New Democrat Update - August 2008
A SMARTER FUTURE FOR COLORADO
Colorado voters will have a chance this November to cut through the special-interest politics of the past and move toward truly investing in our economic future, rather than merely giving narrow tax breaks that reward political clout. In a time when public investments in education and our quality of life are too often shortchanged, Colorado needs a concerted effort to get rid of special-interest tax breaks that do not contribute to economic growth and unfairly drain millions of taxpayer dollars for purposes that are not in the public interest.
Voter approval of a ballot initiative that eliminates an outdated tax subsidy to the oil and gas industry would be a great first step. Backed by Governor Bill Ritter, the proposal calls for closing a loophole that allows oil and gas companies to significantly cut their tax bills - a break provided by no other state in the country.
Maybe this tax credit made sense when it was created nearly 30 years ago and oil was less than $10 a barrel. However, any economic rationale for it completely disappears at today’s price of $120 and an industry enjoying record profits.
This annual $300 million subsidy results from allowing the industry to deduct 87.5 percent of property taxes from its severance taxes (Severance taxes are levied on companies that take or “sever” resources from the earth). That sweet deal results in a light tax burden of only 5.7 percent of production.
According to the nonpartisan Colorado Legislative Council, getting rid of this subsidy will make the state’s severance tax rates much more competitive with others in the region. Colorado’s total tax burden on the oil and gas industry will rise to only about 8 percent, below Wyoming’s 11.2 percent and New Mexico’s 9.4 percent. Only Utah’s rate will be lower.
These freed-up funds will be used to invest in Colorado’s economic future. Sixty percent goes to college scholarships with the remainder financing renewable energy projects, protecting the environment and rebuilding Colorado towns impacted by oil and gas drilling.
“Colorado Promise Scholarships” will give more students the opportunity to go to college without incurring crushing debt. That is important because in today’s global economy it increasingly takes a college education to become a member of the middle class and work in the industries of tomorrow.
According to the Bureau of Labor Statistics, 42 percent of the new jobs this decade will require post-secondary education, compared to 29 percent of all jobs in 2000. College graduates now make nearly twice as much as high school graduates. For today's 22-year-old, that translates into a million-dollar bonus over the course of a career.
In addition to being essential to a middle-class lifestyle, increasing the number of Colorado college graduates is extremely important to the state as a whole. According to the U.S. Bureau of Economic Analysis, states with the highest percentage of adults with college degrees have the highest growth in income nationwide and the lowest rates of unemployment. By promoting innovation and generating more high-value, high-paid jobs, "economic growth is faster in states where the proportion of the population over the age of 25 possesses college degrees," according to a conservative Michigan think tank.
Joe Lehman, director of government affairs at Lockheed Martin, recently told the Rocky Mountain News, "The governor has made clear what he is trying to accomplish. We certainly concur that Colorado needs an educated work force to have the kind of industry and jobs that are stable and sustainable." Concerned about the availability of "knowledge workers," he was also quoted in The Denver Post, "We're having to go to the outside and hire people. We much prefer to hire graduates of Colorado colleges, if we can."
To be fair, the state’s oil and gas industry should not be the only one to pony up. Taxpayers have a right to also demand that students and schools do their part.
GIVING BACK
In exchange for help with college, students should be required to make a commitment to give something back to their communities and country. Community or military service represents an important step away from the prevailing and ultimately destructive ethos of entitlement - the notion that any segment of society has a permanent right to favors and privileges bestowed by the government. Colorado Promise Scholarships can be the first step toward a new social compact, based on reciprocal obligation and civic duty, for other services provided by state government.
Just as important, college scholarships and other public benefits rooted in reciprocity will enjoy stronger public support. Embodied in an ethic of earned benefits, not given, service broadens the political base of support that is very difficult to achieve in tight fiscal times. It is no accident that the G.I. Bill and John F. Kennedy's Peace Corps - both of which rewarded service to our country - are two of the most popular and effective public policy initiatives in American history.
A "Colorado Promise Citizen Corps" can help make headway against some of our most intractable problems with a new and non-bureaucratic civic partnership between state government and society. Rather than a huge and highly centralized bureaucracy, the Corps will build on the foundation of existing community service programs, civic and professional associations, churches and private, non-profit organizations. The number of volunteers around the state will be significantly multiplied, helping in local schools, hospitals, libraries, day care centers, shelters, public and non-profit social agencies, clinics, charities, police and criminal justice systems, programs that assist the elderly and conservation projects.
Finally, the experience of “servers” working together across racial, ethnic, and class lines to solve common problems will hone the basic skills of democratic citizenship - seeing beyond stereotypes, empathizing with others and moving beyond group identities. As President Clinton said in 2000, "I meet with these AmeriCorps (a national service program) kids everywhere I go, and the thing they say over and over and over again is that we gave them a chance to see how different people live, to see how much we have in common as human beings, and to understand just what it means to be an American citizen at the dawn of a new century."
HOLDING SCHOOLS ACCOUNTABLE
In return for this big increase in financial aid, Colorado schools must be challenged to do their part and help make graduating from college a reality for many more students. That is important because those that attend but do not graduate will not earn much more than those who never entered and also do not spur the economy nearly as much as those who get their degrees.
In addition to the now-provided six-year graduation rates and freshman fall-to-fall retention rates, schools should be required to report four-year graduation rates and the percent of the senior class employed upon graduation or enrolled in further education, including information on earnings and field of employment. Just as important, policymakers must make these outcome measures meaningful. Currently, no specific consequences are in place if schools do not meet their goals.
Of course, no good deed will go unpunished. Getting rid of corporate subsidies, regardless of how well the proceeds are invested, will never go away without a big fight. Oil and gas companies are expected to spend tens of millions of dollars to defeat the measure. Without question, the leadership of Gov. Ritter, enlightened members of the business community and others will be vigorously tested.
Hopefully, Coloradans will vote for a smarter future.