TAX BILL PACKAGE – FINANCE MARATHON

I thought the 7-hour meeting of the Senate Finance Committee on January 26 to pass the PERA bill (SB 1) was long! But on February 3-4, we went through a marathon of 20 hours, staying in committee until 12:30 a.m., to consider a “package” of bills – HB 1189, 1190, 1191, 1192, 1193, 1194, 1195, 1196, 1197, 1199 & 1200 – to eliminate or suspend corporate tax credits and exemptions in order to generate about $145 million in revenue. The tax being restored by these bills is the state sales tax of 2.9%. (That’s a little less than 3 cents on the dollar, or 29 cents on $10.00 – just to put it in perspective.)

The revenue generated by these bills is a “drop in the bucket” in comparison with the $2,200 million (i.e., $2.2 billion) in revenue that the state has lost in the last couple of years and which the Legislature has had to cut from the budget. But it will help. Senator Heath told the Senate Finance Committee: “In our lifetime, we have not seen anything as deep as the current recession. Our goal with this bill package is to avoid devastating the key functions of government – education and infrastructure. With the Constitutional prohibition [in TABOR preventing the Legislature from raising taxes or going into debt], we have little flexibility.”

Senator Heath pointed out that Colorado is the 7^th richest state, so we should be able to afford to pay for our state’s basic needs. But we can’t, in part because Colorado “has one of the lowest state tax rates in the country” and because we allow about 100 tax credits and exemptions. I noticed that these credits and exemptions amount to a little over $2 billion, almost exactly the amount of the state’s budget shortfall (is this a coincidence?!).

Representatives of the state’s education organizations told the Finance Committee that Colorado provides about $1,000 less for per-pupil funding than the national average. They reminded us that “educational attainment is the single most important factor in economic growth.” Senator Johnston mentioned that what we’ve already cut from the state education budget in the last two years is 3 times the amount of the total savings of the tax bill package. The person representing the Colorado Fiscal Policy Institute added that Colorado provides funding for only a quarter of the eligible preschool students.

Because of the budget crisis, K-12 education has already suffered reductions of $260 million. To put that in perspective, based on the amount of money the state provides per student, we have reduced the K-12 budget by the equivalent of 50,000 students. For every million dollars we cut from K-12 education, our schools lose about 25 teachers, which means we’ve already cut the equivalent of 6,500 teachers’ jobs in Colorado.

Also, we have reduced the size of state government by 25%. We are on the edge of fraying the safety net of our most vulnerable populations, and our transportation infrastructure is barely supported at all. We have cut local government funding by $14 million. We eliminated $3.1 million from mental health institutes. We’ve suspended the Senior Homestead Exemption and cut $15 million from Medicaid. Without the federal stimulus dollars, higher education would have been cut below the 2005 levels.

I think it’s time to stop balancing the budget on the backs of those in need – our seniors, our students, and our disadvantaged children. In these lean economic times, we all must pull together to share the burden to keep our state going despite the economic challenges. Tax exclusions and credits have not heretofore been touched. It is time to examine all avenues of enhancing revenue so that we try to maintain at least a minimum investment in our students’ education and to protect our vital services for seniors and vulnerable populations. I believe that if you and I must pay taxes, so should big businesses. As Oliver Wendell Holmes, Jr. said, “Taxes are the price we pay to live in a civilized society.”