{"id":39224,"date":"2022-07-28T18:04:39","date_gmt":"2022-07-29T00:04:39","guid":{"rendered":"https:\/\/dh.durangoherald.com\/tj\/rising-inflation-is-on-a-collision-course-with-colorados-tabor-cap\/"},"modified":"2026-03-31T02:48:50","modified_gmt":"2026-03-31T08:48:50","slug":"rising-inflation-is-on-a-collision-course-with-colorados-tabor-cap","status":"publish","type":"post","link":"https:\/\/dh.durangoherald.com\/tj\/rising-inflation-is-on-a-collision-course-with-colorados-tabor-cap\/","title":{"rendered":"Rising inflation is on a collision course with Colorado\u2019s TABOR cap"},"content":{"rendered":"\n

\"A
A shopper pushes his cart past a display of packaged meat in a grocery store in southeast Denver. Inflation is rising fast, but that is unlikely to be considered in calculating Colorado\u2019s Taxpayer\u2019s Bill of Rights caps in the coming year. (David Zalubowski\/Associated Press file)<\/span><\/figcaption><\/figure>\n<\/p>

The lawmakers who write Colorado\u2019s budget are preparing to pare back some capital projects in the coming months as they contend with inflation straining a budget capped by the state\u2019s Taxpayer\u2019s Bill of Rights.<\/p>\n

The TABOR cap, a key component of Colorado\u2019s 1992 constitutional amendment limiting government growth and spending, is calculated by adding together the rates of inflation and population growth.<\/p>\n

But the inflation rate used to determine the cap comes from the previous calendar year, or six months before the start of each fiscal year.<\/p>\n

So for the 2022-23 fiscal year that began July 1 and ends June 30, 2023, the federal consumer price index inflation rate in the Denver-Aurora-Lakewood area used to calculate the TABOR cap was the 2021 rate of 3.5% and a 0.9% rate of population growth. Under that cap, more than $3 billion in excess tax revenue is expected to be refunded to taxpayers in the form of direct checks and tax breaks.<\/p>\n

By the end of May, however, the inflation rate in the Denver metro area had shot up to 8.3%, sharply increasing the cost of governing and of state construction projects.<\/p>\n

But the TABOR cap set using the 3.5% 2021 inflation rate didn\u2019t budge.<\/p>\n

The state lawmakers who sit on the Joint Budget Committee, the bipartisan legislative panel that balances the budget, face the difficult fiscal reality that they will have to reduce the scope of projects they budgeted for this and previous fiscal years or dig into their reserves to cover the discrepancy.<\/p>\n

Already a project approved in the 2021-22 fiscal year budget to refurbish the heating and cooling systems in nine buildings on the Auraria campus in downtown Denver has been cut back because its price tag more than doubled. Now, only three buildings will get upgrades.<\/p>\n

State Sen. Chris Hansen, a Denver Democrat who is slated to be the next chairman of the JBC, said he expects other projects to be scaled back. He called the situation a \u201ctrain wreck.\u201d<\/p>\n

\u201cThe state is facing an immediate escalation of its costs but we\u2019re not going to get any extra revenue retention to meet that,\u201d Hansen said. \u201cWe\u2019re going to have these refunds but immediately be short of the money we need to run the state.\u201d<\/p>\n

Michael Fields, a fiscal conservative activist, downplayed inflation\u2019s effect on the budget, pointing out that state expenditures have increased by billions of dollars in recent years. This year\u2019s budget, at about $36 billion, is the largest ever.<\/p>\n

\u201cThe thing I\u2019m worried about with inflation is families and groceries and gas,\u201d he said, \u201cnot if state government only gets $1.5 billion more and not $2 billion.\u201d<\/p>\n

Nonpartisan staff members in the Legislature expect the Denver-Aurora-Lakewood area inflation rate to finish the 2022 calendar year at 7.9%, or nearly double the rate it was in 2021. That would increase the TABOR cap by $1.5 billion in the 2022-23 fiscal year.<\/p>\n

Assuming the inflation rate is 7.9%, lawmakers will also be forced to pump hundreds of millions of extra dollars into K-12 education. That\u2019s because Amendment 23, approved by voters in 2000, requires the Legislature to increase per-pupil funding each year by at least the rate of inflation.<\/p>\n

That would raise the base per-pupil funding in the 2023-24 fiscal year to $8,068.93 from $7,478.16 in the current fiscal year. (The actual funding per pupil this year was about $9,500.)<\/p>\n

\"Jen
Jen Tarwater works through a Spanish exercise with sixth-grade students at Telluride Intermediate School. Tarwater, a recent college graduate, teaches a sixth-grade Spanish class at the school. (William Woody\/Special to the Colorado Sun file)<\/span>William Woody\/Special to the Colorado Sun<\/span><\/figcaption><\/figure>\n<\/p>

