The Trouble with TABOR

Marc Stier |

UPDATED April 12: The Republican leadership of the House of Representative is poised to bring a dangerous  constitutional amendment, the so-called Taxpayer Bill of Rights (TABOR), HB71 tomorrow, April 13, 2022.

This amendment, which has been championed in states all over the country by the right-wing American Legislative Exchange Council, would limit the growth in PA General Fund spending to the previous year’s level adjusted for the sum of (1) the average percentage change in the U.S. Consumer Price Index for all urban consumers (CPI-U) over the preceding three calendar years plus (2) the average of the percentage change in the resident population for the preceding three calendar years.

Adopting this constitutional amendment would be a terrible mistake for many reasons.

General Fund spending has not been growing faster than TABOR rates.

First, even if one believes that the growth in state spending should be restrained, it is unnecessary. Over the last 11 years, between Fiscal Years 2008-09 and 2019-20, General Fund spending has increased by only 2.4% per year. This is just slightly above the combined increase of population growth and the CPI—2.2% per year. Spending growth has been restrained under both Republican and Democratic governors, largely at the behest of the Republicans who have controlled the General Assembly during this time.

General Fund spending restraint has occurred even as spending for Medical Assistance has grown  faster than the rest of the budget at 6.1% a year. The growth in spending for Medical Assistance is partly the result of Medicaid expansion, but is even more due to health care costs continuing to grow faster than general inflation—even though the ACA has led to slower growth in health care spending since it was enacted.

Leaving out Medical Assistance, the General Fund has increased by only 1.5% a year in the last 11 years, below the proposed TABOR rate.

TABOR would make meeting the needs of Pennsylvanians more difficult.

Second, this constitutional amendment would make it far more difficult to meet the needs of Pennsylvanians in the future.

To begin with, it should be clear that so long as health care, and thus Medical Assistance, costs keep increasing, the rest of the budget would have to shrink relative to the size of our economy, as it has since 2009-10. And while a state government willing to increase suffering among those whose health or long-term care needs are currently met by Medical Assistance in order to save some money, federal law limits how much can be cut from these programs without the state losing significant federal funds. A reduction in funding for Medical Assistance would also provide relief for one year. After a one-time reduction in benefits, health care spending would increase faster than the CPI-U which means that Medical Assistance would continue to crowd out other state spending.

And then there are all the needs of Pennsylvanians that are not being met now. There is, of course, dispute, about what those needs are. But TABOR would not play favorites: new spending supported by either party or ideology would be blocked.

Those who share our perspective on the state budget have long supported new state spending that would reduce our public investment deficit. We seek to

  • increase state aid to K-12 school districts to reduce the worst-in-the-nation economic inequality and the nearly as bad racial inequity in how we fund K-12 education.
  • increase state funding for higher education, where Pennsylvania currently ranks fourth from the bottom on a per capita basis status, and in doing so, keep Pennsylvania from having among the most expensive state colleges in the country relative to median income.
  • close the big gaps in funding for child care, affordable housing, intellectual disabilities services, and many other human services, as well as for environmental protection.

We believe that economic opportunity for both individuals and the state as a whole depends on dealing with our public investment crisis, especially in education at all levels. But we understand that many Pennsylvanians do not agree. Still, there are other areas where concerns about our public investment deficit cross party and ideological lines.

  • There are political leaders and citizens from both parties, and of any ideological position, who favor state spending to reduce extraordinarily high rates of property tax in some parts of the state.
  • Similarly, there is broad agreement in counties and municipalities, and even in the General Assembly, that the state must spend more to repair or replace our seriously dilapidated, and in many cases, dangerous roads and bridges and provide support to our public transit systems.

TABOR will lead to higher local and school taxes.

Third, the property tax issue reminds us of a more general problem—when the state fails to meet local needs, government spending is not necessarily restrained but is shifted from state government to county and municipal governments and school districts. As the state’s share of funding for K-12 education has fallen, school taxes have dramatically risen. A state government limited in its ability to meet the needs of Pennsylvania communities would undoubtedly create higher spending in county and municipal governments or on the users of roads and bridges. At a time when legislators are objecting to PennDOT’s plans to institute tolls to repair and replace bridges around the state, it hardly makes sense to hamstring the ability of state government to address infrastructure problems.

TABOR would block state action during emergencies.

Fourth, the TABOR amendment would make it more difficult for the state to meet the challenges of emergencies, such as the current one created by the COVID-19 pandemic. General Fund spending in the current year has grown and will grow again next year because the economic crisis has led to an upsurge in Medical Assistance cases. While much of that new spending is offset by new federal aid, if the TABOR amendment were in place today, it would prohibit using federal funds to support General Fund spending to meet this or other aspects of the emergency. If the TABOR amendment were in place now, the state would also be severely restricted in spending the $7 billion it will receive from the American Rescue Plan. That would limit the state’s ability to reduce the problems and suffering for individuals and small businesses caused by the pandemic and to help the economy recover from the current recession.

TABOR would make it impossible for the state to meet future challenges.

Finally, the TABOR amendment would make it impossible for the state to adjust for new circumstances created by technological or other advances. These are impossible to predict. But a thought experiment could show us how serious the problem might be.

