CUT Hosts Budget Preview

The Colorado Freedom Report:  A libertarian journal of politics and culture.

The Colorado Freedom Report--www.FreeColorado.com

CUT Hosts Budget Preview

by Ari Armstrong, January 17, 2003

Speaker of the House Lola Spradley joined Democrat Suzanne Williams and lobbyist Frank DeFilippo to discuss the legislative budget at a dinner hosted by the Colorado Union of Taxpayers. Around 40 people attended the January 16 event in Arvada, including Barry Poulson of the Independence Institute, Jeffco Treasurer Mark Paschall, and Representatives Bill Crane and Tambor Williams. CUT President and former legislator Penn Pfiffner moderated the event.


House Speaker Lola Spradley chats with Dick Sargent.

This year, the state legislature has to cut over $800 million from the budget because of the Taxpayer's Bill of Rights, the Constitutional requirement to balance the budget, and declining tax revenues. The beauty of TABOR, from the perspective on those who want smaller government, is that it automatically lowers the threshold on future spending as well.

"This time you're seeing actual cuts," noted DeFilippo, not just "cuts" in spending increases. However, legislators are "getting very creative and they're trying to shift things around." For instance, some are trying to redirect employment taxes to other projects and set back salary payments by a day for accounting purposes.

The January 17 Denver Post followed up: "Gov. Bill Owens wants to divert $19 million from the state's employment funds to boost Colorado's sagging economy... He would use $10 million to promote tourism, $7 million for economic development grants to encourage businesses to move into the state and $2 million to promote Colorado agricultural products." Even though both Democrats and Republicans lined up to support this corporate welfare, it is a wholly inappropriate project for state government. It is immoral for the state to subsidize some industries at the expense of others.

If it is true, as Eugene Dilbeck of the Denver Metro Convention and Visitors Bureau told the Post, that tourism promotion can yield a 20-1 return, then surely that is an argument for letting the tourism industry fund its own advertising. If this $19 million dollars is not needed for its intended purpose, then the tax should simply be eliminated. But Owens' proposal is more about politics than the economy: last year he ticked off tourism businesses by claiming "all of Colorado is burning," which itself was a political ploy to generate federal funding. Now Owens is trying to placate the businesses annoyed by his remark.

But back to the dinner. Even Williams said, "We continue, every cycle, to have to cut the budget -- we have to cut from areas we've never had to cut from before." However, she said, the Democrats "try to keep in mind... the results of these cuts" and avoid "across-the-board cuts" in programs they deem more important.

I can see why Spradley became speaker. She struck me as intelligent, hard-working, and friendly. She said the "big four" issues in the legislature this year are the budget, water, affordable health insurance, and affordable automobile insurance.

She expressed concern that the payday delay would just create problems down the road. "It was clear to me that we have way too many members in the body who don't understand the issue and don't know what the tradeoffs are," she said, hoping an educational effort would remedy the misunderstandings.

For House Speaker, Spradley was surprisingly blunt about legislative shortcomings. She also said, "One of the good things... is TABOR. If not for TABOR, [the legislature] would have spent up to the revenue stream the last few years." Now, Colorado is having an easier time dealing with falling revenues than are other states.

Spradley also pointed out the problems with the popularly approved Amendment 23, which puts K-12 government school funding on automatic growth for a decade. That amendment "makes it really tough" for the legislature to cut programs evenly. Amendment 23 has already taken 40% of the budget off-line, and "K-12 is going to continue to be a higher and higher percentage of the budget" in future years, she said.


Larry Lotito, Dick Sargent, and Russ Haas are members of the Colorado Union of Taxpayers.

At least TABOR gives lawmakers the excuse they so often need to do the right thing. "It's not my fault -- it's that awful Doug Bruce who is FORCING me to gut your program!" Thus, the tax-limitation measure is a fascinating real-world experiment in Public Choice economics.

