October 2006

Taxpayer Bill of Rights (TABOR)

Welcome to the first issue of State Policy Focus, a monthly newsletter for National Council members. Every month, State Policy Focus will zero in on a public policy topic affecting your state, your organization and those you serve.

The first issue takes on the critical anti-government movement known as the Taxpayer Bill of Rights, or "TABOR." In November, TABOR proposals will be on four state ballots, and similar proposals were raised in an additional 12 states this year. TABOR has had a devastating impact on behavioral healthcare in Colorado, the only state that has enacted the controversial measure. TABOR is an issue we all need to stay on top of and we urge you to educate your community about the dangers of TABOR.

Future issues of State Policy Focus will address topics such as reentry from jails and prisons; domestic violence services for women with mental illness; and court decisions affecting children services. No matter the topic, each issue of State Policy Focus will offer you useful information and insightful analysis.

We are proud of the growing array of member benefits, among them — weekly public policy update; monthly technical assistance e-newsletter; the theme-based NC News; Linda's letter; member listserv; and hot topic conference calls. State Policy Focus, your newest benefit, reflects the National Council's commitment to a strong membership armed and ready for public policy advocacy.

Best regards,
Linda

Coming to a State Near You
TABOR: An Emerging Issue for Behavioral Healthcare Providers

The Taxpayer Bill of Rights (TABOR) is a part of a national movement to limit the size of government. In 1992, Colorado became the first state to adopt TABOR, and the results were disastrous for mental health and substance abuse providers. This year, TABOR proposals were introduced in 16 states, and TABOR will be on four state ballots in November. The TABOR movement is at a critical juncture, where even a single victory will provide momentum to push for similar reform in other states and perhaps even a federal TABOR proposal. Given what's at stake for the individuals and families they serve, community mental health and addiction service providers in all states should be informed about TABOR and the implications it has for state budgets.

What is TABOR?
In Colorado, TABOR is a state constitutional amendment that limits the growth of state and local budgets. While many states have some tax and/or spending limits, Colorado's TABOR amendment contains the most restrictive limitations in the nation. The amendment uses a formula to limit the growth of state and local government revenue. Voters must approve any state or local government tax increases. Since Colorado's version of TABOR limits the amount of revenue that the state may spend each year, any funds collected above the spending limit must be refunded to taxpayers. Colorado, like many states, must balance its budget every year, which prevents it from running a deficit to cover any unexpected spending needs, but TABOR also prevents the creation of a rainy day fund for times of a recession or for special needs.

TABOR's strict requirements prevent a state from recovering from economic downturns, since budgeting is based on the previous year's spending levels - a feature of TABOR known as the "ratchet" effect. Under the ratchet, if a state produces lower revenues as a result of a recession or other unforeseen economic decline, this in turn lowers the amount the state may spend that year. That new budget, which has been cut as a result of less revenue, becomes the new basis for determining the next year's budget. When the state's economy begins to recover, and its ability to spend more on state services increases, the state remains bound by that new lower budget and is only able to increase spending based on the limits set in terms of the TABOR amendment. TABOR hinders a state's ability to respond to crises and stifles innovation. "By creating what is essentially a permanent revenue shortage, TABOR pits state programs and services against each other for survival each year and virtually rules out any new initiatives to address unmet or emerging needs."¹ 

TABOR's Impact on Behavioral Healthcare in Colorado
While a variety of key state services have faced declining funding in the wake of TABOR, Colorado's health care services have been hit especially hard. Under TABOR, Colorado's state funding for mental health and substance abuse services has dropped to an all-time low. In 2001, Colorado spent $64 per person on mental health services — 21 percent below the national average of $81.²  Colorado ranks 49th in per capita spending on substance abuse and treatment programs at the same time it ranks first in the nation for cocaine use and fourth for use of any drug.³ 

The number of long-term care beds available for people with severe mental illnesses has also declined under TABOR. According to the Center on Budget and Policy Priorities, decreased funding for mental health services in Colorado has led to a 14 percent loss in overall state mental health hospital capacity.⁴  The Ft. Logan Mental Health Institute, for example, has been forced to eliminate an after-care program, 27 beds in its adult unit, and 16 beds in its residential unit. Another provider, Pueblo Mental Health, has had to eliminate eight beds in its adolescent unit and 32 beds in its adult unit.⁵ 

