COLORADO VOTERS demonstrated a welcome bit of tax sanity this month when they loosened the budgetary shackles that they had unwisely imposed on the state in 1992. The handcuffs took the form of the Taxpayer Bill of Rights (TABOR), which created the most stringent budget rules in the nation. Under TABOR, state spending is permitted to rise only to keep pace with population growth and inflation; any revenue collected beyond that must be returned to taxpayers.
Tough enough, and difficult to live under, given the fact that health care costs, which consume a significant share of state budgets, have been rising much faster than the overall inflation rate. But the real TABOR crunch arose when the recession hit in 2001 and tax revenue fell 16 percent over two years. Under TABOR's unforgiving ratchet provision, the amount of revenue the state is permitted to spend each year is based on the previous year's take. So when recessions drive down spending levels, those are locked in for years, and programs slashed during hard times can't be brought back.
Under TABOR, higher education funding dropped by 31 percent. The share of Colorado children without health insurance doubled, bucking the national trend and putting Colorado last among the 50 states. Transportation spending dropped 41 percent.
A measure of the damage wreaked by TABOR's inflexibility is the fact that the leader of the effort to relax its restrictions was the state's conservative Republican governor, Bill Owens. An early champion of TABOR, Mr. Owens infuriated conservative groups that had once talked him up as a possible presidential candidate; they began to vilify him when he argued that the measure needed to be modified to survive.
Wisely, Colorado voters listened to the governor who had labored under the reality of TABOR, not to the anti-tax activists unwilling to consider its real-world consequences. The result of the vote is to suspend TABOR's restrictions for five years, letting the state use an estimated $3.7 billion in taxes it otherwise would have to return.
The anti-tax crowd is mobilizing to push TABOR initiatives in more than a dozen states next year. Already, Ohio is slated to vote on a ballot measure, and a petition drive in Maine has produced enough signatures to put a measure before voters there. But states considering similar handcuffs should look at Colorado and take the state's unhappy experience to heart.