Posts Tagged Amendment 66

Yes on 66 Campaign Goes Brave Sir Robin

When danger reared its ugly head
He bravely turned his tail and fled
Brave, brave, brave, brave Sir Robin
“Monty Python and the Holy Grail”

That was roughly the approach taken by Abigail Hinga of the Yes on 66 campaign Sunday morning.

In response to WatchdogWire’s coverage of Amendment 66, News Director Roman Moore of Krystal 93 FM in Dillon invited me and a representative of the Yes on 66 campaign to participate in a radio forum of about 45 minutes, to be aired at least once, and podcast on the site.  The show was to be recorded at 1:00 PM.

As I was driving up to Dillon this morning, I got a call from Mr. Moore saying that the Yes on 66 representative had cancelled – without giving a reason – and that he didn’t feel it would be right to continue with the forum with only one side in attendance.  Mr. Moore asked be for a statement, and I gave him the following:  “It’s sad that the out-of-state money and union interests that are backing this amendment don’t want the residents of Summit County to have access to a full and fair debate.  That’s probably because under the new funding formula, it’ll just mean more broken promises to Summit County public school students.”

It should be noted that Watchdog Wire has not taken an official editorial position on Amendment 66, however, we have devoted a fair amount of time to discussing the inconsistencies of those who are supporting the measure, including Governor Hickenlooper and ProgressNow’s Alan Franklin.

In my conversations with Mr. Moore, he never betrayed his own opinion on Amendment 66, only his desire that his listeners be treated to a full debate on the matter, something that he did not believe was happening.  In a message to his listeners – aired several times today and tomorrow – Mr. Moore details the difficulty he had with the Amendment 66 team first in securing a representative, and then in retaining one.  In short, Margaret Carlson, President of the Summit County School Board had agreed to participate.  She then backed out, to be replaced by a former Summit County teacher, Melissa Wagasky.  Ms. Wagasky cancelled this morning.  No reason was given for either cancellation.

Let’s be reasonable here.  The Yes on 66 side has bought a tremendous amount of airtime on Krystal 93 for advertising.  Without a participant, it was clear that Moore wouldn’t be able to have  a forum.  And without a forum, they would effectively muzzle the opposition.  The way this game is normally played, the side who thinks they have nothing to gain ducks and dodges, while the side who wants the debate accuses them of ducking an dodging. But it’s highly unusual – to say the least – to commit several times to a forum and then pull out of it at virtually the last minute.  That’s not politics, it’s just poor form.

 

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Transparency At A Steep Price

This post originally appeared on Watchdog Wire Colorado (“Gov. Hickenlooper Channels His Inner Pelosi“).

 

Rep. Nancy Pelosi (D-CA) famously said about Obamacare that, “We have to pass the bill so that you can find out what’s in it, away from the fog of the controversy.”  That seems to be the line that Gov. John Hickenlooper (D) is taking with respect to PERA spending by the state’s school districts, and Amendment 66.

In a recent post that has garnered attention from both the Colorado Springs Gazette and the Denver Post, we discussed the governor’s approach to PERA spending by the districts, which is to increase transparency in order to drive public opinion:

Gov. Hickenlooper: Well, if you want to fix that, if that’s what’s happening, then we can’t legislate that. There’s a certain amount of money that goes into the districts, and that is the way our education system is structured. If you want to fix that, put it up on our website, how much of that money the district is spending on PERA. And I guarantee you the parents will go nuts.

In response to another question at that same October 8 event, Hickenlooper touted the transparency website as part of the “Grand Bargain” of Amendment 66, that the entrenched interests and monopoly power of the districts and the teachers unions would likely not have accepted the transparency without the additional money from Amendment 66’s tax increase:

Play

And the other question of whether you could just do this – let’s assume the website was for free, to get that into the bill, the school districts, and the school administrators, would have fought it like crazy, because it’s going to make their life hell.

The only reason they were willing to let it be in this bill was because we had a tax increase.

It’s why they call it, “The Grand Bargain.” We’ve got all this stuff that no other state – I mean – doesn’t it sound like a great idea to have that transparency? And yet why is it that not a single other state has that kind of a website. (Emphasis Added.)

In short, he’s arguing that the only way to get the transparency is to vote for the tax increase first.

