TABOR-Like Spending Limits Considered by States

As states have wrestled with budget constraints in recent years, many have adopted or are contemplating spending-limit measures, such as Colorado's Taypayer's Bill of Rights (TABOR), or similar fiscal limitations that restrain growth of government spending. In the recent November elections, California voters rejected a spending-limit proposal and Colorado voters suspended their state's restrictive TABOR amendment, allowing the state to keep funds for the next five years.

A number of states during the last decade have adopted tax or expenditure limitations (TELs) that are designed to restrain the growth of state and/or local governments on either the tax side, spending side or both. The National Conference of State Legislatures (NCSL) says that as these approaches to fiscal restraint become more popular, policy issues associated with fiscal limits are under review and will have an impact on how those states considering such restraints or amending existing restraints move forward. According to a NCSL September 2005 report, State Tax and Expenditure Limits-2005, “23 states have spending limits, four have tax limits and three have both. About half are constitutional provisions and the other half are statutory. Many of the TEL were enacted in the late 1970s and early 1990s, coinciding with economic fluctuation in the U.S.”

According to the Center on Budget and Policy Priorities and various newspaper reports, as many as 23 states had proposals under consideration during the 2005 legislative session, and other states currently have new tax- and spending-limit proposals under discussion, including: Alaska, Arizona, California, Idaho, Kansas, Maine, Maryland, Michigan, Minnesota, Missouri, Nevada, New Hampshire, New Mexico, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Virginia and Wisconsin.

The states are taking different approaches to these spending limitation proposals, with some proposals more restrictive than others, such as the 1992 voter-approved TABOR constitutional amendment in Colorado, which limits revenue growth for state and local governments, requires rebates of the surplus revenues, and requires that any tax increase in any state or local government be approved by the voters of the affected government, pursuant to the state constitution. According to NCSL’s Talking Points on Colorado’s TABOR, “Colorado’s early experience with TABOR was successful because of the rapid population and economic growth of the state in the 1990s.” In 2000 and 2001, the state’s economy along with the rest of the country’s declined and so did tax collections. The TABOR cap on revenue growth and a 2000 voter-approved constitutional amendment mandate for education expenditure limits that led to education spending growth at a faster pace than the TABOR expenditure limit ensured that the state would be unlikely to grow out of its problems, according to the NCSL.

Coloradans on Nov. 1 amended their constitution to allow the state to keep and spend $3.7 billion for the next five years instead of refunding it to taxpayers. Additionally, Colorado voters in at least three local governments, Boulder County, Castle Rock and Nederland, opted out of the taxing and spending limits established by TABOR, according to a Nov. 2 article in the Rocky Mountain News. These entities are among many Colorado counties and cities that have passed overrides since 1992 allowing local governments to keep the extra funds, according to a Nov. 2 article in the Boulder Daily Times-Call. In Boulder County, voters agreed with proponents that a projected $2.5 million property-tax surplus would be better spent to improve government services rather than return an average of $11 to each taxpayer. The NCSL indicates that several votes have passed in school districts and some small cities exempting their governments from TABOR limits.

Proponents and opponents of spending limits on government were watching the Colorado vote closely. “As state’s move forward to design fiscal restraint mechanisms, the level of flexibility in the TEL’s structure to respond to sweeping changes or volatile fiscal environments will help to shape the types of responses legislatures will consider,” according to the NCSL report. The following states have recently rejected or are currently considering spending limit proposals.

• California voters on November 8 rejected by 62 percent to 38 percent Proposition 76, a constitutional amendment that would have created an additional state spending limit and allowed the governor new powers to unilaterally reduce state spending.
• In Maine, a citizens action group is likely to have enough signatures for a TABOR initiative calling for spending limits on both state and local governments for the November 2006 ballot.
• Similar efforts in Ohio by Citizens for Tax Reform have qualified a state and local government spending-limit proposal for the ballot in November 2006, after having withdrawn signed petitions for the November 2005 ballot.
• In Oklahoma, members of the Oklahoma Council of Public Affairs returned from a June 2005 summit on TABOR in Richmond, Va., ready to move forward with presenting a TABOR policy directly to the voters, since two attempts to approve TABOR failed to gain hearings in the 2005 legislative session, according to June 17 article in the Oklahoma City Journal Record.
• According to a Sept. 16 article by the Associated Press, Oregon will be another battleground between anti-tax activists who want to cap both state and local government spending and their opponents, who say such a move would put schools and important social services at risk.
• The Pennsylvania Senate and House each have approved spending-limit legislation that would cap annual spending increases in the budget. Those two proposals currently are being resolved in a conference committee. The House also plans to pursue placing spending limits into the constitution, according to the Harrisburg Patriot-News. Such an effort would need to pass two legislative sessions before going to voters.
• The Rhode Island Public Expenditure Council (RIPEC), a nonpartisan public policy, research and education organization, issued on Oct. 15 a study that says the state needs limits written into the state constitution on government taxing and spending at both the state and local levels. In Rhode Island 2010/Charting a New Course, RIPEC does not indicate the kind of an amendment the state should pursue, but the group’s executive director says he would like a TABOR similar to Colorado, according to an Oct. 16 article in the Providence Journal.
• Wisconsin's legislature has held in committee AJR 55, a proposed TABOR constitutional amendment that limits spending by both state and local governments. The legislature can resurrect the proposed legislation in 2006.

In addition to the above states, the Center on Budget and Policy Priorities listed the following states that considered in their 2005 legislative session TABOR proposals as constitutional amendments that limit annual growth in state and/or local spending or revenue to the rate of growth of population plus inflation. The proposals died in committee, unless otherwise noted: Alaska, Arizona, Idaho, Kansas (not taken up in 2005; same proposal can be considered in 2006), Maryland, Michigan (in committee), Minnesota, Missouri (voted out of House rules committee, but never made it to House floor vote), Nevada, New Hampshire, New Mexico, North Carolina, South Carolina, Tennessee, Texas and Virginia.