Colorado
General Assembly, Legislative Council
| The Legislative Council takes no position with respect to the merits of the proposals. In listing the "arguments for" and "arguments against", the Council is merely describing the arguments relating to the proposals. The quantity or quality of the "for" or "against" paragraphs listed for the proposals should not be interpreted as an indication of the Legislative Council position. |
Forward to Text of Referendum D
The proposed amendment to the Colorado Constitution:
The state Division of Employment and Training sets unemployment compensation tax rates based on the tax rate schedules and the current balance in the unemployment compensation fund. The balance in the unemployment compensation fund fluctuates, the amount available being one factor that determines tax rates from the schedules. The tax rate schedule has been changed by legislative action three times in the last 15 years - 1983, 1986, and 1991. The primary result of these changes was an increase in taxes for some classes of employers. In January 1995 and January 1996, the fund balance was sufficient to reduce the tax rate for some employers.
The state constitution limits state and local government spending and requires voter approval of any tax increases. There are three issues relating to unemployment compensation tax increases: whether voter approval is required for any tax rate changes made by the division within existing statutory schedules; whether voter approval is required for any increases in the schedules; and whether voter approval is required for increases in the taxable wage base. The Colorado Attorney General has issued an opinion that tax rate changes made by the division, within the existing statutory schedules, do not require voter approval, while voter approval is required to increase the schedules or the taxable wage base. The Colorado Supreme Court has not made a ruling on these issues. The amendment exempts changes regarding the unemployment insurance tax system from voter approval requirements.
Another part of the amendment adjusts how the state's financial base is calculated for purposes of determining the state spending limit. The proposal allows 20 percent of unemployment compensation spending in the state fiscal year 1996-97 - approximately $44 million - to remain part of the financial base for calculating the 1997-98 spending limit.
2) Maintenance of unemployment compensation revenues and the taxes that support it should be the responsibility of the General Assembly. The unemployment insurance tax rate structure involves complicated relationships among several variables. In addition, the unemployment insurance tax system must conform to certain federal guidelines. Although changes to the tax rate schedule have been infrequent, the General Assembly is in the best position to determine the magnitude and timing of, and businesses affected by, any changes.
2) The amendment takes the wrong approach in its adjustment of the state's spending limit. The amendment allows 20 percent of unemployment insurance revenues to remain in the state financial base in fiscal year 1996-97. This provision potentially increases government spending and reduces the possibility of tax refunds in the next few years. Rather than being arbitrarily phased out, unemployment insurance revenues should be either totally included or excluded from the spending limit.
Forward to Text of Referendum D
