TABOR INFORMATION

TABOR Alert, December 5, 2005

TABOR Alert, December 8, 2005

TABOR Background
The Taxpayer Bill of Rights (TABOR) is a name that represents four tax bills before the Pennsylvania Legislature containing Tax and Expenditure Limits or TELs. TELs are tools with which several states are limiting their spending. A TEL limits spending by a using a population growth + inflation formula which prevents a state budget from rising at a percentage rate that exceeds the components of the formula, i.e., a state’s expenditures cannot surpass a state’s population and inflation growth.

What’s Wrong With The TABOR Formula?
The TABOR formula may seem logical at the outset – put into place a formula that prevents a state from overspending and that has the possibility of generating money that will be returned to taxpayers. However, the TABOR formula does not work for 2 main reasons:

1. The cost of services such as healthcare rises faster than the rate of inflation

2. Sub-populations in need of state funded services such as the elderly can grow faster than the total population

What’s Wrong With TABOR As A Policy?
TABOR is bad fiscal policy. It removes the ability for our legislators to design a responsible state budget. State budgets are a balancing act of revenue generators and expenditures that address a multitude of issues such as mandated costs, immediate public needs, and long-term priorities. TABOR legislation removes the careful weighing and quick reallocating that is needed in drafting a state budget.

The Center on Budget and Policy Priorities shows that:

The rigidities of formula-based budgeting, such as a population-plus-inflation growth factor, do not allow funding of new priorities that may be embraced by the public, such as reduced class sizes or more stringent corrections policies. They do not allow states to adapt to federal mandates that require states to spend more in areas such as security and education, and they may have no provisions for emergency spending on natural disasters or other unanticipated problems.

Therefore, just as with a personal or business budget, it takes a certain amount of discernment to recognize and to assign money in each given year to where your family or company has a need or to address an emergency. With TABOR, this type of prioritizing is not possible.

See the Why is this Critical section of our 12/5/2005 alert for a few reasons why a state budget needs to be more flexible than TABOR allows.

What Does This Mean For State Arts and Culture Dollars?
TABOR adds up to more competition for state dollars and it pits programs directly against one another. Imagine this scenario:

Pennsylvania’s population goes up 2% and Pennsylvania’s inflation also goes up 2%. With the TABOR formula in place, this means the PA budget would grow by 4%. But, what if one area of the budget such as healthcare goes up much faster, to say 10%? If our legislators chose to maintain the current level of healthcare, then that 10% must come from another program, such as higher education, or a series of other programs, such as arts and culture, preservation, etc.

This is different from the way budgeting is done now because the TABOR is restricting the amount of revenue by allowing the budget to increase only with population and inflation. Therefore, when one budget area grows at a faster rate than the formula, other budget areas must be eliminated.

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