Legislators Should Cut Spending, Not Raise Taxes

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Legislators Should Cut Spending, Not Raise Taxes

by Ari Armstrong, February 23, 2005

Ken Gordon, Colorado's Senate Majority Leader, thinks it's "insane" that he and his fellow legislators can't spend even more of other people's money.

In a February 21 e-mail, Gordon wrote, "In the 2006 budget year we will be cutting $181 million dollars from our budget and at the same time refunding over $336 million dollars. This is insane."

Yet the only aspect of it that's insane is that state government continues to spend so much money. As Douglas Bruce's Active Citizens Together notes, Colorado's budget in 2004 exceeded $13 billion. The total budget has gone up every year for many years, and it is expected to go up every year into the future. True enough, spending from the general fund is expected to drop slightly. Jon Caldara, President of the Independence Institute, thinks the shortfall is around $158 million for 2006, "about one-and-a-third percent of the budget."

"If we find 1.5% savings, there's no reason to mess with TABOR. And, if we can rearrange how we do things, as written in Priority Colorado, we can easily keep the same service levels by doing business differently," Caldara continued. The document Caldara mentioned is available through the Independence Institute. (I recently wrote an article in defense of the Taxpayer's Bill of Rights, along with a separate piece about state spending generally.)

Nationally, Democrats are accusing the Republicans of manufacturing a crisis surrounding Social Security in order to promote reforms that reach too far. It is ironic, then, that Democrats in Colorado are trying to manufacture a crisis about state spending, so that they can gut the Taxpayer's Bill of Rights and raise taxes every year into the future. The problems with Social Security are real and substantial, as even ridiculously optimistic estimates predict that funding levels will eventually be 20% lower than promised benefits (without changes to the system). By comparison, the 1.5% cuts required in Colorado should be child's play -- which is perfect given the mentality of many legislators.

Conspicuously absent from Priority Colorado, a study released jointly by the Independence Institute and the Reason Foundation, is the suggestion to simply eliminate all subsidies to higher education. I have long argued for this solution, and the separation of college and state has taken on new urgency given the controversies surrounding Ward Churchill.

One of Gordon's assistants told me the annual state subsidy for higher education is nearly $600 million. I was shocked, and so I called Senator Ron Teck's office for verification. Teck confirmed the figure. So, problem solved. The legislature can make the necessary cuts three times over, and then some, simply by eliminating tax subsidies for higher education. That's something that should be done anyway, regardless of the budget crunch.

But Priority Colorado doesn't suggest that, most Republicans are too cowardly to suggest it, and most Democrats can barely comprehend the concept of free markets in education.

Yet Priority Colorado does make some interesting suggestions for cutting spending in other, less dramatic ways. The report's authors claim their suggestions can save the state between about $350 million and $620 million (the estimates are very loose). In general, all wasteful spending should be cut, because of the principle of it, whether or not there is a short-term budgetary problem.

The Rocky Mountain News's Jim Tankersley, who seems not to like TABOR, reported February 22, "John Ziegler, staff director for the Joint Budget Committee, told legislators that the think tank's proposal vastly overstates savings..." Whether or not that's true -- and Tankersley didn't bother to evaluate whether or not it's true -- the state should make all the suggested cuts that are possible.

There's something refreshing about reading a report that uses the word "eliminate" seven times, with respect to government programs, in its first table. The report lists eight general categories of proposed cuts:

1. Sell off state buildings and lands that are "unused, underutilized," and not being put to good use.
2. Eliminate "non-essential or low-priority" programs.
3. Consolidate "administrative functions" -- i.e., fire especially worthless bureaucrats -- and require the state to contract out for more services.
4. Reform criminal sentencing by reducing sentences for "non-violent drug offenses." The report also suggests, "Downgrade simple use and possession of controlled substances from felony crimes to misdemeanors."
5. Cut Medicaid spending by limiting subsidized services and increasing co-pays.
6. Cut the budget for the Department of Education's Management and Administration. The report also suggests that Amendment 23, which mandates annual spending increases for K-12 education, be restricted.
7. Ease "procurement" rules. The report recommends "performance-based contracting," "reverse auctioning," and dropping the requirement to buy shoddy furniture made by prisoners.
8. Use more "competitive sourcing."

The report contains a number of nice ideas. It proposes "budgeting for outcomes," as opposed to budgeting to automatically spend more every year. It endorses "Kitchen-table Economics," which means that "when revenue does not add up to desired spending, families eliminate unneeded or non-priority spending." The report laments "government sprawl and inefficiency." The report praises TABOR, because around "$3.25 billion in tax dollars were refunded over five years (1997-2001), amounting to about $800 per capita -- $3,200 for an average family of four."

Yet the report has some problems. Here is an indication of the key problem: "The goal of lawmakers confronting the state deficit should not be to reduce service delivery. Instead, the goal should be to increase the value to taxpayers by providing more and better services for less money." That goal explains why the report is cautious in its recommendation. But don't these conservative/libertarian organizations recognize that there are some "services" that the government ought not be providing, at all? We don't want efficient delivery of a fundamentally inappropriate service.

The wonkese in which the report is written is often difficult to decipher. For example, the report states, "As of January 2004 there were 326,600 debts totaling approximately $332 million owed to the state... Using private contractors under a 'share in the revenue' contract whereby the contractor receives payment based on their amount of money recovered can reduce the debts owed to the state." But what are these "debts?" I assume that they are "debts" owed by people behind on their taxes. If so, these aren't really "debts," a term which implies money owed for the delivery of particular goods or services. Rather, they represent the forced redistribution of wealth. Under no circumstances should tax collection be conducted by "private contractors." So if that's what the report is talking about, it is a horrible proposal.

Nevertheless, the report contains a variety of legitimate ideas for cutting state spending. The legislature should look into these ideas and adopt the ones that fit, to whatever level is possible. I suspect that the cuts suggested by the report could cover the shortfall about which Gordon is so stressed. Whether or not they do, the suggested cuts should be seen only as a first step.

Of course, the Democrats now have an interest in avoiding common-sense cuts, so that they can jump about frantically, project insanity, and pretend cuts of less than 1.5% represent some sort of financial apocalypse. TABOR is working just fine. The problem is the legislature.

The Colorado Freedom Report--www.FreeColorado.com