In baseball, when a runner is caught between two bases he is said to be in a pickle. He can’t decide what base to run to, and he’s usually caught and tagged out.
The Democrats at the State Capitol are in a bit of a pickle themselves now on the budget.
They really want to raise taxes and fees this year, both to shore up baseline program spending and implement new programs, but they know that if they raise too much revenue, they will trigger a lower TABOR revenue cap in the near future.
The TABOR revenue cap sets the amount of money that the state can keep and spend each year.
When Ref C passed in 2005, one of its provisions eliminated the annual resetting of the TABOR revenue cap. During the Ref C timeout period, a new cap was going to be set at the highest level achieved in that period and then future caps would always grow from that newly established high point. Never declining, or ratcheting down, but always growing at inflation plus growth from the highest point reached during the timeout.
That new high point was achieved in 2007-2008 at $10 billion. This year, 2009-2010, the total projected revenue is estimated to come in at $9.65 billion.
If the Democrats raise too many more fees or taxes this year, and the economy recovers a bit by the start of calendar year 2010, the total revenue collected for this year could exceed that $10 billion from 07-08.
If that happens a new revenue cap will be established and the growth will come from the new cap giving up two years of inflation and population growth from the 07-08 cap.
Confusing? Yes, it is, but here’s what it means in dollars. If the new cap is established this year at the old level plus one dollar, in 2010-2011 the revenue cap (which represents how much the state can keep and spend) will be $10.254 billion. If, instead, the old cap is used, the 2010-2011 revenue cap will be $11.313 billion. So if they increase taxes too much this year, they lose the opportunity to spend an extra $1.1 billion next year!
Now that’s a pickle.