A variety of key mental health and substance abuse programs have been eliminated entirely in the wake of TABOR, including: the state's Mental Health Treatment Program for Detained Youth; the Early Intervention Program; the Early Childhood Mental Health Program; and Community Mental Health Programs for uninsured clients who are not eligible for Medicaid.⁶ 

By the Numbers: TABOR's Toll on Colorado:

• Colorado ranks 49th in per capita spending on substance abuse and treatment programs - and fourth in per capita drug use⁷ 
• In 2001, Colorado spent $64 per person on mental health services - 21 percent below the national average of $81⁸ 
• The number of low-income children lacking health insurance doubled in Colorado between 1992 and 2004 - at the same time as this rate fell overall nationwide⁹ 
• Colorado is one of only 15 states without a "medically needy" program under Medicaid.¹⁰ 
• Colorado is one of only six states to impose an asset test on children applying for Medicaid. Children whose families have more than $2,500 in assets are ineligible for Medicaid regardless of their income level.¹¹ 
• The number of adults with serious mental illnesses in Colorado's prisons has increased from 239 in 1991 to 3802 in 2003.¹² 
• Only 21 of Colorado's 83 hospitals have behavioral health facilities or staff.¹³ 
• The annual rate of emergency department admissions for mental health and substance abuse needs for people with Medicaid or the uninsured grew 83 percent over three years under TABOR.¹⁴ 
• The number of low-income children lacking health insurance doubled in Colorado between 1992 and 2004 - at the same time as this rate fell overall nationwide.¹⁵ 
• Colorado has cut its Medicaid hospital reimbursement rate by nearly 5 percent since 2001.¹⁶ 

How did TABOR lead to these outcomes? TABOR's spending limits are linked to inflation (using the Consumer Price Index, or CPI) and population growth. Medical inflation, however, has consistently outpaced the CPI over the past ten years. In August 2002, for example, medical inflation increased more than twice as much as the CPI as a whole.¹⁷  Because the cost of health care is growing more rapidly than inflation, funding for health care programs has been dramatically reduced under TABOR. In addition, TABOR's formula does not take into account the faster growth rate of subpopulations, such as people with disabilities and senior citizens, who require more extensive and more costly care. The total US population increased by 15.4 percent between 1990 and 2002 — while the number of people with disabilities and senior citizens enrolled in Medicaid increased by 70 percent in the same period.¹⁸ 

In 2005, after media coverage of school children wearing winter coats in unheated classrooms and other consequences of TABOR's restrictions, Colorado citizens decided that TABOR needed to be suspended. The state's voters passed Referendum C, a measure that overrides TABOR's revenue formula for five years. The Referendum also allows the state to keep and spend the revenue it collects during that period, retaining any surplus to address unexpected needs or to fund new initiatives. Referendum C also permanently eliminates the ratchet effect. Despite Referendum C, Colorado's budget continues to reflect the damage of TABOR's past constraints. When Referendum C expires in 2010, Colorado will again be faced with severe restrictions on spending for many social programs.¹⁹ 

The State of the States: 2006 Proposals
Proponents of TABOR, including Grover Norquist's Americans for Tax Reform, the Cato Institute, and Americans for Limited Government, have described it as the "Holy Grail" of fiscal policy, promising to rein in irresponsible spending and give more control and annual refunds to taxpayers. Despite the dramatic cuts to health care and other public services seen in Colorado since TABOR's enactment, proponents continue to push for its expansion in other states. Supporters counter criticisms of TABOR's effects, advocating for slight modifications to the Colorado model that they contend will make such a proposal more effective in other states. "I think it is such a good idea that I hope we can actually get a parallel bill introduced in Washington next year, to create an American Taxpayer Bill of Rights, to put a straitjacket on the federal government's (economic) growth," Newt Gingrich, former Speaker of the House, said of TABOR earlier this year.