Imagine that all state constitutions in the U.S. had a TABOR rule in 1910. At that time, state government spending was only .7% of the U.S. gross domestic product (GDP) of $33 billion. If state spending across the fifty states were only allowed to increase since then in accord with TABOR rules it would today be only .4% of our $20 trillion U.S. GDP. But all state spending is currently 8.26% of the U.S. GDP. (General Fund spending in Pennsylvania is on the low end at only 4.25% of gross state product.)

Why was state spending so much lower in 1910 than today? There were limited roads and bridges—and no four-lane highways in 1910. Only 2.7% of people aged 25 or older were college graduates and only 13.5% graduated from college. Doctors and hospitals could do very little to help those who were ill—one reason that the life expectancy for men was 48.4 years in 1910, as compared to 76.3 for men and women in 2019. There were far fewer seniors who needed help in their 70s and 80s. And no one had any concerns about water and air pollution in 1910. Those who complain about the growth in government spending over the course of the 20th century should stop and ask themselves this critical question: Were we better off in 1910 or should we be grateful for a modern economy and health care system that is unthinkable without a much higher level of government investment in education, infrastructure, health insurance, and environmental protection? To all but the most hard-hearted ideologues, the answer is obvious.

Will the future require even larger government? As Yogi Berra said, “Prediction is hard, especially about the future,” so no one can really say. It’s likely that our economic growth will continue to depend on an ever more highly educated workforce and that equality of opportunity and social mobility will decline without equal access to education. But in other cases, we simply will have to see. Some futurists imagine interstate highways with embedded electronic controls that guide electric vehicles allowing for faster and safer travel. That may require substantial new government investment. But it also might reduce government spending because the safe distance between computer-controlled cars would be less than today, increasing the carrying capacity of our highways and reducing the need to expand them.

The key point is that Pennsylvania’s government must be able to respond to changing circumstances, some of which we can’t imagine—and to changing preferences among the voters. TABOR, however, would place flexible and creative government in a financial straightjacket, embedded in our constitution.

This is how TABOR caused decline in another state: the Colorado experience.

All these reasons have led 29 of the 30 states that have considered TABOR since 2004 to reject it. Only one—Colorado—has embraced the idea, and the consequences in that state provide a stark warning for us. Since Colorado adopted TABOR in 1992, there have been significant consequences for the state.

  • Colorado fell from 35th to 49th in the nation in K-12 spending as a percentage of personal income between 1992 and 2001.
  • Colorado’s college and university funding, as a share of personal income, declined from 35th in the nation to 48th by 2008.
  • Colorado fell to the bottom of national rankings in providing children with full vaccinations. It even suspended its vaccination program between 2001 and 2002 because it could not afford to buy vaccines.
  • The share of low-income children in the state without health insurance doubled between 1992 and 2005, while decreasing in the rest of the nation.
  • Colorado’s business climate and economy deteriorated under TABOR. The measure contributed to a credit downgrade in 2002 and alarmed business leaders by undermining the state’s ability to invest in its basic infrastructure and workforce. Tom Clark, former executive vice president of the Denver Metro Chamber of Commerce, stated, “For businesses to be successful, you need roads and you need higher education, both of which have gotten worse under TABOR and will continue to get worse.”

Colorado instituted TABOR when it had average spending in many areas. Pennsylvania is already near the bottom on spending for education at all levels, infrastructure, and environmental protection. What was deeply problematic for Colorado would be a disaster for Pennsylvania.

TABOR is dangerous for our democracy.

Coming back where we began—with evidence that state spending has barely grown faster in the last eleven years than the TABOR rules would allow—we want to point out that those who seek to continue this spending restraint can do two things without enacting a constitutional amendment that would limit every subsequent General Assembly. They can appeal to the public to vote for them in free and fair democratic elections and continue to hold the political power to restrain spending growth in the state. And they could work with Governor Wolf to advance proposals that we support to reduce the rate of increase in health care spending.

Spending restraint is possible if the voters choose to elect officials who support it. And it is less likely if voters make other choices. Isn’t that how it should be in a republic, that is, a representative democracy?

It is hard to escape the impression that this constitutional amendment is only being put forward because some Republican legislators fear either that the public will decide to support increased state spending for one purpose or another in the future and / or because they worry their majority in the House and Senate will soon shrink or disappear since in 2022 and for the rest of the decade they will have to run in election districts not gerrymandered to maximize their power.

It is hard not to see the return of TABOR as one more step in the plan of some Republicans to hold power not with the support of Pennsylvania voters but despite them. There have been many elements in the plan: gerrymandered legislative and congressional districts over the last two decades; a Voter ID law meant to make it harder for Democrats to vote; the embrace of Donald Trump’s false claims about the 2020 election; a proposed constitutional amendment to allow judicial districts to be gerrymandered; and recent legislative proposals to end vote by mail in the state. Like TABOR, these proposals are all meant to block the people of Pennsylvania from having too much influence in the governance of the Commonwealth.

Seen in this light, TABOR is not just a threat to the government we need to create a strong and just economy, but to our democracy itself. That, by itself, is a critical reason to reject it.

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