With more state revenue, debate over voter-approved tax refunds flares up again in Colorado

Colorado's economy has been on an upswing, and government officials are getting more comfortable asking the state for help with their funding needs after years of budget cuts.

But more revenue means Colorado is required to start giving refunds to taxpayers, rekindling a decades-old debate over how much money state government should be allowed to keep during a growing economy.

Already, there's talk from lawmakers about whether they should ask voters for permission for the state to keep the refunds.

The question pits Democrats, who have long argued that Colorado's spending limits restrict government's ability to budget, against Republicans, who see the requirements as forcing the state to operate within its means.

The conflict was evident at a recent government conference in Colorado Springs. Gov. John Hickenlooper heard from one county commissioner after another about funding needs. One urged support for mental health services. Another touted the benefits of broadband expansion. Someone else suggested the state restore the cuts public schools suffered during the recession.

The governor was sympathetic to the requests but told officials the state also needs to start budgeting for refunds under Colorado's Taxpayer's Bill of Rights, or TABOR, a 1992 voter-approved constitutional amendment that mandates returns when revenue exceeds the combined rate of inflation and population growth.

"That's going to be the question for everybody — is there an appetite to go out and say, 'All right, how do we get some of this money to our local communities?'" Hickenlooper told officials at the annual conference for Colorado Counties Inc.

In the budget lawmakers will debate in the spring, Hickenlooper is setting aside nearly $137 million in refunds for the 2016 tax year, amounting to an average $15.60 sales-tax refund for all taxpayers filing a return, according to the governor's office. Some taxpayers will also get an average of about $220 as an earned income tax credit.

The following year, the amount budgeted for refunds could be larger.

To keep excess revenue under the amendment, legislators would need approval from voters in November, a heavy lift in a state where the electorate has resoundingly rejected recent proposed tax increases for education, including a $1 billion measure backed by Hickenlooper last year.

Control of the Colorado Legislature will also be split next year, with Republicans ruling the Senate and Democrats the House, making it harder to refer a question to voters.

It's been about a decade since the last refunds were issued — a span marked by slow economic growth and a voter-approved time-out from reimbursements.

The possible refunds now would come at a time when transportation infrastructure needs are underfunded by about $800 million annually, according to the Colorado Department of Transportation. Public schools, meanwhile, are about $900 million below where they should be, based on the funding formula of Amendment 23, which calls for annual increases.

"I think it's a damn shame to be refunding money before we finish making whole our budget after the cuts of the last economic recession," said Sen. Pat Steadman, a Democrat on the Joint Budget Committee, which prepares the state's annual spending plan.

Both parties are looking to Hickenlooper for guidance but from different perspectives.

Republicans point to Hickenlooper's campaign comments supporting the refunds and saying as recently as last month that there's no desire from voters to let government keep excess revenue.

"The question is, overall, what size and scope of government do the people want?" said Republican Sen. Kent Lambert, who chairs the budget panel. "And I think Gov. Hickenlooper's mentioned several times, both in his campaign speeches and he's gone around the state and said, Look, the people I talked to just have no burning desire to increase their taxes."

At a Denver luncheon this week with civic leaders, Hickenlooper outlined the fiscal challenges Colorado will face in the coming years as the state deals with refunds. Hickenlooper maintained that he supports the process and people's power to vote on approving tax hikes.

And yet, Hickenlooper said budgeting based on inflation and population growth doesn't give the state the revenue it needs.

"We're going to have real difficult challenges in terms of how we address pretty much any basic infrastructure," Hickenlooper said.

Hickenlooper insisted his focus is on educating residents about the state's fiscal challenges, not a statewide campaign addressing the amendment calling for refunds.

Steadman was encouraged by the comments nevertheless.

"Has the governor just warmed up a couple of degrees to the idea? Apparently so," he said. "Hopefully, a warming trend continues."