Claims that Senate Bill 26-135 could permanently eliminate the refund of overcollected revenue under Colorado’s Taxpayer’s Bill of Rights (TABOR) amendment may at first blush sound hyperbolic, but they are not. Let me explain.
Beyond handing progressive legislators a blank check to cover up their own overspending, the new TABOR revenue limit creates a perverse incentive to limit both fiscal transparency and voter consent.
TABOR Working Just Fine
TABOR’s existing formula limits annual growth of a portion of the state budget to a combination of population growth plus inflation.
This formula allows government to reasonably grow and accounts for factors not directly within the government’s control. TABOR also allows for additional revenue and spending increases as long as they are authorized by voters.
While policy decisions certainly influence Colorado’s attractiveness for migration or starting a family, global population trends suggest that population changes occur regardless of political regimes.
Therefore, it makes sense that revenue and spending limits be adjusted to the state’s population.
Also, inflation is largely a monetary phenomenon, meaning that it is caused by the US central bank’s tinkering with interest rates, leading to “printing” money and a devaluation of the dollar, which affects individuals and governments alike.
Again, inflation is largely outside of the state’s control, and, as the state government is harmed by inflation just as individuals are, it is reasonable that state spending should account for it.
But beyond that, it’s hard to argue with Coloradans having a direct say in their own taxation.
Monkeying with the Formula
The new SB-135 TABOR limit, if approved by voters in the 2026 election, would essentially change the existing formula forever, allowing the legislature to set its own fiscal guardrails.
While the new TABOR limit would still grow in line with population growth and inflation, it would also allow increased revenue to match the state’s share of K-12 education funding from the prior year—something under the legislature’s control.
Because the new limit would be directly tied to legislative action, it would create a perverse incentive to pump money into anything “education”-related to keep overall revenue below the new limit, regardless of academic outcomes or administrative bloat.
And believe it or not, education funding in Colorado is already bloated.
According to the Common Sense Institute, administration has ballooned, far outpacing growth in the number of teachers, while student enrollment is actually declining.
On the other hand, because money is fungible, legislators could hypothetically transfer the “education” funding to the General Fund to be spent on whatever they desire, all while forever remaining below the TABOR cap.
Given current budget woes, most of the newly retained revenue would likely go to backfilling Medicaid, allowing legislators to continue kicking the can down the road on the main culprit behind Colorado’s structural budget deficit.
Rewriting the Spending Playbook
While the SB-135 fiscal note suggests that the new limit would be approximately $4.8 billion above the current TABOR limit in fiscal year 2027-28 (based on 2026-27 state education funding), the state currently expects to retain only approximately $817 million above the current limit in 2027-28.
While that would only be a fraction of the $4.8 billion permitted to be retained, it’s only a matter of time before the state starts to bump up against the new limit. Here’s how.
The legislature created several tax credits and deductions in recent years to “spend” overcollected revenue without hitting the TABOR cap.
With a new cap, we should expect legislators to start removing (especially business-friendly) targeted tax breaks to quickly increase the revenue they are allowed to retain and spend on other things, until they begin to bump up against (and catastrophize) the new TABOR limit.
While removing tax breaks and allowing the state’s flat income tax to work as intended is generally better policy for Colorado, this particular deception would only help the government buy votes and keep more taxpayer money.
Coloradans are always only one step away from losing their voter consent over taxation. Save TABOR, save democracy.
