RALEIGH – A recent cover story in Governing magazine about the fiscal situation in Colorado Springs gives both conservatives and liberals in North Carolina something to think about.
The second largest city in the state, after Denver, Colorado Springs has more than 400,000 residents and a longstanding reputation for fiscal conservatism. Its property taxes are among the lowest in the country for an urban area, and its local Taxpayer Bill of Rights predates Colorado’s better-known state version.
Far more dependent than most municipalities on sales-tax receipts to finance its budget, Colorado Springs found itself in fiscal trouble early on in the recession as cash-strapped consumers cut back on discretionary spending to focus on essentials such as housing and food and to pay off debts (expenditures that don’t typically generate sales-tax revenue). Facing a $40 million deficit in 2009, city leaders put a property-tax hike on the November ballot, as required by TABOR.
Colorado Springs voters said no, loudly.
So city officials cut the budget. The largest savings came from reductions in parks, recreation, and maintenance budgets, though other departments also pared their budgets and workforces. Municipal bus service ended on nights and weekends. The police department auctioned off its three helicopters.
Colorado Springs made national headlines with some of these cuts. Liberals castigated them. Conservatives defended them. When Governing took a look at the results, however, it offered a more detailed and nuanced perspective.
For one thing, many of the services the city no longer pays for out of tax dollars didn’t disappear. They continue in a different form, funded by donations and advertising or performed by volunteers. For another, while the city’s police department is concerned about being understaffed, there haven’t been any deleterious consequences yet on outcome measures such as crime rates.
As reporter Zach Patton put it:
It’s easy to walk around the place and wonder what all the fuss is about. So what if there are a few weeds in the medians? Or if some of the streetlights have been turned off? Is that such a price to pay for low taxes and limited government?
As it happens, I don’t agree entirely with the priorities adopted by Colorado Springs. But I do think the city’s experience illustrates some lessons that North Carolina policymakers should keep in mind when grappling with our own set of economic and fiscal challenges.
First, emergencies aren’t the ideal time to make decisions about government budgets and services. When the economy is growing, politicians are tempted to spend virtually all of the revenue growth they experience – the political constituency for prudence and rebating tax overpayments isn’t nearly as powerful as the constituency for spending. That’s an argument for capping the annual growth rate of government budgets, so that when recessions come around the jurisdiction doesn’t have as large a deficit to close – and has a larger savings reserve to help close it. (Colorado Springs’ cap, it seems, was too loose.)
Second, be careful what you wish for. Over the past decade, many North Carolina localities have sought to shorten the periods for property-tax revaluations, arguing that an eight-year cycle doesn’t allow them to capture revenue gains from escalating real-estate prices in time to finance the services that growing communities need. Some have even argued that residential property ought to be revalued annually, as with commercial property.
Now, many local officials must be feeling glad they didn’t get what they wanted. If North Carolina cities and counties had been revaluing their property-tax base annually, the past couple of years of housing-market declines would have worsened their budget deficits significantly. Perhaps lag time isn’t such a bad idea after all.
Finally, government budgeting is not simply an accounting exercise or an enterprise-management issue. It’s a philosophical one. What does coercive government exist to do? If we limit government to core functions – the protection of individual rights and the provision of true public goods that can’t be generated through voluntary exchange – it will be smaller, more affordable, and more respectful of freedom.
As to whether these lessons will be learned, hope springs eternal.
Hood is president of the John Locke Foundation.