As Colorado’s budget faces a $1 billion gap for the upcoming fiscal year and with no end to the deficit in sight, now may be the time to reset the state’s spending cap, Speaker Julie McCluskie said Tuesday.
The Taxpayer’s Bill of Rights, or TABOR, restricts growth in state spending using a formula based on population growth and inflation. However, spending has outpaced the constitutional spending cap, particularly as mandatory costs — chiefly Medicaid — have skyrocketed past earlier projections.
McCluskie, a Dillon Democrat and one of the most influential voices in the state, said the cap doesn’t reflect the higher rates of inflation in areas where the state spends the most, such as education and health care. Those costlier obligations, in effect, eat away at the state’s ability to pay for other things because it’s all competing for the same TABOR-restricted pot of money.
Meanwhile, the flood of pandemic-era stimulus money, which kept the state flush the past few years, has dried up. Inflation and population growth have slowed. That has left state lawmakers grappling with a $1 billion shortfall in the $16 billion general fund for the fiscal year that begins July 1.
And it has nonpartisan budget analysts warning in bolded letters in a recent memo: “The budget appears to be on an unsustainable path.”
Even without a recession, the state would exhaust its reserves in a matter of years, the analysts warned.
“There is no shift, there is no turning point where the structural challenges we are facing are going to disappear,” McCluskie said during a meeting with reporters at the Capitol Tuesday. “So we’ve got to figure (it) out if we want high-quality education, if we want to keep tuition low, if we want to make sure our seniors and low-income folks — who have no other access to insurance — that they have medical care.”
She invoked Referendum C — a successful, bipartisan 2005 ballot measure that paused the spending cap for five years and then reset it — as a possible starting point for reform, though she noted that this year’s budget hole is the focus now.
“(This shortfall) is the beginning of what I think needs to be a much deeper dive into the structural challenges we are now facing as a state,” McCluskie said. “And just as state leadership — executive and legislature and business and industry and other sectors — came together to look at reforming the cap with Ref C, this is maybe a time for us to be having those conversations again.”
The TABOR spending cap has long been a concern by Democrats and fiscal liberals in the state — even as voters in recent years have rejected reforms to it.
In 2023, the most recent example, voters resoundingly shot down Proposition HH by nearly 20 percentage points. The measure was primarily aimed at property taxes but also would have ratcheted up the state spending cap for education funding. In 2019, voters rejected Proposition CC, which would have ended the spending cap and associated tax refunds, by 7 percentage points.
Any formal proposals to adjust the TABOR cap would surely run into fierce opposition from critics who want the state to keep spending in check, and tax dollars in resident’s pockets.
Sen. Barbara Kirkmeyer, a Weld County Republican and member of the Joint Budget Committee, has been among the fiercest critics of state spending habits as her committee tries to plug the $1 billion hole. On Tuesday, before McCluskie made her comments, Kirkmeyer argued against a bill that would increase the number of judges because of its $4 million price tag.
The state “cannot spend (its) way out of a structural deficit,” she said on the Senate floor, while highlighting the sharp cuts the budget committee wrestled with every day.
In a text message to The Denver Post after McCluskie’s comments, Kirkmeyer said they reflect “a crisis of priorities” among Democrats.
“Instead of being honest about the more than 450 bills they passed, creating billions in ongoing expenses and adding over 5,000 new state employees, they are now looking to take even more money from hardworking Coloradans rather than making the tough choices needed to balance the budget,” Kirkmeyer wrote.
In a statement, a spokesperson for Gov. Jared Polis said his budget proposal could put the state on a sustainable path — and notably did not bite on whether the state should look at raising the TABOR cap.
“The state budget is tight this year and the JBC has difficult decisions to make to ensure that our budget is balanced and sustainable,” Eric Maruyama, the spokesperson, said. “The Governor is confident (that) with smart action this year, like what he proposed in his balanced and sustainable budget plan, we can avoid many cuts in the future.”
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