14-92 August 25, 1992 AMENDMENT SIX PUTS TAXPAYERS LAST School Funding Plan a Trojan Horse for Triple Tax Hike Costing an Educationally Unnecessary $700 Million By Larry Samer Introduction by the Editor: Everyone agrees our kids and their schools deserve first priority. But must it be done by giving our hard-working Colorado taxpayers last priority? Such would be the effect of Amendment Six, the misnamed "Children First Initiative" which teacher unions and Gov. Roy Romer want voters to approve on Nov. 3. ‘Analyst Larry Sarner shows in this paper that the amendment's ostensible one-third-billion tax impact (unnecessary from an educational standpoint in the first place) is understated by more than half. Several obvious questions suggest themselves: Govenor Romer talks up the national education goal of making our students. the world's best in math. Why can't he do the simple arithmetic that reveals his proposal will tap citizens for more than twice its advertised price tag? The Governor prides himself on straight talk. When will he level with the public about the sneaky trigger clauses in state law that will pile on top of his $333 million sales tax hike a $192 million income tax boost and on top of that a $172 million property tax hit? His campaign rhetoric about making our state the Athens of the West was a two-time winner. But this Trojan Horse initiative with the $700 million shocker inside deserves to lose. Sadly it seems he is playing games with geography as well as arithmetic and classics. As the Denver Post's Bob Ewegen warned yesterday, if "Children First" passes, our name on the map will have to say Taxarado. This paper tells why. --Copyright 1992 - Independence Institute- = INDEPENDENCE INSTITUTE is a Colorado nonprofit corporation. It is governed by a bipartisan board of trustees and holds a 501(c)(3) tax exemption from the IRS. Its public policy research focuses on economic growth, education reform, environment, equal opportunity, and government effectiveness. PERMISSION TO REPRINT this paper in whole or in part is hereby granted, provided full credit is given to the Independence Institute LARRY SARNER is a business entrepreneur in Loveland and an Independence research associate, He holds degrees in applied mathematics from the University of Colorado and in political science from Colorado State University. EDITOR of the Independence Issue Paper series is John K. Andrews, Jr. president of the Institute,Taxpayers Last: The Governor’s Trojan Horse In promoting his misnamed “Children First” initiative, Governor Roy Romer has emphasized three rationalizations for the form that his proposal has taken: © That this is the only way to get a christmas-tree list of “reforms” which he proposes as part of the Act. © That increasing the sales tax is the only passable tax; though he would prefer otherwise, increases in income and property taxes are specifically unpalatable to taxpaying voters. That all of the new tax revenues generated by this goes to offset one-time funding “gimmicks” which go away next fiscal year; there is no “new money” going to schools through this proposal. ‘An analysis of the actual text which the voters are asked to enact into law reveals an entirely different picture than that which the Govemor paints for them, Truth be known, the Governor has carefully crafted a Trojan Horse. Relying on the fact that the people must vote his entire proposal up or down, and that school finance is a complicated subject understood by few, the Govemor has craftily drafted the thing so that he gets his way in the end. He hopes voters will wheel in a gussied up sales tax, and not notice what it carries inside it in the fine print. Voters need to realize what Romer’s Trojan Horse is all about: © Allof the proposed “reforms”—save one—were already in the mill to be adopted without his tax increase. * Coupled with current schoo! finance law, the proposal mandates huge increases in the income tax and the property tax, and not just the sales tax. ‘* Almost none of the sales tax goes to make up projected decreases in state equalization aid, but rather increases that aid by a quarter. Rather than calling the Governor's tax increase “Children First,” the principles of truth-in-advertising should require it to be labelled “Taxpayers Last.” Page 1The Sales Tax Hit ‘Accorrection is needed for the revenue that the proposed sales tax will raise. The number usually used by the Governor and others is $320 million, but there never has been any justification for that amount. In fact, the fiscal note adopted for the bill projects the amount to be $340 million, and the latest Legislative Council estimates are for $333. The last amount is that used for this analysis. The Appropriations “Lock Down” The Governor claims that his proposal’s §22-54-110(1\(b) merely prevents the Legislature from shifting the new sales tax revenues away from education. In fact, it does much more than that. It “locks down” the appropriation levels to very nearly those of this year, thus making the new revenues an “add on” and not the break-even proposition claimed by the Governor. The Govemor claims that if his proposal fails, then state equalization aid would decrease from the current $1,272 million’ to $1,109 million—a $163 million cut. In fact, his appropriations lock-down requires the Legislature to spend the following on school equalization: General Fund $1,071 million School Lands & Mineral Leases $54 million §22-53-121.5 Funds $70 million Total Equalization Lock-Down $1,195 million This alone makes up more than half of the $163 million “cut.” ‘Then there is that part of Romer’s proposal which creates an “Incentive & Innovation Fund.” In addition to creating the “I&I,” he also requires the Legislature to appropriate (outside of the equalization line item), 2% of the total ‘equalization appropriation, or $50 million minimum. There are a number of undetermined fiscal impacts to the various proposed “reforms” mandated by Romer’s proposal, but most experts—including the Govemor’s—have begged off any serious effort to estimate them. One exception * 1992's “Long Bill” states the appropriation as $1,260 million, bot there was an arithmetic error commit- ted by the lint Budget Committe and is staff, Thelin item actually totals $1,272 milion. Page2