It is an acronym that stands for Taxpayer Bill of Rights and refers generally to a one-size-fits-all measure that caps state and local government spending and revenue to a defined base amount, adding inflation and population. Referenda are required to exceed the capped amounts. Referenda are also required for any new or increased tax or fee. Finally, often these measures require some form of refund for the over-collected revenues and penalties for the over-spent amounts.
In Florida, several TABOR-inspired proposals are being discussed by the Taxation & Budget Reform Commission, the Governor, and the House of Representatives. In fact, the Taxation & Budget Reform Commission is deliberating over several drafted and active proposed constitutional amendments, each with slightly different approaches to the key TABOR features. Generally, each of these proposals contains some form of the following features:
• A constitutional, rather than a statutory measure
• Stringent limits on the growth in spending equal to inflation and population growth
• The spending limit would be applied to the local and the state governments
• Some surplus revenue would be allocated to a budget stabilization fund; thus, constraining the growth in government and stabilizing the budget
• Some surplus revenue would be allocated to tax relief, including property tax relief
• Voter approval would be required for any increase in taxes, debt, or fees or for any expenditure of surplus revenue
TABOR History
The idea for limiting state government revenues may have begun with a 1972 task force in California created by then Governor Reagan, the “Tax Reduction Task Force.” Its original proposal failed at the ballot box but enough political and ideological momentum was created for California to still become the first recognized state to adopt a tax limitation measure that prohibited governmental spending from annually increasing more than population growth plus inflation, and that mandated a refund of any revenues collected in excess of the limit. That measure passed in 1978 and is known as “Proposition 13,” sparking a national movement. By 1979, five states had adopted some form of tax or spending limits.
Then, in 1992, Colorado voters adopted the first limitation to be labeled as a “TABOR” measure. Despite the arguable failure of TABOR in Colorado (the people of Colorado have suspended TABOR for a five year period to help the state recover), national momentum for the ideas behind TABOR abounds. In 2005, for example, TABOR proposals were introduced in about half of the states; but they all failed, either in the legislature, for legal reasons, or at the ballot box. Based on January 18, 2007 data, TABOR constitutional proposals, either through the legislatures or ballot initiatives were pushed in 16 states during 2006: Arizona, Kansas, Maine, Maryland, Michigan, Minnesota, Missouri, Montana, Nebraska, Nevada, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, and Wisconsin. In five of these states, signatures were turned in for initiatives, but the initiatives were thrown out by the courts. In three states, TABOR initiatives did make the ballot, but were defeated (Maine, Nebraska, Oregon).
TABOR in Colorado Art. 10, Sec. 20, Colorado Constitution
TABOR's basic provisions:
Voter approval for tax increase
Voters must approve in advance any new tax, tax rate increase, mill levy increase, extension of an expiring tax, or a tax policy change that would result in a net revenue gain.
Revenue limits
Prohibited:
• New or increased real estate transfer taxes
• New state property taxes
• New local government income taxes
• All taxable net income is to be taxed at one rate.
Government spending limit
Increases in spending from one year to the next are limited to a formula of inflation plus the percentage change in population.
Revenue refunds
If revenues not exempted exceed the spending limit formula, the excess is to be refunded the next year, unless voters approve a revenue change.
Effect of TABOR in Colorado
Since 1992, public services have deteriorated significantly in Colorado. For example, between 1992 and 2001, Colorado declined from 35th to 49th in the nation in K-12 spending as a share of personal income. Colorado dropped to 48th in higher education funding as a share of personal income -- down from 35th in 1992. Between 1991 and 2004 -- a period in which the percentage of children who are uninsured declined nationally -- the proportion of low-income children who lack health insurance in Colorado doubled. Colorado now ranks last in the nation on this measure. In addition, between 1992 and 2002, Colorado declined from 23rd to 48th in the nation in access to prenatal care, a sign of funding shortages in local health clinics.
The conditions in Colorado deteriorated to a point where, in November 2005, its voters voted to suspend the TABOR amendment for five years so that the state could begin restoring cuts in public services and avoid making even more drastic ones. Yet organizations dedicated to the TABOR movement are still pushing for the adoption of TABORs in other states.
The Intent and the Effect of TABOR
Proponents of TABOR promote its measures as preventing government from growing faster than the economy, thereby preventing the size of government from growing beyond what its citizens can afford. The argument is that by limiting revenues and spending, government will necessarily become more efficient and more productive, within its available funds.
Often proponents of TABOR assert that government should operate more like business. In private enterprise, a business owner must either provide its product or service at a price that consumers are willing to pay, or the enterprise will go out of business. Government, however, is not ruled completely by market forces; government often provides those things for which there is little or no market and things that private enterprise does not want to or could not provide (e.g., indigent health care, fire protection, growth management, emergency management, transportation systems, to name a few). Furthermore, government cannot go out of business. During economic downturns, when, under the analogy government should be “tightening its belt” to improve “the bottom line,” the demand on expensive, safety-net programs, like Medicaid, affordable housing, and education actually increase as more and more people lose jobs. Clearly, government should always seek to obtain efficiencies in its operations and the efficiencies can help to reduce costs. But the price of government cannot continually decrease on an annual basis as it does under TABOR measures. Accordingly, formulas like TABOR create demands on government to constantly reduce the price of government, until a vote of the people authorizes differently.
Neither the cost of providing government nor the populations that are often most intensely served are measured well by standards of consumer inflation and growth in overall population. Research shows that
• If a population-plus-inflation revenue and expenditure limit has been effective in all states from 1990 to 2004, the aggregate state-own source expenditures in 2004 would have been $162.7 billion, or 21 percent, below its actual level. Closing this gap in 2004 could have been achieved by cutting 78 percent of all state K-12 education budgets; all state Medicaid and transportation spending; or 60 percent of all other state spending.
• No existing measure of inflation correctly captures the growth in the cost of the kinds of services purchased through government. Accordingly, the inflation adjustment generally is not sufficient to allow the continuation of existing services. State and local governments spend much of their revenue on education and healthcare; they typically have cost increases much greater than the general rate of inflation. Within the Consumer Price Index (CPI) itself, medical care and education have been growing at twice the rate of the overall CPI.
• The groups of people that governments serve tend to grow more quickly than the overall population rates. When total population grew nationally by 15.4 percent from 1990 to 2002, total state prison population grew by 83 percent, disabled children in schools grew by 35 percent, and the number of elderly and disabled persons on Medicaid grew by 70 percent. In Florida, state demographics indicate that the 65 and over population will grow disproportionately: this age group is projected to represent 26.1 percent in 2030, compared to 17.6 percent in 2000 and 16.9 percent in 2006.
• While Florida’s aged population will continue to grow disproportionately, the “wage-earning” population group, will at the same time be decreasing. It is projected that the ratio of taxpaying workers to retirees will fall from today’s national ratio of 4:1, to 3:1 by 2057, but to 2:1 in Florida by 2057. Thus, the state may find itself in an environment where the state has the need for more costly services, with less revenue, even without TABOR.
• Many TABOR measures, and Colorado’s in particular contain a feature that causes public services to be cut even more than under the population plus inflation formula. It is commonly known as the “ratchet effect,” and it exists when the amount of actual spending or revenue in the prior year (rather than the amount of authorized spending or revenue) is the base amount for the cap calculation. When budgets grow slowly or fall, actual spending or revenues are often lower than the level permitted by the TABOR formula. When this lower level becomes the new base, then the level of public services is permanently ratcheted down.
This information was copied from the Florida Association of Counties website. Please feel free to visit their website @ www.fl-counties.com or viewing the document directly by clicking here.
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