By Matt Sundeen

There's a story going around that's so scary it ought to be told only in a whisper:

If Colorado tries to untangle the conflicts in its budget, it will end up like...California.

No self-respecting state would want that. The massive budget cuts, the IOUs, the celebrity governor autographing government-surplus sale items...yikes! Just the thought makes your blood curdle.

The "change makes us California" story is intended to scare us, but like many good tales, it's blatantly untrue. Budget reforms will not transform us into the Golden State. Almost the opposite is true. In many ways, Colorado is already like California, and if we don't change, more California-type problems are likely.

Opponents of budget reform have peddled the Colorado-to-California scare tactic for years. This summer, the Independence Institute's Barry Poulson repeated it to Colorado's Long-term Fiscal Stability Commission. Speaking about Colorado's ongoing reform efforts, Poulson warned that "if these trends continue, the outcome in Colorado will be similar to that in California."

Poulson supported his ominous assertion by comparing Colorado to California of the 1980s. That's when California voters modified their GANN amendment, a constitutional provision similar to our own TABOR. After that, the story goes, California spiraled into a free-spending budget morass – a state that people and businesses were eager to leave. Surely a similar nightmare would befall Colorado, Poulson intimated.

The comparison is simplistic and false. It ignores meaningful differences between the two states. California boasts one of the world's 10 largest economies, and a general fund budget roughly 13 times the size of Colorado's. California state services support nearly 38 million people, compared to the 4.9 million here.

California's main problem is its requirement for a two-thirds "supermajority" vote by its legislature to pass fiscal measures. This provision allows individual lawmakers to hold the budget hostage each year and makes it almost impossible to pass anything on time. The result is an annual budget impasse and the perception that California is running amok. Stunningly, many in the Colorado-to-California crowd have called for a similar supermajority rule here.

It's also noteworthy that California's GANN changes did not lead to runaway taxes, stagnant growth and people fleeing the state. California's nonpartisan Legislative Analyst’s Office reports that California tax rates, though slightly higher than the national average, are comparable to tax rates in the western region and in other large states. Many corporate powerhouses are located in California, and the state experienced sustained economic growth in the 1990s and early 2000s. Although its growth has slowed along with the rest of the country, California's population continues to climb.

Unfortunately, the "change makes us California" story overshadows the real threat. Colorado's lawmakers are already hamstrung by many of the budget conditions afflicting California. Look at the similarities:
  • Both states limit residential property taxes. Over time, that's reduced local revenues and shifted much of the public education costs to the states' budgets.
  • Voters in both states passed constitutional budget formulas that guaranteed ever-increasing amounts for K-12 education. That means K-12 funding must grow even when state revenues drop.
  • Both states are experiencing fiscal pressure from other programs that can't be cut, notably corrections and federally mandated Medicaid. Roughly 73 percent of their general fund budgets are consumed by K-12 education, Medicaid and corrections.
  • Although we don't have a supermajority requirement, Colorado's voter-approval requirement in TABOR has a similar effect -- revenue increases to pay for our growing costs aren't impossible, but they are highly improbable.
Those restrictions are creating significant fiscal headaches. This year, the economic downturn forced Colorado lawmakers to close a $1.8 billion budget shortfall. With limited options, the resulting cuts hurt -- layoffs and furloughs for state employees, a closed nursing home and a shutdown of a prison project are examples. And all indications are that next year will be just as painful, if not more so.

The lesson is this: Don't be scared by wild stories that budget reform will turn Colorado into California. It won't. But inaction might cause budget paralysis that's just as bad, and that's what's truly worrisome.
Sundeen is a senior policy analyst and general counsel for the Bell Policy Center, a nonprofit, nonpartisan policy research center in Denver.
Copyright (C) 2009 by the Colorado Editorial Forum. 10/09