Colorado's fee-based enterprises skirt TABOR, increase revenue by 3,000%

In 1992 voters enacted the Taxpayer’s Bill of Rights to constrain the growth of government by requiring voter approval for tax increases. Since then, the state government has built a new structure to avoid that requirement.

The creation of TABOR-exempt state-owned “enterprises” has allowed government to increase fees from 46% of total state spending in 1996 to 71% of state spending in 2023 without requiring approval from taxpayers, according to a new report released by the Common Sense Institute, a non-partisan research organization “dedicated to the protection and promotion of Colorado’s economy.”

“Fees are a rapidly growing and significant cost for Coloradans,” said Kelly Caufield, Executive Director of the Common Sense Institute. “At the end of the day, it doesn’t matter if we call it a tax or a fee, these costs are driving the cost of living in our state.”

Legislators have been shifting more and more of the state’s revenue dependence away from tax increases, which voters have mostly kept in close check by refusing to approve them, to fee-based enterprises not subject to TABOR, says the report.

In the first year after TABOR was enacted, fee-based enterprises generated $742 million.

In the 28 years between 1992 and 2020, legislators created 24 new enterprises which together, collected $20.9 billion in 2020. By 2023, their revenue had increased by over 3,000%, far beyond population growth (62%), to $23.3 billion, said the report.

Proposition 117, passed in 2020, required new enterprises projected to collect more than $100 million obtain voter approval. In response the state established eight new enterprises and expanded a preexisting one to bypass TABOR again, costing Coloradans a total of $88.3 million in fiscal year 2023, according to the report.

Defining what “tax” and “fee” mean is often a subtle distinction and has recently been the subject of controversy. At its simplest says CSI, a tax is a mandatory payment to the government that funds a wide range of public services and programs, like income tax or sales tax. A fee on the other hand, is a payment made for a specific service or benefit provided directly to the person paying it, such as a park entrance fee or a vehicle registration.

“Users of public services, like parks, toll roads, and waste disposal facilities, pay fees to the state government enterprises responsible for them. These enterprises are government-owned entities that fund their operations with the fees they collect. They must receive less than 10% of their funding from government grants,” said CSI. “Some fee enterprises, including several that were established after 2020, provide no direct services to their payers and behave instead as means of generating revenue for government projects and/or disincentivizing adverse behaviors.”

Examples of fee-funded enterprises include Bridge and Tunnel, Community Access, Clean Motor Vehicle, 988 Crisis Hotline, Air Pollution Mitigation, Clean Transit, Orphan Wells, Air Quality and Natural Disaster Mitigation enterprises.

Two major fee-related bills passed into law during the 2024 legislative session that will take effect in years to come include the Transportation Enterprise Special Revenue Fund that looks to collect $28.5 million in 2025 and a fee on oil and gas production that will fund the Clean Transit Enterprise and the Colorado Parks and Wildlife Enterprise.