The Shift and Shaft Game

Bob Ewegen, The Denver Post
July 14, 2001

Silent Sam Mamet, who lobbies the legislature for the Colorado Municipal League, coined the term “shift and shaft” to describe the process whereby one level of government shifts responsibilities to a lower level, then shafts the recipient by denying it the resources to handle those new responsibilities.

In the early days of the Reagan administration, the federal government turned many responsibilities back to the states with no accompanying revenue source.

Colorado’s state government simply shrugged and passed many of those new burdens on to cities and counties. Lacking anyone lower in the pecking order to shift these responsibilities to, local governments either had to raise taxes to pay for them or face angry voters complaining about those services being curtailed.

Colorado didn’t invent the shift and shaft game, but has raised it to an art form. The Colorado Public Expenditure Council reports that our state ranked 25th in combined state and local taxes per capita in 1996, the last year for which comparative nationwide figures are available. Alternatively, if you compute our taxes as a share of personal income, Colorado ranks 41st in our combined state and local tax burden. (Our taxes look lower as a share of personal income because Coloradoans have higher-than-average incomes.)

CTP notes: “Colorado remains one of the most fiscally decentralized states in the nation. In Colorado, only 52.2 percent of total taxes were collected by state governments, placing it 47th nationally. In contrast, Colorado local governments collected 47.8 percent of total revenue, placing the state fourth in its local share.”

So our total tax burden, in dollars per citizen, is 25th out of the 50 states. But we’re only “average” in the same way that Mark Twain said a man with one foot on a hot stove and the other in a bucket of ice water is, on average, at a comfortable temperature.

Our local tax burden – already fourth highest in the nation – will become even higher if ideas circulating in the Colorado Department of Transportation comes to fruition. CDOT is scrambling to fill a multi-billion dollar shortfall in its highway plans through 2020.

Gov. Bill Owens’ TRANS bonds, approved by voters in 1999 as Referendum A, accelerated some highway projects but didn’t increase total funding. When the bond money is spend in 2011, we’ll have to cut back highway construction while we finish paying off those bonds – unless we find a new source of revenue before then.

CDOT is kicking around five main ideas:

• Tapping some of the state’s surplus revenue above the spending limits set by the 1992 TABOR amendment. The problem with this idea is that it takes a vote of the people. When the state asked voters to forgo part of their tax refunds to boost highway funding in 1998 as part of Referendum B, voters nixed the idea.
• Issuing more bonds. As with the earlier TRANS bonds, new bonds are not a long-term solution unless we come up with a way to pay off those bonds without tapping into normal revenues earmarked for highway construction and maintenance.
• Building more toll roads, like the successful E-470 project.
• Coaxing private sector companies that benefit from new highways to help pay for them. This is a worthwhile but limited source of new money. Private sector participation in T-REX totals less that 2 percent of the cost of the project.
• Asking local governments to pay for part of the cost of state projects in their jurisdictions.

It’s that last idea that has cities and counties singing the “shift and shaft” blues again. State law has long required that the auto registration fees and fuel taxes collected for the Highway Users Tax Fund be divided, with 60 percent going to the state, 22 percent to counties and 18 percent to municipalities. But in recent years when the legislature has assigned extra money to transportation from income or sales taxes, it has spend every penny of the extra cash on state projects only.

The state’s fuel tax is a fixed 22 cents per gallon, a “unit tax” that steadily loses purchasing power in the face of inflation. The legislature’s willingness to put extra money into state highways to offset inflammation does nothing to help cities and counties maintain their feeder networks.

Now, far from being told that they will share in potential new sources of transportation dollars, cities and counties fear they’ll have to raise local taxes yet again to subsidize state projects.

That brings me to the Bob Ewegen/Levi Strauss theory of public finance. I may pay my federal taxes from my left pocket, my state taxes from my right pocket, and local taxes from my back pocket.

But friend, all that money comes from the same pair of jeans.

Bob Ewegan is deputy editorial page editor of The Denver Post. He has written on state and local government since 1963. E-mail him at: bewegen@Denverpost.com