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Thursday, July 2, 2009

Today, Tim Eyman filed Initiative 1033, a measure that would severely limit the amount of state, county, and city revenue that could be spent starting in 2010. Any revenue raised above the limit would be required to go to reducing property taxes in the following year.

According to the initiative, the spending limit would grow annually by a formula adjusting for inflation and population growth. This formula is flawed in a number of ways. First, it adjusts for inflation using a measure of the change in costs of goods and services consumers buy, not those purchased by government. Secondly, the change in population growth only looks at changes in the general population and does not account for special populations, such as the rising numbers of retiring baby boomers.

Importantly, I-1033 leaves no room for unanticipated costs, such as those that come with natural disasters, unfunded mandates, or emerging public priorities.

But even with regard to maintaining current commitments, I-1033 will fail to keep up with spending needs. The graph below illustrates the discrepancy between state estimates for rising costs of maintaining current investments and the spending limit that would be imposed by I-1033.

In upcoming blog posts, we will look at why it would be especially damaging to enact this initiative during an economic recession, the effect on the state budget over the long term, and the negative impact a similar measure has had in the state of Colorado.

To view our slideshow that provides more details on I-1033, click here.

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