Plain talk on Colorado's budget: It's time to talk about raising taxes

It's a serious subject, but we still tried to have some fun this summer telling you about General Fund and his mounting problems. We hope our Plain Talk series made some dry topics more interesting and understandable. And it didn't hurt to have General Fund himself illustrate our points.

But in the end there's nothing funny about what's happening to General Fund or the public services he supports on our behalf. The seriousness of his predicament was highlighted last week when the DU Center for Colorado's Economic Future released a summary of findings for Phase Two of its analysis of our state's fiscal health. In a nutshell:

•  Things are worse than we thought
•  It's unrealistic to think we can get out of this by cutting services alone
•  It's time to talk about raising taxes

In previous emails we talked about what General Fund does, how we're asking him to do even more, how we are giving him less to do it with, and how amendments we keep putting in the Colorado Constitution make his job much harder.

But if you think we made it sound bad, just look at what the folks at the DU Center wrote last week:

"Twelve years from now, Colorado will generate only enough sales, income and other general-purpose tax revenue to pay for the three largest programs in the General Fund -- public schools, health care and prisons. There will be no tax revenue for public colleges and universities, no money for the state court system, nothing for child-protective services, nothing for youth corrections, nothing for state crime labs and nothing for other core services of state government."

Wow! Their models predict that, by 2023-24, state revenues will be $3.1 billion short of what would be needed to sustain state programs at current levels – a 20 percent gap. And that's on top of significant constraints we've already placed on spending in the past decade. Remember this chart from our second Plain Talk email back in July? When adjusted for inflation, General Fund's purchasing power declined 23 percent per Coloradan in just the last 11 years.

The researchers at the DU Center also tested scenarios for closing this gap with spending cuts alone. They identified major impediments to making big cuts to Medicaid and many social services programs – including federal mandates, the loss of federal matching funds, constitutional challenges and shifting costs to other, more expensive programs. That leaves the prospect of deep cuts to K-12 education (despite Amendment 23) and 10 other state departments (including higher education, public health and public safety).

All of which leads them to a blunt conclusion – "Cutting programs to match revenues, without changing the structure of the current tax system, is unrealistic." They go on say the gap "cannot be addressed with mere belt tightening or across-the-board cuts to state agencies. Closing the gap without increasing revenues could mean eliminating whole programs, perhaps whole departments."

The Center's findings are consistent with what we have been saying all summer in these Plain Talk emails. And they lead us at the Bell to one conclusion. It is time to talk about taxes.

Without increased revenues, we will continue to erode the quality of our public schools, we will continue to rely on annual double-digit tuition increases at our state colleges and universities, we will continue to neglect our deteriorating roads and bridges, and we will continue to undercut the effectiveness of many other critical, but already underfunded, public systems and structures. Down that road lies a state that is powerless to solve many of its problems and an economy that places opportunity out of reach for many of those who don't now have it. This is a vision of Colorado we refuse to accept.

The DU report identifies a variety of options for raising revenues and stabilizing our fiscal system, including:

• Extending the sales tax to personal services. In our third Plain Talk email we discussed how Colorado's sales tax applies to fewer services than almost any other state and how that has led to a much smaller sales tax base over the years. This would raise about $900 million more a year by 2025.
• Reinstating a graduated income tax. We had one until 1987, when we went to a flat rate. Depending on the rates selected, this could raise between $1.5 and $3.3 billion more a year by 2025.
• Rebalancing and restructuring the state and local school funding partnership. Our seventh Plain Talk email outlined how the Gallagher and TABOR amendments eroded the local contribution to public schools, leaving General Fund to backfill for the loss. The Center suggests a variety of options, including a statewide property tax or a minimum local mill levy, to raise additional revenues for schools.

These all are options worth considering. Try out your own combination of options at the DU Center's interactive web site. And there are other options they didn't explore – including finding a more stable funding source for transportation – that are also worth talking about.

The bad news is that General Fund is hurting, and so are the important public services he supports. The good news is that, as voters, we have it in our power to ease his pain. Our job is to come together around a solution that reflects our vision of the kind of state we want Colorado to be.

A good first step would be to pass Proposition 103 this November. That would return sales and income tax rates to their 1999 levels for five years, raising another $530 million in each of those years while we work together to find a more permanent fix.

Join the conversation. We want to hear your 2 cents' worth.

What do you think about the option of increasing taxes

to help address Colorado's fiscal challenges?

How would increasing taxes affect your community and quality of life?

If we consider increasing taxes, what do you think is the best approach?

Email PlainTalk@BellPolicy.org and let us know how you answer these questions.

Note: This is the eighth in a series of emails addressing budget and fiscal issues in Colorado. It builds on the information in our In Plain Talk video and tool kit. Learn more and get involved by visiting our In Plain Talk video page or by "joining up" at www.boomorbustcolorado.com.