On Tuesday, February 10, 2026, Independence Institute’s Fiscal Policy Center Policy Analyst Nash Herman submitted written testimony on SB26-042 to the Senate Finance Committee.
If passed, the bill would reclassify certain revenue streams to align with the statutory definitions of “damage awards,” and “revenue collected for other governments,” carveouts created by the Taxpayer’s Bill of Rights (TABOR). Through the reclassification, Legislative Council Staff forecasted that TABOR revenue (which would otherwise be returned to taxpayers) would decrease by approximately $31 million annually. Below is Nash’s testimony:
Thank you, Madam Chair, members of the committee, for the opportunity to comment on Senate Bill 042.
My name is Nash Herman, I am a fiscal policy analyst at Independence Institute, Colorado’s free-market think tank. I also write articles for Complete Colorado on fiscal topics in Colorado.
As a free-market think tank, Independence Institute generally supports state policy that protects Coloradans’ constitutional right to direct participation in their own taxation, and generally opposes state policy that attempts to circumvent voter authorization of state revenue and spending. We believe the discussion surrounding SB 042 relates to those principles.
While SB 042 may have a plausible cause for the reclassification of specified revenue streams according to definitions of “damage awards” and “collections for another government,” the bill raises concerns about the overall growth of Colorado’s state government beyond what was intended by TABOR.
TABOR was passed in 1992 by Coloradans to “reasonably restrain most the growth of government.” To reasonably restrain government growth, state revenue/spending is limited to a formula based on population plus inflation, subject to voter approval.
However, recent research from the Independence Institute shows that, when adjusted for population growth and inflation, Colorado’s state government continues to grow beyond TABOR’s revenue and spending limits.[1]
For example, the General Fund has grown by 44% since FY1993-94, but cash funds have grown by 588% when adjusted to population growth and inflation. Whereas approximately 56% of the state’s budget was once subject to TABOR, now that number is 35%.
The General Assembly has deliberately circumvented TABOR’s constraints by creating or expanding enterprises that generate revenue through TABOR-exempt fees, allowing spending growth without voter approval for tax increases.
Given that TABOR is already being circumvented through fee-based enterprises, SB 042’s expansion of TABOR-exempt revenue via reclassification risks creating another pathway for revenue growth outside voter oversight. Also, the bill could potentially lead to an overreliance on penalties and fines that could distort regulatory enforcement priorities away from compliance and instead toward revenue generation.
By reducing revenue subject to TABOR, SB 042 would diminish Coloradans’ freedom to spend their own hard-earned money and to have a direct say in how their tax dollars are spent by potentially reducing TABOR revenue by approximately $31 million annually that would otherwise be returned to taxpayers. I urge the committee to consider these broader implications and prioritize preserving a key constitutional provision that you swore to protect. Thank you.
[1] Nash Herman, Leviathan by Loophole: the Growth of Colorado’s State Government After TABOR, Independence Institute, January 20, 2026. https://i2i.org/leviathan-by-loophole-the-growth-of-colorados-state-government-after-tabor/.