However, the legislature has in the past mandated transparency, and with no objection from the districts.  In 2010, the legislature approved HB10-1036, the Public School Financial Transparency Act, virtually without objection.  Among other things, it’s the reason that school districts have to post Comprehensive Annual Financial Reports and Quarterly Financial Statements online, along with check registers and credit and debit card purchase statements within 60 days of incurring the expense.

The bill passed without dissent through both Education Committees, and registered only one “No” vote on the floor of the House.  It appears as though nobody testified against it in committee.  Our own Ben DeGrow did testify in favor of it before the House Education Committee.

If the governor is now arguing that such an extension of the transparency requirements would meet with stiff resistance from the school boards and teachers unions, he’s essentially arguing that there’s not enough support within the majority Democratic caucus in the legislature to get such a bill passed, and admitting perhaps more than he would like about union influence within that caucus.

In order to garner support for the tax increase from reluctant parties, Gov. Hickenlooper has pledged to put SB10-191’s tenure reform on the ballot in the form of a Constitutional amendment, should the expected legal challenges succeed.  If the tax increase amounts to the price to be paid for bringing his own caucus along on transparency, it calls into question his ability to fulfill that pledge once the tax increase has already passed.

 

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Amendment 66 – Exacerbates The Revenue Problem

Rather than aid poorer school districts, Amendment 66 will, in the long run, likely end up hurting them, making budgeting harder for those districts, and lives more difficult for both the students and teachers who live and work there.

The state is complaining that it’s chronically short of cash for education, both as a result of decreased tax revenues since the recession, and the state’s budget restrictions.  In response, they have proposed a two-tiered income tax system, the first in over a quarter of a century in Colorado.

Currently, Colorado has a flat, 4.63% income tax rate from the first dollar of income.  The proposed system would raise that to 5% for income under $75,000 and to 5.9% for income over $75,000.  Colorado has roughly 1.8 million filers in the first bracket, and just under 600,000 filers in the proposed upper bracket.  Proponents claim this would raise roughly $1 billion a year in new revenue, which they also claim would go largely to the poorer and neediest school districts.

How could a $1 billion tax increase make things worse for these districts?  Because the income tax, unlike the property tax, is pro-cyclical.  When the economy is doing well, incomes are highers, and receipts from the income tax rise.  The income tax varies much more with the business cycle than the property tax does because incomes vary much more than property values do.

This conclusion is borne out by a 2010 Tax Foundation study comparing variations in various sources of state and local income nationwide.  Corporate income tax was the most volatile, with personal income tax next.  A more recent analysis, also by the Tax Foundation, confirmed this result, and found that over the last 20 years, the least volatile source of state and local revenue has been the property tax, the primary source of income for school districts.

This has particular resonance for Colorado.  In 2008-2009, Colorado ranked 36th in year-over-year percentage change in state tax revenues; increasing the state’s dependence on personal income taxes will likely make them more volatile, and adding a progressive component will make them more volatile still.

Under Amendment 66, the state will backfill much of the difference for poorer districts.  This means that those poorer districts will find themselves more dependent on a more volatile source of income: personal income taxes.  When times are good, this will help them.  But when the next recession inevitably hits, it’s those poorer districts, the ones that Amendment 66 claims to help the most, who will in fact, suffer the most.

 

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A New Challenge to Amendment 66

Late this afternoon, a lawsuit was filed challenging the validity of many of the signatures gathered by the supporters of Colorado Initiative 22, now Amendment 66, which seeks to raise state income tax and create a two-tiered tax system for the state.

The lawsuit was filed in Denver District Court by a bipartisan pair of former state legislators, Norma Anderson (R) and Bob Hagedorn (D), and has not yet been scheduled for hearing. According to the press release by Coloradans for Real Education Reform, its primary charge is that the IDs of many of the petition-gatherers were not properly validated by notaries.

If upheld, this challenge could invalidate as many as 39,000 of the nearly 90,000 signatures ruled valid by the Secretary of State’s office. (Initiative supporters had turned in just over 165,000 signatures, of which just under 76,000 were rejected as invalid.) The Initiative needs a little over 86,000 signatures to qualify, so this section alone would invalidate far more than enough to keep the measure off the ballot.

