The Taxpayers Bill of Rights (TABOR) is enshrined in Colorado’s Constitution (Art. X, Sec. 20) as the Nation’s strictest tax and spending limitation.  TABOR is the proverbial “elephant in the room,” arousing strong passions among adherents and opponents regarding its constraints on government size and growth.  Never before has a grave emergency akin to COVID-19 so impacted the State’s limited resources as imposed by TABOR.

TABOR is both simplistic on its face and complex in application, spawning decades of litigation involving agencies and programs.  The pandemic has now upended prior fiscal projections and assumptions in many areas.  Gaping and painful budget constraints exist, particularly in education and health care, including a projected surge in Medicaid enrollment following loss of employer-based coverage among newly-unemployed persons.  More funds are sorely needed to meet legitimate needs, yet TABOR purports to limit generation of necessary revenue even in the face of the current emergency.

On the surface, TABOR may inhibit an appropriate response to the present budget predicament, and the political will to act may or may not exist to remedy the problem, now or later.  However, objective analysis does offer a potential legal solution to state budgetary despair, without deep philosophical debate about retaining or repealing TABOR in an absolute sense.  That solution is a temporary emergency tax as specified by Sections (v) and (vi) of existing law. 

Perhaps ironically, TABOR itself addresses emergencies such as now exist, including epidemics and other public health threats.  In such circumstances and subject to defined limits, taxes may be raised temporarily to generate needed revenue, subject to later voter ratification.  A temporary tax could be broad-based or narrowly tailored to raise the State’s flat rate income tax for a limited time on high income individuals; the form of such a change could be openly debated and analyzed before enactment.

The process is straightforward:

•  By its terms, TABOR requires all state and local governments to retain a 3% reserve in cash or other assets. 

• Such a reserve must be depleted before the emergency tax power may be exercised. 

• Authorization permitting access to the state’s emergency reserves must be made by the Governor’s declaration or by the 2/3 vote of both chambers of the General Assembly. 

• Then, a 2/3 vote of both legislative chambers is needed to utilize the reserve funds before an emergency tax is imposed.

• Assessment of an emergency tax is then subject to voter approval within 60 days of its imposition.

A key issue relating to TABOR’s “depletion of reserves” mandate is how to address non-cash assets (currently real estate) held in the emergency reserve.  A viable path forward may involve entry into one or more lease-purchase agreement(s) where the State transfers designated property to comply with the “deplete” requirement but retains possession and use as a leasee paying fair market rent.

Two possible avenues may exist permitting this required asset transfer:

1. A lease/purchase arrangement with a private commercial entity, or

2. A lease/purchase arrangement with a TABOR-compliant enterprise, i.e., a government-owned business receiving less than 10% of its revenue from state grants while retaining authority to issue its own bonds, to which property has been transferred.

Many TABOR-compliant enterprises do operate successfully under Colorado law at the present time, and serve as valuable examples in this setting.

Various details (including timing) remain and possible challenges from strict TABOR adherents abound, apart from the requirement for subsequent voter approval.  Nonetheless, there is a valid mechanism to enact an emergency tax under TABOR generating essential revenue to address the pandemic crisis.  Supposed but illusory legal constraints should not prevent action to support needed state activity (e.g., addressing the anticipated surge in Medicaid enrollment) at this exceptional moment.  Although significant effort is needed, available legal tools do now exist for Colorado, as outlined above, and can be utilized to effectively meet health care and other needs of the State’s residents.