TABOR’s mysterious vanishing people: Why lawmakers are afraid 24,000 Coloradans may disappear in the next budget year

Nearly 24,000 Coloradans are set to disappear from the state’s population this year — at least as far as the state budget is concerned.

It’s no mere illusion.

The vanishing act will have real consequences for public services, to the tune of $77 million in required cuts, if lawmakers don’t take action to prevent it.

The issue dates all the way back to when the legislature first implemented the Taxpayer’s Bill of Rights in 1993, the year after voters added it to the state constitution.

TABOR limits how much state revenue can grow from year to year, based on the combined rate of consumer inflation and population growth. The constitution requires the state to use U.S. Census Bureau estimates to determine the population, but the legislature ultimately decides exactly how the growth rate should be calculated.

For the past 32 years, the state has used a formula that leads to undercounts in some years and overcounts in others, a Colorado Legislative Council staff analysis found. And it doesn’t necessarily even out.

Next budget year, the formula will result in the state losing 24,000 people to an undercount, trimming the TABOR growth rate by 0.4 percentage points. That has the Joint Budget Committee considering a once-in-a-generation change to how the state calculates the Taxpayer’s Bill of Rights revenue cap.

The current calculation, said Rep. Shannon Bird, a Westminster Democrat and vice chair of the JBC, “isn’t really reflective of reality.”

How to lose 24,000 people (on paper)

Each December, the Census Bureau releases new estimates for what the population was on July 1 of any given year. So for 2024, Colorado had an estimated population of 5,957,493.

The 2023 population estimate used in last year’s TABOR cap was 5,877,610. So from one budget year to the next, the population grew by 79,883 people, or 1.4%.

That’s the rate the JBC wants to use in next year’s budget. But that’s not how population growth is calculated under state law today.

Each December, the Census Bureau tries to correct mistakes from previous years. Under the most recent estimates, the state’s population was actually 5,901,339 in 2023 — about 24,000 more than last year’s estimate. That means that from 2023 to 2024, the state’s population only grew by 56,154 people — a 1% growth rate for TABOR purposes.

On the surface, that seems like a reasonable way to calculate growth. After all, why wouldn’t you use the most current estimates available?

The problem is, the state can’t go back and correct this year’s TABOR cap to reflect higher growth. Colorado didn’t get credit for those 24,000 people in this year’s budget, because the cap was set with the smaller estimate from December 2023. And it won’t get credit for them in next year’s budget either, because the state’s population is growing off the new, higher population estimate.

“I actually think the 1% (growth rate under current law) is a better reflection of how much Colorado’s population grew in 2024,” Greg Sobetski, the chief economist for Colorado Legislative Council staff, told the JBC last week. “The issue is that the 1% misses people who ought to have been included in the count of Colorado’s population in 2023. They weren’t, and our current methodology never lets them be counted at all.”

In other words, unless state law changes, TABOR will make those 24,000 people disappear.

Double counts and undercounts

Estimating errors cut both ways, legislative analysts found.

When the population estimate turns out to be too high, the TABOR cap gets credited with growth that didn’t occur. In those cases, a downward revision by the Census Bureau leads to the people getting counted twice: once in the year the error occurred, and once in the year the error was corrected.

Over the last 10 years, people were double-counted three times, resulting in an artificially high TABOR cap growth. Undercounts happened twice, and in four other years the error was so minimal it didn’t affect the cap due to rounding.

This year’s error was unusually large, Sobetski told the JBC.

On Tuesday, the six-member budget committee voted unanimously to draft a bill to eliminate these miscounts going forward. It would have to be passed by both chambers and signed into law within the next few weeks to prevent an undercount from affecting the upcoming budget.

However, lawmakers said they’re wary of being accused of circumventing TABOR. A $77 million increase to the cap will help in a difficult budget year, but it will also mean $77 million less in taxpayers refunds in 2026.

“I don’t want anyone thinking we’re pulling a fast one on them,” Sen. Barbara Kirkmeyer, a Republican from Brighton, said at Tuesday’s meeting. “We need to be able to explain it. No more double count, no more undercount. We should be counting those 24,000 people — I think that’s the plain language of TABOR.

“But at the same time, if we just try to slam it through, people will be like, ‘what the hell are they doing over there?’ ” Kirkmeyer said.

The memo wasn’t all good news for budget writers. Even if lawmakers address the undercounts, the TABOR cap will still grow more slowly than state economic forecasters expected, adding to the state’s roughly $1 billion budget deficit.

The most recent forecasts from the governor’s Office of State Planning and Budgeting were off by $96 million, while Colorado Legislative Council forecasts missed the mark by $115 million. Even if the legislature agrees to change how it calculates the cap, the budget hole would still grow by $19 million to $38 million.