Following is the latest analysis of what should be Colorado's legislative and budget strategy following the passage of Referendum C (the largest tax hike in state history.)

My guess is that Mark's points are not too likely to be adhered to if the Democrats feel that they are likely to maintain their control over both houses of the state legislature in next year's election.

Republicans (and fiscally responsible Democrats, if there are any) should particularly heed the points about "no new entitlements" and controlling health care spending.

At the Federal level, citizens are disgusted with how far Republicans have strayed from the path of fiscal responsibility. Colorado's Republicans have been slightly better (but ineffective because of being in the minority). Nevertheless, they will be tinged with the stain of profligacy that people associate with the Federal Congress unless state legislators make a specific and obvious effort to demonstrate restraint in spending taxpayers money.

While some supporters of Referendum C are dyed-in-the-wool big-government liberals, the margin of victory was provided by those who bought the argument that it just got the budget back to pre-recession levels. These are not people who will stand for the legislature taking Referendum C to mean that government should grow at (or beyond) its remaining constitutional limitations. Those limitations are a maximum, not a target.

It will be interesting to see what strategy both parties choose in the upcoming fiscal year in Colorado. I hope that the Republicans focus on fiscal responsibility (I think there's a good chance of that) and that the Democrats don't read too much into Referendum C's passage (I think they will, and will try to go crazy spending money where it helps unions.)

In any case, the passage of Referendum C makes it all the more critical that Colorado elect a Republican governor, preferably Bob Beauprez, to veto most attempts to increase government spending on pork and political favors.

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CAPITOL REVIEW: Responsible budgeting requires discipline, restraint

By State Treasurer Mark Hillman

With Referendum C now on the books, the Legislature has five years to budget without the fiscal guardrails that the Taxpayers Bill of Rights provided. Lawmakers now stand at a critical crossroads. One direction leads to prudent, sustainable budgets; the other to runaway expectations.

Prudent, pay-as-you-go budgeting requires lawmakers to live within their means and stick to their stated goals of merely restoring funding for programs that were scaled back during the recession.

For example, Amendment 23's State Education Fund served as a de facto reserve fund, but it's now depleted. With one-third of new Ref C spending earmarked for K-12 education, the Legislature can replenish the fund rather than spend it.

Also, the value of "opportunity scholarships" for in-state college students can rebound, so tuition costs should rise very little or not at all.

Health care, the fastest-growing portion of the budget, requires the greatest restraint. New funds provided Ref C must be carefully managed to pay for existing programs that benefit the truly needy.

Because Ref C did not change the six-percent limit on new general fund spending, anything over that amount should restore funding for transportation and maintenance of state buildings.

However, a more-tempting course looms, lined with good intentions but paved, oddly enough, with perverse incentives. Lawmakers who want to increase public trust should steer clear of this path. Unfortunately, the siren song of special interests won't be so easy to resist.

This course might be called "The Road to Referendum X" because its ultimate destination is to set the stage for the repeal of any meaningful limitation on state spending by convincing voters that government — given enough time, power and money — is the solution to so many unsolvable problems.

Averting this path will require statesmanship and budgetary discipline from leaders in both parties, including adherence to some basic principles that need not be partisan:

- Budget conservatively. Before Ref C, some argued that government must maximize spending each year or else its "spending base" would be permanently reduced. Now that TABOR limits will be based on allowable — rather than actual – spending, that argument is moot.

Last year, the Legislature pegged the state budget to its own optimistic economic forecast rather than that of the Governor's office, which was $110 million lower. This avoided difficult budget decisions but could have been disastrous had the economy soured.

- No new entitlements. Joint Budget Committee forecasts verify that the six-percent limit on general fund growth will do little more than accommodate existing programs. Last year, Gov. Owens vetoed two massive new health care entitlements, and a third died on a bipartisan vote in a House committee.

- Health care is particularly perilous because government is a colossal failure at controlling costs. New programs — even those that explicitly say "this is not an entitlement" — create dependency on government rather than incentives for self-determination.

- Restore trust funds. The legislature "borrowed" some $366 million from trust funds during the recession, including a transfer of $170 million from a fund that pays the medical bills of severely injured workers, resulting in a de facto tax increase on Colorado businesses. Those actions may have been the lesser of evils at the time, but the state now has a moral obligation to restore those funds.

- Rein in fees. During the recession, fees for state services were increased substantially to help balance the budget. Although it stands to reason that users of state services should pay the cost, many services provide regulation for the benefit of the public at large. It's reasonable then that general tax dollars share these costs. Lawmakers must also avoid the temptation raise fees even higher to inflate the TABOR limit when it is reinstated.

The choice confronting the legislature is important. Voters narrowly approved Ref C — not because they want expansive government, but because they believed it reasonable to allow the state budget to rebound to pre-recession levels. If lawmakers now open the floodgates to new programs and unsustainable spending, they shouldn't be surprised when voters' skepticism returns with a vengeance.

Mark Hillman is Colorado's State Treasurer. His e-mail address is mail@markhillman.com.