Headlines from the State Capitol might cause a reader to believe Colorado is in a deep recession.  Legislators say they must cut more than $1 billion in spending to balance the 2025-26 budget.

Still, state government has $687 million more to spend than last year in a $19 billion budget.  So why all the histrionics about a budget “crisis”?  Because Colorado lawmakers practice “fiscal tailgating.”

Tailgating on the highway is dangerous because when drivers travel too fast and follow too close to the car ahead, the tailgating driver doesn’t have time to react if the lead driver unexpectedly brakes or swerves.

Fiscal tailgating is much the same.  Lawmakers spend money as fast as it comes in, then when the economy slows, they face much harder choices than if they had tapped the brakes when awash in money.

After COVID, Congress inflated the money supply and passed out trillions to states.  Colorado raked in billions, which lawmakers knew would someday run out.

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Not long ago, veteran members of the Joint Budget Committee, regardless of party, would stand firmly against spending one-time funds for ongoing programs because they knew they’d ultimately be forced to either cut the new program or cut something else.  Ending a program people have come to rely on is never popular.

But for the past few years, the Democrat-controlled legislature has done the opposite.  As the Colorado Sun reported, “The budget has actually been out of balance for years.  Infusions of one-time federal funding during the pandemic helped pay for some of the legislature’s biggest priorities, like eliminating the K-12 funding shortfall, expanding mental health and early childhood programs and boosting funding to higher education.”

Now, this spending must be funded from state taxes, which voters have chosen to limit.  Federal funds, by contrast, are like free money because they are exempt from spending limits.

Some lawmakers claim constitutional spending limits, collectively known as the Taxpayers Bill of Rights (TABOR), are the problem.  But the budget mess would be uglier without TABOR.  In both 2022 and 2023, economic growth generated over $1 billion more than the legislature was able to spend; that money was refunded to taxpayers.  Had legislators instead spent that money as freely as they spent federal funds, the current budget hole would be much deeper.

TABOR recognizes that voters have a right to limit how much money their government takes from them.  TABOR then acts as a brake on government spending in good times by forcing legislators to seek efficiencies in the same way competition forces businesses to be lean.  In hard times, TABOR doesn’t affect government spending at all.

After COVID, profligate federal funds allowed lawmakers to take a holiday from reality.  They used tax dollars to pay for programs like free phone calls for prison inmates ($5 million); an energy efficiency program for marijuana growers ($500,000); food pantries ($1 million) and diaper banks ($500,000); health care for children of illegal immigrants ($19 million); and bailing out the new program that provides “free” lunch for every public school student ($50-100 million).  They also added 8,662 new state employees.

Those programs and others like them certainly add up, but cutting them all makes only a small dent.  The biggest expenditures are health care and Medicaid ($5 billion, 32% of the general fund), K-12 education ($4.5 billion, 29%), higher education ($1.7 billion, 11%), and human services ($1.2 billion, 8%).

Democrats have held the governor’s mansion and largely controlled the legislature since 2007.  Back then, K-12 education received 42% of the general fund.  Had K-12 funding simply kept pace with overall budget growth, the education budget would be $1.5 billion more.  Under Gov. Bill Ritter, Democrats created the budget stabilization factor to balance the budget by reducing education spending while Medicaid spending exploded.

Last year, lawmakers also created roughly $1 billion in “refundable” tax credits for low- and middle-income families.  These programs literally write checks to families, including illegal immigrants, that pay little or nothing in taxes.  A single parent with four children and less than $15,000 in taxable income could collect a check for $15,215.

A few years ago when economists were predicting TABOR surpluses exceeding $3 billion a year, lawmakers were lulled into complacency.  I recall similar assumptions in 1999-2000; then came 9/11 and the bursting of the tech stock bubble.  Economic euphoria was extinguished.

This year’s predicament is unique because the economy isn’t in recession; the problem is unsustainable spending.

Mark Hillman served as Colorado State Treasurer and Senate Majority Leader.  To read more or comment, go to www.MarkHillman.com.