State’s economy needs moderation, taxes, say experts

Economists: Fixing infrastructure will require voters to tax themselves more


Colorado’s economic star is rising, but promoting continued growth will require addressing the state’s government funding paradox, according to leading economists.

“What’s wrong with public finance in Colorado isn’t bad people, it’s bad systems,” economist Henry Sobanet, chief financial officer of Colorado State University, said at the South Metro Denver Chamber of Commerce’s annual Economic Forecast Breakfast on Jan. 18.

Colorado’s economy is booming, but the state’s infrastructure — think roads and bridges — is lagging, which could start to weigh on the state’s business prospects, Sobanet said during the event at CU South Denver in Lone Tree.

The problem is a trio of contradictory laws, Sobanet said. TABOR, or the Taxpayer’s Bill of Rights, limits how much revenue the state government can take in. Meanwhile, Amendment 23 mandates ever-increasing funding for K-12 education, while the Gallagher Amendment holds down the growth of property tax revenues, which offset how much the state needs to spend on schools.

The logjam means that the state is perpetually on the hook for a massive education bill, meaning there’s little left over for roads.

If voters really want to fix the roads, Sobanet said, one of the best ways would be to raise gasoline taxes, which have sat at 22 cents per gallon since 1991.

Inflation-adjusted revenues from gas taxes have been falling for years, Sobanet said, as cars’ gas mileage has improved. Meanwhile, concrete, steel, asphalt and labor all cost more. Gas taxes would have to be 44 cents per gallon to have the same purchasing power as they did in 1991, he said.

“I’m going to say something extremely controversial: The users of the transportation system should pay for its upkeep,” Sobanet said. “Over half the states have adjusted their gas tax or added sales tax to deal with a model that doesn’t work. In Colorado, to get more money requires a vote of the people.”

Elected officials need to have the guts to ask voters to tax themselves more, said Lone Tree Mayor Jackie Millet.

“We continue to have a fight at the Capitol that there’s enough money to fund all the things we must fund, you just need to spend it differently,” Millet said. “There isn’t enough money. These are obligations written into our constitution… It’ll take the courage of elected leaders to go out and say, `This is what we need and this is how we will spend the money.’”

The partisan political divide in what has traditionally been a moderate state could hinder efforts to fix funding problems, said JJ Ament, the CEO of the Metro Denver Economic Development Corp.

“We have to find a way to cram some space between utopia — be it liberal or conservative — and apocalypse,” Ament said. “Business happens between those two things… With all this bitterness, can you focus on what’s happening, and decide if the person across from you is not valid to interact with?”

Voters have tended to respond positively to calls from local governments to override TABOR revenue caps, Sobanet said, allowing municipalities to fund needed infrastructure projects. But the lift seems to get heavier at the state level.

“People feel disconnected from the state government,” Sobanet said, adding that political heavyweights stand ready to pounce on policy officials who suggest tax increases.

“You ask the voters and you’re an apostate,” Sobanet said.

Collaboration and moderation built the state’s economy to where it is today, said Mike Fitzgerald, president of the South Denver Economic Development Partnership.

“We run the risk of hollowing out the center,” Fitzgerald said. “But the center is where decisions of collaboration get made.”


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