Ref. #1). These can be seem as efforts to keep voter power in place while limiting the power of elected officials once elected.

Generally voters have favored expanding the role of direct democracy. Voters have rejected a proposal similar to the one offered by the Colorado Economic Futures Panel to make it harder to pass constitutional amendments at the ballot box in 1996 (A). Voters, in contrast, have favored proposal to require referenda on municipal franches in 1986 (Ref. #3), and in 1980 required greater voter approval of annexations (Ref. #3) and making the RTD board more accountable to voters (Ref. #6). In 1990 voters also favored moving to a presidential primary system (Ref. #2), rather than a caucus process that did not involve the voters, although in 2002 voters rejected a proposal to greatly curtail the role of the caucus process (#29).

Not all limitations on voter power, however, have failed, particularly where the limitations are regulatory rather than ending a power entirely. Voters favored a single subject limitation on initiatives and referenda in 1994 (A), and imposed a review and comment stage upon the process in 1980 (Ref. #1). Similarly bills to impose qualification requirements on elected coroners in 2002 (C), and elected sheriffs in 1996 (C) passed. And in 1982 voters endorsed giving a judicial discipline commission greater power to discipline sitting judgees even without losing a retention election (Ref. #3). And, not all efforts to expand voter powers have prevailed. Voters rejected a 1996 proposal to expand petition powers (#13), for example, and repeated rejected TABOR like proposals before it was finally adopted.


Short of a state constitutional convention, that would allow a top to bottom overhaul of the state's constitution, any effort to remove the barriers Colorado's constitution puts in the way of our economy, is going to have to be more piecemeal and more subtle than the more obvious approaches to dealing with the problems identified by the Colorado Economic Futures Panel. Getting fiscal policy out of the state constitution, and a broad effort to make it harder to pass initiatives or referendums that favor constitutional amendments will be a very hard sell with the voters. Ending term limits would also be a very hard sell.

One can imagine voters approving discrete adjustments to particular taxes that don't constitute broadside attacks on current fiscal limtations in the state constitution, and one can imagine relatively subtle procedural limitations on ballot issues that discourage bad fiscal policy becoming law (e.g. imposing a revenue neutrality requirement on all tax and spending ballot proposals with a significant fiscal impact), but fundamentally, Colorado voters have a deep seated distrust of their elected officials that has shown up consistently in voter reactions to the ballot proposals that come before them.

The Gordian knot that any reformer has to deal with is how to win that public trust from voters, so that voters will be willing to give elected officials the tools that they need to govern responsibility in a manner that would earn the public trust.

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