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Reason Foundation

The Sky Isn't Falling in Colorado

Proven Strategies for Budget

Geoffrey Segal and Adam Summers
October 1, 2005

Executive Summary

This November, Coloradoans will make a critical decision about the future fiscal responsibility and tax policy in their state. Colorado, through its Taxpayer’s Bill of Rights (TABOR), has emerged as one of the leaders in cutting taxes and restraining the growth of government that has nearly bankrupted many other states—returning $3.25 billion to taxpayers between 1997 and 2001. As a result, half of the states in the nation have followed its lead and introduced similar measures.

Proponents of Referenda C and D are arguing that the state is in dire straits and needs more money to survive. They paint a scary picture indeed; one in which hospitals, schools and libraries will close, where 911 emergency services will shut down and police and fire departments will be left without the tools and resources needed to function. While fear mongering may be a brilliant communications and public relations strategy, it is not an accurate depiction of the situation. It presupposes that every dollar spent by the state of Colorado is both spent well and importantly. While the services in Colorado may be performed efficiently, there is always room for improvement. In addition, over the years the state has taken on new responsibilities and started new programs. Rarely do old programs get phased out or eliminated. There certainly must be some functions government can stop providing.

The states of Washington and South Carolina have developed a budget process that identifies all government services by activity, rather than by agency, and categorizes them according to a set of pre-established goals. Special teams of policy experts, state agency employees, private citizens, and other stakeholders analyze and rank the activities in order of priority and effectiveness. The administration then “purchases” (funds) the activities from the top of the list down until all available revenues have been used up, leaving the lowestpriority activities for better economic times and eliminating duplicative, poor-performing, unnecessary, or otherwise wasteful activities. Texas engages in performance-based budgeting and utilizes a Sunset Advisory Commission to recommend eliminating programs that are duplicative or have outlived their purpose. The federal government has developed the Program Assessment Rating Tool (PART) to evaluate programs based on their purpose, strategic design, management, and results.

A cursory view of the Colorado state budget reveals several items that are not priorities of government that should be considered for suspension, reduction, or even elimination. The following are just a few examples that would equate to at least 10 percent of the amount needed to offset the added tax revenues called for by Referendum C:

Again, these five program changes get Colorado more than 10 percent of the funding that proponents of Referenda C and D say Colorado needs to provide vital services. A rigorous review will find numerous other low-priority programs.

Quite simply, the sky is not falling. If there are high-priority programs and services in need of funding, there are plenty of savings to be found to pay for them. Colorado should take a more rational approach to budgeting by following the example of so many private individuals and families—and, increasingly, other governments—and fund government services by prioritizing wants and needs. The adoption of performance-based budgeting and an activity-based prioritization funding model would help Colorado decisionmakers to more easily identify the governmental activities most important to Coloradoans and make difficult trade-off and cost-benefit decisions. It would result in the provision of better, more efficient services while allowing Colorado to protect taxpayers and maintain fiscal responsibility.


Adam Summers is Senior Policy Analyst

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