Spradley shared the story of three constituents who visited her office worried about cuts in government-preschool funding. Some areas are looking at "cuts [in the] available preschool slots by 50%," Spradley said. Spradley asked the voters if they had supported Amendment 23, and they admitted they had. Well, explained Spradley, you supported inflexible spending for K-12 government schools, but "now you want preschool saved."

When libertarians call people idiots, they too often sound like raving lunatics, regardless of the truth and justice of their position. Spradley's genius is that she can call you an idiot and you feel like she's your grandmother who has invited you over for hot biscuits and jam. She's delightfully hard-nosed.

Spradley scored a meager 50% CUT rating, incidentally. Her pragmatism is appealing, but I wish she'd spend a little more time considering the practicality of free markets. Pfiffner lightly made fun of Williams' low CUT rating, third from the bottom with under 6%. She responded, "I'm really surprised I am that low on your score... People see me as a moderate Democrat." CUT ratings are available at the group's web page, or by sending a self-addressed, stamped envelope to CUT, 1685 S. Colorado Blvd., Unit S, PMB 162, Denver, CO 80222. The "taxpayer hotline" is 303.494.2400.

Spradley said the legislature needs to "stimulate our economy," a tell-tale sign she's no marketeer. Stopping the legislature from dragging down the economy is not the same thing as "stimulating" it. She spoke approvingly of "public-private partnerships" in the context of water policy, and she wondered whether unfettered property rights in water might lead to inefficient use.


CUT President and former state representative Penn Pfiffner reviews a project with Steve Gresh of Colorado Springs.

"Adequate storage is something we've got to look at" for water, Spradley said. "We have a growing state -- we have not increased our water storage capacity." Offhand, I'm uncertain why this needs to be a state-level issue at all. Williams cited the need for conservation, noting xeriscaping may become more popular, but I wish somebody had discussed the matter of market-based water pricing to encourage efficient use.

Williams stated the obvious about health care: it is "too expensive." But she didn't have much to say as to how the situation can plausibly be improved. She wants to lower prescription drug prices and she's skeptical about dropping all mandates for health insurance. Spradley sensibly pointed out people are better off with a policy absent government mandates than with a policy they can't afford to purchase. She also wants tort-reform for medical malpractice. Of course, if state legislators really wanted to help medical consumers, they would pass a resolution demanding the repeal of all federal intrusions into medicine and also repeal state controls.

In terms of auto insurance, Spradley said "right now we have the worst of both worlds" -- no-fault plus the tort system. According to Pfiffner, what that means is that we have no-fault for damages under $5,000, and the tort system (lawsuits) above that amount.

What none of the speakers questioned was the legitimacy of government meddling in the insurance industry. If the state wants to mandate car insurance to drive on government roads, at most that would entail setting minimum standards for accepted policies. If the state wants to limit the damages of lawsuits -- something Pfiffner thinks the Republicans want to do -- that does not entail the general regulation of the insurance industry.

The economic basis of no-fault insurance is that usually both parties involved in an "accident" are generally at fault to some degree or another. (A better term is "dual-fault.") Ideally, financial damages are assigned according to the level of fault of each party. The trouble is this is very difficult to determine in most cases. (In some cases one party clearly bears all or nearly all the responsibility.) No-fault avoids legal fees while at the same time encouraging every driver to take prudent steps to avoid crashes.

But why should politicians be involved in setting the policy? The default system is tort. If two people get in an accident, and each blames the other, they go to court to settle the matter. (Insurance companies generally handle most of this.) If insurance companies find it in their economic interests to develop no-fault pacts with other companies, then they'll be able to offer better insurance at lower cost. The market would tend to create an efficient system of insurance. The state can only make insurance worse by interfering with it.

But today's politicians are not often interested in the big questions. They don't care if socialist policies don't work -- they're going to keep promoting them simply because they are today's status quo.

Pfiffner is trying hard to make CUT a policy player. He'll have to find the right balance between developing relationships with legislators and aggressively questioning their statist views.

The Colorado Freedom Report--www.FreeColorado.com