TABOR proponents have been very active in the past two years. In 2005, TABOR proposals were introduced in 23 states: Alaska, Arizona, California, Idaho, Kansas, Maine, Maryland, Michigan, Minnesota, Missouri, Nevada, New Hampshire, New Mexico, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, and Wisconsin. None made it onto a statewide ballot.

This year, TABOR proposals were introduced in 16 states: Arizona, Kansas, Maine, Maryland, Michigan, Minnesota, Missouri, Montana, Nebraska, Nevada, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, and Wisconsin. In the upcoming November elections, TABOR proposals are on the ballot in four states: Maine, Montana, Nebraska, and Oregon.

In Maine, TABOR will appear on the ballot as "Question One." Maine's version of TABOR preserves what many consider the central flaw of Colorado's TABOR: the inflation plus overall population change formula that limits state budget growth.²⁰  Proponents of Maine's TABOR claim the ratchet effect that Colorado voters corrected in 2005 with Referendum C has been eliminated, but others disagree. Maine's ballot measure, like Colorado's TABOR, does not take into account the higher rate of inflation for medical services nor the specific population growth of groups that need higher rates of healthcare (e.g., seniors, people with disabilities). Although many of Maine's human service organizations and individuals — teachers, hospitals, mental health and addiction treatment providers — oppose TABOR, the momentum appears to be swinging the other way. Recently, the Portland Regional Chamber of Commerce announced its support of TABOR - a disturbing development, as business groups are commonly among the chief opponents to TABOR legislation.

In Montana, "StopOverSpending," or SOS, will appear on the ballot as CI-97. Again, the inflation plus population change formula that is at the heart of Colorado's TABOR is included, as is a requirement for voter approval to spend above the formula's limit. Proponents argue that SOS is an improved version of TABOR that also eliminates the ratchet, offering a reserve fund to safeguard against state revenue shortfalls.²¹  But critics point out that SOS contains no specific information on how large this reserve fund would be, how much would be deposited into it, nor under what circumstances funds would be withdrawn.

Groups opposed to SOS have brought two state lawsuits in an attempt to keep the measure off the ballot in November. On September 13, District Court Judge Dirk M. Sandefur rendered SOS invalid due to "deceptive, fraudulent, and procedurally defective practices."²²  On September 19, District Court Judge Thomas Honzel ruled that SOS illegally amends more than one section of Montana's constitution and prohibits the secretary of state from counting any votes on the measure.(²³  However, because of the late date of these rulings, SOS will still appear on the November ballot, along with two other measures being challenged in court. Proponents have appealed to the state Supreme Court, which is not expected to make a ruling in the case until after the election. Anti-SOS advocates are encouraging Montana's voters to vote against SOS as a safeguard against the possibility that the state Supreme Court could overturn the lower courts' decisions.

Nebraska's TABOR proposal, also called "StopOverSpending" (SOS), will appear on the ballot as Initiative 423. Like Montana's SOS proposal, Nebraska's SOS also retains the inflation plus population change formula that is at the heart of Colorado's TABOR is included, as well as the requirement for voter approval to spend above the formula's limit.

Nebraska's SOS has also been challenged in state court, but it remains on the ballot. In June, District Judge Richard Kopf ruled that petition circulators must be allowed to solicit signatures on most public property after SOS proponents claimed they were prohibited from gathering signatures in public places in the cities of Grand Island, Omaha, and Lincoln.²⁴  In September, District Judge Jodi L. Nelson ruled against claims that SOS is unconstitutional, finding that the ballot initiative did not interfere with the state legislature's power to tax and that proponents were in compliance with state law regarding ballot initiatives. Judge Nelson's decision is being appealed, but SOS will remain on the ballot.

