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Economy 4.0

Colorado’s cracked dams create budget dilemma

David Brancaccio Mar 15, 2011
Economy 4.0

Colorado’s cracked dams create budget dilemma

David Brancaccio Mar 15, 2011

Kai Ryssdal: Ohio governor John Kasich released his proposed budget today. It’s fairly grim. The state financing refrain is by now a familiar one: some combination of spending cuts, tax increases or both.

In boom times, the budget process can be almost fun. In a recession, we learn how badly it’s actually broken. Our series Economy 4.0 is all about how to make to make the financial system work better for more people. Today our special correspondent David Brancaccio travels to Colorado, where budget rules are so tough, they’ve led to some creative thinking.

David Brancaccio: This is what happens when there’s no money to shore up a 70-foot dam that once held over a billion gallons of water. A jagged stone gap and a little creek is what’s left of Colorado’s Castlewood Dam. Back in 1933, after years of safety warnings, the thing collapsed. Result: Two people dead and downtown Denver, 30 miles away, underwater.

Mark Haynes: My utmost concern is public safety. But dams do fail.

Mark Haynes runs Colorado’s effort to make sure about 1,900 mostly privately owned dams do no harm. His team identifies problems but he can’t force owners to fix them.

Haynes: One here shows there’s no spillway and has an inoperable outlet. Here’s another one that’s a dam partially breached due to over-topping.

Brancaccio: That’s water coming over the dam.

Haynes: That’s correct.

What Haynes can do is tell owners to drain reservoirs, which is not a great solution in the arid West, which needs more water, not less. So the state pitched in by subsidizing cheap loans to cover repairs. That is, until this recession, when lawmakers siphoned off that fund to balance the budget.

Right now, Colorado has to close $1 billion gap in a budget of $7 billion. The new governor, a Democrat, has a plan to close a prison and for big cuts to public schools in a state where a third of school districts already do four-day weeks to save money.

Steve Tool: Job growth in Colorado would need to be in excess of 50,000 jobs a year for the next three years to pull out of our budget crisis.

Steve Tool once headed the budget committee in the statehouse. He’s a Republican who prefers fixing the budget by attracting new jobs, but he’s seen the forecast this year — less than half the hiring required. Tool met for two days with other ex-lawmakers — a group equally split GOP and Democrat — to see what bright minds free from the usual pressures of politics might do with the budget. The non-binding exercise, organized by the Denver Post, resulted in a call to — listen to this from a rock-ribbed Republican:

Tool: We made a decision to increase the state income tax from 4.63 percent to 5 percent.

Brancaccio: As a practical matter, is it possible to raise those taxes?

Tool: It’s probably not.

You see, there is something called the Taxpayers Bill of Rights, an amendment to the Colorado constitution that means legislators can lower taxes but only voters can raise them. Breaking out of this awful pattern of budgets shattering every time the economy freezes up requires changes that voters have a tough time digesting, in part because it’s dreary budget stuff. In some places like Colorado, this would mean changing the state’s constitution: a thorny process but something that could happen, says Carol Hedges, director of the Colorado Fiscal Policy Institute, if debate is put in terms that resonate.

Carol Hedges: We ask the question of, is Colorado worth it? Are we willing to invest? And I think most Coloradans are willing at least to contemplate that question.

If states don’t, something could crack, if not infrastructure like dams then possibly systems that leave tax decisions to the voters. In Colorado, I learned of an untested strategy that could force a massive overhaul. A group of lawyers, including a former congressman, contends that handing the power of taxation directly to voters was illegal because it robbed the legislature of its ability to govern, in violation of the U.S. Constitution. Once a legal challenge is filed, a decision could take years, not necessarily in time for the next budget mess produced by the inevitable next economic downturn.

In Denver, I’m David Brancaccio.

Ryssdal: There’s more from David at the Economy 4.0 blog.

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