Colorado had long had what was regarded as one of the nation’s least restrictive ballot access requirements for both statewide initiatives and proposed constitutional amendments. A 2009 law, HB09-1326, passed with strong bipartisan majorities in both houses of the legislature, tightened up those requirements in a number of ways. It contained restrictions on signature-gatherers, including those that are being challenged in this section of the lawsuit.

Part of the 2009 law requires that circulators sign an affidavit on the petition sections they submit, stating that all of the signatures on that section were gathered in their presence, and that to the best of their knowledge, the signers’ information is correct.

The revised section, Colorado Revised Statutes 1-40-111, reads that:

(C) The circulator presents a form of identification, as such term is defined in section 1-1-104 (19.5). A notary public shall specify the form of identification presented to him or her on a blank line, which shall be part of the affidavit form.

(II) An affidavit that is notarized in violation of any provision of subparagraph (I) of this paragraph (b) shall be invalid

The plaintiffs argue that in many cases, the circulator himself wrote down the form of ID that was presented, rather than the notary, as is required by law. This would seem to defeat the purpose of having the notary verify the identification.

The 2009 law also inserted language stating that, “that he or she understands that failing to make himself or herself available to be deposed and to provide testimony in the event of a protest shall invalidate the petition section if it is challenged on the grounds of circulator fraud.” This would seem to mean that signatures gathered by any circulator whose affidavit is being challenged, and who won’t or can’t testify for this case would be thrown out, as well.

While a 2010 lawsuit (Johnson v. Beuscher) did challenge the validity of some signatures under the new law, this particular section was not used in that suit.

It would also seem that the filing of the suit by members of each party, neither of whom has a reputation for anti-tax activism, would lend it credibility. Part of the reason for the late date of the suit is the late date of the filing deadline; signatures were submitted in August, and the Secretary of State only issued his ruling on the petition on September 4.

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More Bad News for Colorado’s Public Pensions

Another month, another report showing the country’s pension problem to be worse than we thought, Colorado’s pension problem to be among the nation’s worst.  This time, it’s a report from the non-partisan State Budget Solutions, “Promises Made, Promises Broken – The Betrayal of Pensioners and Taxpayers.”

In three significant measures, Colorado ranks in the bottom third of the nation’s public pensions: Its funded ratio is the 11th-lowest in the country, at 32.8%; the per capita unfunded liability is 15th-worst, at $16,158 per head; and as a percentage of the state’s GDP, Colorado is 16th-highest, at just over 31%.  These dire rankings corroborate a recent Moody’s study that had Colorado’s unfunded pension liability in the bottom 10 as a percentage of state government revenues, another measure of the state’s ability to cover these debts.

They calculate the actual unfunded liability at just under $84 billion, nearly four times what PERA admits to, and $27 billion more than is estimated in an upcoming Independence Institute report.  It should be noted, however, that the authors include five plans managed by the state’s Fire and Police Pension Association, much smaller plans which are not part of PERA.

The report takes issue with most public pensions’ investment return expectations, which usually vary between 7% and 9%, and the aggressive discounting oliabilities that most plans engage in.  Instead of the optimistic – some would say wildly optimistic – return assumptions, the report’s authors use 3.225%, the 15-year Treasury rate.  They also use that number to discount plans’ liabilities, arguing correctly that the discount rate should reflect a plan’s risk to its investors, not its returns on its investments.  They argue that since these plans approach being risk-free investments, they should be discounted as such.

Personally, I think both the return assumption and the discount rate are too low.  Even if 8% is unrealistic, and I’m not sure that it is, funds tend to have their money in diversified portfolios which will average returns higher than Treasuries.  In addition, the plans are covered by state obligations, not federal ones.  Investors have long recognized that state obligations carry more risk than do federal “risk-free” obligations, a fact reflected in the higher interest rates carried by state debt.

That said, the study makes two useful contributions to the debate.  By making the return and discount assumptions it has, the report effectively sets an upper bound on the problem; surely no lower interest or discount rates could reasonably be chosen.

More concretely, by showing us to occupy the same neighborhood as such well-known pension basket cases as New Jersey and California, the report shows the foolishness of the approach of Amendment 66 – raising taxes, while appropriating all of the increased short-term revenue to ongoing operations.

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