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NC Budget and Tax Center Testifies to TABOR’s Harm

Today, the House Judiciary A Subcommittee heard briefly from the public about HB188 or TABOR which would put in place an artificial and restrictive formula to cap state investments in public schools, health care, public safety and infrastructure.  Testifying to the committee, the N.C. Budget and Tax Center’s Edwin McLenaghan, summarized the damage that TABOR would cause in North Carolina and has already created in Colorado.

House Bill 188, or TABOR, would take critical decisions about revenues and public investments out of the hands of legislators and instead use a rigid, arbitrary formula to determine the state’s annual budget.  This proposal would weaken North Carolina’s ability to recover from the Great Recession, and it would undermine the long-term viability of public schools, community colleges and universities, hospitals and courts.

The restrictive cap on the growth of the state budget equal to population growth plus inflation fails to take into account that the costs of services such as health care and education grow faster than inflation. The TABOR formula also fails to account for demographic shifts, such as the increasing share of North Carolina’s population made up of elderly residents and college students.

Because TABOR’s restrictive formula does not keep up with the cost of health care, education and many other public services, it would force annual, recurring reductions in all government services.

The state of Colorado passed a TABOR constitutional amendment in 1992, and its budget constraints have seriously weakened Colorado’s public structures.

So much so that after 12 years of TABOR, Coloradans voted to bypass TABOR in 2005 to allow state revenues to grow with the economy. It’s now been more than five years since Coloradans voted to suspend TABOR, and the state’s public structures have yet to recover. Citizens and business leaders there are calling for TABOR’s end.

Other states have heeded the warning provided by Colorado’s mistake: Despite TABOR amendments being proposed in 28 state legislatures between 2005 and 2009, Colorado remains the only state where TABOR has passed.

TABOR’s fiscal straightjacket would eliminate the possibility of restoring critical public investments in North Carolina as the economy recovers. Instead, TABOR would permanently lock in the budget cuts made during this recession and further starve the state’s public structures of the resources necessary to put North Carolina and its economy on the path to recovery and future prosperity.

TABOR’s inherent flaws and the experience of Colorado make it clear that TABOR is the wrong formula for North Carolina’s future.

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