THE EFFECTS OF ARTIFICIAL CONSTRAINTS ON LOCAL AUTONOMY: CONSEQUENCES OF TABOR ON LOCAL STRUCTURE, FINANCE, AND PUBLIC CHOICE

This study attempts to determine the effects of Colorado’s Taxpayers’ Bill of Rights (TABOR) on the composition of local structure and the fiscal behaviors of local governments. TABOR was adopted in 1992 as the most restrictive Tax and Expenditure Limitations (TELs) in the country. First, it examines how strong fiscal restrictiveness on local governments leads to the creation of small intra-local service districts. Second, it assesses the impact of high fiscal constraints on the revenue collection of different local governments from property taxes. Finally, it appraises how the fiscal restrictions affect behavioral changes of counties to make expenditures for different public services. The data collected from sixty-four counties in Colorado from 1990 to 2011 was analyzed with a standard fixed-effect regression model. The time frame included both pre-TABOR and post-TABOR periods and the effects of the amendments could be compared. The results of analysis demonstrate that there have been increases in the number and proportion of Community Special districts, small intra-local service districts in Colorado. As counties face severe fiscal constraints as a result of TABOR, they tend to create new local jurisdictions to provide certain public services and relieve fiscal distress. The study identifies that TABOR restrictiveness increases the amounts of property taxes collected by Community Special Districts. They perform greater roles to collect property taxes than Traditional Special Districts do. However, TABOR restrictiveness has not decreased the amounts of property taxes collected by general local governments. Per capita annual changes in property taxes collected by all types of local governments as well as general local governments have increased even under harsh fiscal conditions. Furthermore, the spending patterns of counties have changed since the adoption of TABOR. Contrary to the expectation, per capita county expenditures increase, as fiscal constraints get stronger. Per capita expenditures of counties for general fund, public welfare, and health services have increased, because such services are difficult to devolve to Community Special Districts. However, the proportional compositions of public welfare and health services in total county expenditures have decreased. In addition, per capita expenditures for solid waste disposal and public services have decreased as expected in that responsibilities for the services can be transferred to Community Special Districts. However, results for the proportional compositions of different services show somewhat mixed and are not statistically significant. The study concludes with a discussion emphasizing policy implications of the research. The proliferation of small, intra-local service entities may raise accountability issues as well efficient and equitable distribution of local resources. The controversy between direct democracy and deliberative democracy is discussed as a political implication of the research