Oregon faces a pair of TABOR-related ballot measures. Ballot Measure 48 again uses the inflation plus population change formula from Colorado's TABOR. Ballot Measure 41 would amend the Oregon Tax Code to substitute federal tax deductions for state tax exemptions and would institute an immediate retroactive budget cut of $151 million - meaning health care and other important services could lose funds they've already budgeted for.²⁵  For the 2007-2009 budget, nearly $800 million would be cut.²⁶  In September, a poll conducted for The Oregonian and KATU TV 2 found that Oregon voters are divided on Ballot Measure 48: 26 percent of voters planned to vote yes, 37 percent planned to vote no, and 32 percent were undecided.²⁷ 

What Can You Do?
Proponents of TABOR and similar proposals are actively working to put a "straitjacket" on state spending, regardless of the serious consequences for behavioral healthcare and other social services needed by states' most vulnerable citizens. A victory in even one state may encourage support for similar initiatives in other states and at the federal level. The National Council urges you to find out about these proposals in your state and to join other advocates in opposing the spread of TABOR. For more information on how you can become active in the fight against TABOR, contact Allison Fort at 301.984.6200, ext. 235 or allisonf@nccbh.org.

¹ Bradley, David and Karen Lyons. "A Formula For Decline: Lessons from Colorado for States Considering TABOR." Center on Budget and Policy Priorities. October 19, 2005, p. 4.
² "TABOR Issue Brief: Mental Health." The Bell Policy Center, March 10, 2005.
³ Ibid.
⁴ Johnson, Nicholas and David H. Bradley. "Public Services and TABOR in Colorado." Center on Budget and Policy Priorities, January 13, 2005, p. 3.
⁵ "TABOR Issue Brief: Mental Health." The Bell Policy Center, March 10, 2005.
⁶ Ibid.
⁷ "TABOR Issue Brief: Mental Health." The Bell Policy Center, March 10, 2005.
⁸ Ibid
⁹ "TABOR is Hazardous for Health Care." Center on Budget and Policy Priorities.
¹⁰ Ibid
¹¹ Bradley, David and Karen Lyons. "A Formula For Decline: Lessons from Colorado for States Considering TABOR." Center on Budget and Policy Priorities. October 19, 2005, p. 4.
¹² "Impact of State Budget Cuts on Mental Health & Substance Abuse Care in Colorado." Colorado Mental Health and Substance Abuse Summit brochure.
¹³ Ibid
¹⁴ Ibid
¹⁵ "TABOR is Hazardous for Health Care." Center on Budget and Policy Priorities.
¹⁶ Johnson, Nicholas and David H. Bradley. "Public Services and TABOR in Colorado." Center on Budget and Policy Priorities, January 13, 2005, p. 3.
¹⁷ Bureau of Labor Statistics Consumer Price Index, August 2002. http://ftp://ftp.bls.gov/pub/news.release/History/cpi.09182002.news
¹⁸ Bradley, David H., Nicholas Johnson, and Iris J. Lav. "The Flawed "Population Plus Inflation" Formula: Why TABOR's Growth Formula Doesn't Work." Center on Budget and Policy Priorities, January 13, 2005, p. 1-2.
¹⁰ Ellis, Justin. "Gingrich Criticizes Dirigo Health Plan." Blethen Maine Newspapers. September 7, 2006.
²⁰ Lav, Iris J. and Karen Lyons. "The Same Old TABOR: Maine's "Taxpayer Bill of Rights" Proposal Fails to Fix Flaws of Colorado's TABOR." Center on Budget and Policy Priorities, March 16, 2006.
²¹ Lyons, Karen and Iris J. Lav. "A Taxpayer Bill of Rights By Any Other Name: Montana's "StopOverSpending" Proposal is a TABOR." Center on Budget and Policy Priorities, April 4, 2006.
²² "Two separate judges rule against CI-97" www.notinmontana.org/newssandefur.htm
²³ Ibid.
²⁴ O'Hanlon, Kevin. "Judge issues order against cities on petition-circulator policies." Associated Press, June 29, 2006.
²⁵ The facts about Bill Sizemore's Shell Game (Measure 41). www.defendoregon.org
²⁶ Ibid.
²⁷ Davis, Hibbitts & Midghall,Inc. Oregonian/KATU Statewide Survey-Annotated. September 23-25,2006. http://politicsupdates.blogs.oregonlive.com/uploads/191542-LC.61POLL128.pdf

State Policy Focus is a monthly e-newsletter published by the National Council for Community Behavioral Healthcare. Director of State Policy - Tammy Seltzer.