Sunday, June 9, 2013

Let 'Em Go!

Last week, the Denver Post reported a story about eight counties in the northeastern part of Colorado that say they want to secede and form their own state (to be called "North Colorado").  My immediate reaction — and my reaction after further consideration, for that matter — is that this is definitely a case of "be careful what you ask for."  First, some background.

The eight counties are shown in light green in the picture to the left, tucked up under the Nebraska panhandle.  The total population of the eight counties is about 345,000.  76% of the total population lives in Weld county, the one farthest to the west.  Of that population, probably two-thirds lives in a strip 20 miles wide running down the western edge of Weld county (for reference, Weld's northern border is about 75 miles long).  Greeley, the only city of any size contained entirely within the eight counties, is certainly within that strip.

There appear to be three specific complaints these counties have about the legislative session that concluded last month: (1) the General Assembly voted to regulate oil and gas drillers' use of hydraulic fracturing; (2) the General Assembly passed modest expansions of Colorado's gun control law, principally by requiring more extensive use of background checks; and (3) the General Assembly imposed some form of a renewable electricity portfolio on rural electric cooperatives, similar to the requirements that the state's investor-owned utilities already operate under.  Personally, I suspect that this declaration by the counties represents a deeper general resentment.  Decades back, Colorado was a relatively small (in population) relatively poor state with a resource-based economy (agriculture, mining, etc).  Today, it's a medium sized relatively rich state with a tech- and service-based economy.  The large majority of the new population and wealth are located in the urban/suburban areas of the Front Range.

As regular readers know, I spent three years on the staff of the General Assembly's Joint Budget Committee.  Being a state is an expensive business these days, and I suspect that this new state would be bankrupt on day one.  To pick a few examples...
  • States are not required to participate in the state/federal unemployment insurance program.  But unless states implement a conforming program, the full federal UI tax is collected.  Broadly speaking, if Colorado were to cancel its program, most employers would face an increase in their total UI tax bill.  If the new state implements a UI program, it will have to have a software system that meets federal Dept. of Labor audit standards, and those are somewhat pricy.  If as a state you choose to participate in Medicaid, software that meets federal requirements is even more pricy.
  • The new state would include Colorado's portion of the Republican River, so would presumably be subject to the terms of the current Republican River Compact with Nebraska and Kansas.  From time to time, Colorado farmers overdraw Republican River waters and the state gets sued [1].  The new state will also be responsible for deliveries of South Platte River water to Nebraska (with a no-doubt fascinating legal battle as the new state and Colorado settle who owes how much).  Court proceedings and the penalties in water fights can get expensive — especially if you're drawing from a much smaller total budget.
  • Which leads to the final point I want to make: all of these counties' average household income is lower than the average for Colorado overall (Weld County has the highest, but is still about 8% below the state average).  As a result, because of the way certain state budget formulas work, most of them are receiving transfers for funding schools, roads, and social services from the richer counties.  A question that I would ask the seven smaller counties in particular: "Do you really believe that Weld County (whose commissioners seem to be the 'brains' behind this), which is poorer than Colorado as a whole, is going to maintain your school subsidies at the level they are today?"
Still, I'm generally of the opinion that politicians ought to be allowed to make their own mistakes.  Actually, my time with the JBC convinced me that they'll go ahead and make those mistakes any way no matter how much good advice they get.  So, go for it, Weld County and companions!  I can hardly wait to see your first state budget — I'm betting on big cuts in services and increases in taxes.  And I really want to hear how you tell your citizens, "We're smaller and poorer now, so we can't afford as many nice things."

[1] An interesting question: if your hope is that the oil and gas drillers are going to drill and fracture lots of wells, where's the water going to come from?  The North Dakota government estimates that drilling in the Bakkan Shale formations will eventually require seven billion gallons of water per year for drilling and ongoing operations.  Given all of the constraints on water supplies in northeast Colorado, it seems likely that they'll have to put a lot of farmers out of business in order to free up the water.

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