That means those millions of dollars won\u2019t be available to the Legislature for other priorities. And that money won\u2019t be available to help blunt the effects of inflation on the cost of governing.<\/p>\n

\u201cWhere I see the biggest challenge with inflation this year is with Amendment 23,\u201d said Rep. Julie McCluskie, a Dillon Democrat and the current chairwoman of the JBC.<\/p>\n

Inflation and TABOR have long been debated<\/div>\n

Democrats and Republicans in the Legislature have long been worried about the role inflation has in setting the TABOR cap.<\/p>\n

First, the inflation rate in the Denver metro area doesn\u2019t necessarily reflect the inflation rate across Colorado. Second, opponents argue, the rate doesn\u2019t necessarily take into account the cost of offering government services in the realms of health care and construction, where inflation rates can be much higher than they are for other goods and services.<\/p>\n

In 2017, two Republicans sought to put a measure on the ballot asking voters to decouple inflation and the TABOR cap. They wanted the cap to be calculated by the average rate of change in state personal income over a five-year period.<\/p>\n

Their bill failed in the Republican-controlled Senate, where hard-line conservatives chafed at the proposal, despite support from the business community.<\/p>\n

But this appears to be the first time that TABOR and inflation have clashed in such a pronounced way.<\/p>\n

\u201cThis is the first year TABOR has really had to reckon with inflation,\u201d said Scott Wasserman, who leads the liberal-leaning fiscal nonprofit Bell Policy Center.<\/p>\n

Hansen, the incoming JBC chairman, is among those who think tying the TABOR cap to inflation is a bad idea. But there doesn\u2019t appear to be an appetite to try to forever split the two.<\/p>\n

\"Gov.
Gov. Jared Polis presents his fiscal year 2022-23 budget proposal to members of the Joint Budget Committee on Dec. 3, at the Legislative Services Building in Denver. (Olivia Sun\/The Colorado Sun)<\/span>Olivia Sun\/The Colorado Sun<\/span><\/figcaption><\/figure>\n<\/p>

Instead, members of the JBC, including Sen. Bob Rankin, a Carbondale Republican, want to explore if there is a way to prevent outdated inflation rates from being used to set the TABOR cap.<\/p>\n

\u201cWhat if we can make an estimate of the inflation rate in the year we\u2019re in and use that?\u201d he said. \u201cThat would help us raise the TABOR limit for the year we\u2019re actually budgeting for. I don\u2019t know if we can do that. I want to go back and examine the constitutional constraints. But the inflation rate that we use to raise the TABOR cap ought to match our current problem, not a year ago or two years ago.\u201d<\/p>\n

Hansen said JBC members have \u201cbeen talking to legal staff\u201d about potential changes.<\/p>\n

But stauncher conservatives are skeptical.<\/p>\n

\u201cWe\u2019ve changed the formula so many times. We\u2019ve gone around it so many times,\u201d said Jon Caldara, a conservative commentator who leads the Independence Institute. \u201cIsn\u2019t it time that just once we just read the damn law and do what it says and give people back their tax money? Taxpayers deserve a win every now and then.\u201d<\/p>\n

His message: \u201cJust use what\u2019s in the law.\u201d<\/p>\n

Fields said any changes made should at least be consistent so that the Legislature can\u2019t cherry-pick the inflation number that gets them the most revenue.<\/p>\n

\u201cWhenever anybody is talking about changing the formula it\u2019s because they want more revenue,\u201d Fields said. \u201cState government has more money than ever right now. They\u2019re doing just fine.\u201d<\/p>\n

The JBC will begin drafting the 2022-23 budget in the coming weeks. The Legislature reconvenes in January.<\/p>\n

The Colorado Sun is a reader-supported, nonpartisan news organization dedicated to covering Colorado issues. To learn more, go to coloradosun.com<\/em><\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

A lag in economic indicators means fast-rising numbers aren\u2019t reflected in calculations<\/p>\n","protected":false},"author":1,"featured_media":39225,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[],"tags":[1724,120,394,94,233,28,1264,1762,12,1160,1526],"naviga_topic":[],"class_list":["post-39224","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","tag-budgets-and-budgeting","tag-colorado","tag-colorado-legislature","tag-colorado-state-government","tag-coloradosun-com","tag-headlines","tag-property-tax","tag-sales-tax","tag-state-budget-and-tax","tag-taxation","tag-taxation-and-budget"],"acf":[],"author_name":"dh_admin","_links":{"self":[{"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/posts\/39224","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/comments?post=39224"}],"version-history":[{"count":1,"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/posts\/39224\/revisions"}],"predecessor-version":[{"id":84265,"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/posts\/39224\/revisions\/84265"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/media\/39225"}],"wp:attachment":[{"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/media?parent=39224"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/categories?post=39224"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/tags?post=39224"},{"taxonomy":"naviga_topic","embeddable":true,"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/naviga_topic?post=39224"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}