COLORADO SPRINGS, Colo. -- When Robert Jones, Colorado Springs's finance director, writes budgets in the next few years, he will be taking a back-to-basics approach.

And it is not because times are tough. Actually, the state's second-largest city is beginning to see an end to the worst economic downturn in a half-century.

What has Mr. Jones sharpening his budget axe are two city charter amendments passed by taxpayers in April. The measures limit how much revenue Colorado Springs can raise without voter approval and also roll back an estimated $17 million in existing taxes.

"We are going to have to be very, very diligent and conservative," said Mr. Jones, who left a deputy finance position in Atlanta last year for his new job. "I think that's what the people have mandated."

After a decade of balancing budgets with sluggish revenues, local officials across Colorado face the 1990s with the prospect of a revolt by a growing minority that wants to cut its taxes by cutting off government.

Such limitations make life tough for officials such as Mr. Jones. This year, for instance, the $116 million general fund will come up $2.6 million short because of the new limitations and declining assessments. The problem gets worse next year, with a projected deficit of at least $12 million.

The man who wrote the measures does not mind officials' complaints of a fiscal straitjacket.

'They Waste Our Money'

The government "always comes up with new ways to blow our money," said Douglas Bruce, a former of the antitax effort in Colorado. "They waste our money, and the waste is a result of thinking they have unlimited access to our money.

"The answer is to take away the money," he said. And, if Mr. Bruce has his way, all Coloradans will get a chance in 1992 to decide whether to amend the state's constitution to limit revenues for government at all levels.

He dismissed talk of paralyzed government. "People are going to see that Colorado Springs is not going to go out of business," he said.

In the 1980s, many cities, towns, and counties came close to insolvency. In fact, dozens of special districts did go bankrupt, leaving a legacy of nearly $500 million of defaulted tax-exempt bonds and fueling calls for restraints on government.

Of course, the economy is getting better.

"We certainly experienced our share of the roller coaster rides from the economy," said Sam Mamet, associate director of the Colorado Municipal League. "We are in better shape now."

Even as the economy is improving, local officials fear voters may still be angry because the downturn depressed property values and pushed taxes up. Some say those tough times may have made cities and counties scapegoats for problems they had no hand in.

Steve Hutt, Denver's treasurer, thinks the support for tax and spending limits are tied to taxpayer frustration over the federal budget deficit and other factors beyond the control of city officials.

"People just didn't decide all of sudden that government in Colorado was inefficient," he said.

Others say local officials have just not done a good job of telling their story.

"I wonder if we have packaged the message appropriately that we really are running government efficiently," said Alan Krcmarik, finance director of Fort Collins.

"There's a perception out here that property taxes are insufferable," said Mr. Krcmarik, who is also president of the Colorado chapter of the Government Finance Officers Association. "But when you talk to someone from, say Michigan, you see how much higher theirs are."

In fact, Colorado has long been a low-tax, low-debt state with a distinctly Jeffersonian approach.

"We not only preach, but we practice local government," said James Jacobs, director of research for the Colorado Public Expenditures Council, a private group.

"Here," said Colorado Springs's Mr. Jones, "people have the idea that the less government is the best government."

How Bad Is Spending?

While Mr. Bruce believes government spending is out of control, the Colorado Public Expenditures Council in a recent study found that local spending outpaced inflation by only two-tents of a percent over the last 15 years.

In fact, Mr. Jacobs said Colorado is one of only four states that spend the majority of all taxes on local government. The state spends 51.1% of all funding at the local level, behind New Hampshire and New York and just ahead of South Dakota. The national average is 39.4%.

"We are fiscally decentralized," he said, adding that Colorado may be too decentalized -- with about 1,400 special districts that have been at the heart of the state's bond defaults and bankruptcy filings.

While the $500 million-plus in defaults have not involved traditional city or county issuers, officials fear it could affect their ability to access the credit markets.

"It puts, if not a cloud, at least a haze over everyone," said Mr. Krcmarik. "But I hope the markets will distinguish between credits."

But for areas such as Colorado Springs, where scores of the bankrupt districts were created, the failure of one taxing district can affect voter feelings about another.

Noting that his city was home to the Metex and Colorado Centre districts, two of the best known defaults, Mr. Jones conceded, "The defaults may have led to the passage of these tax limitation proposals."

But the same decentralization that may be to blame for the defaults is also credited with making local governments more sensitive to their finances.

Because Colorado cities and counties are so dependent on sales taxes, many were able to see every month what their economic position was compared to projections.

That made a big difference in the tiny western slope city of Rifle. When Mike Bestor came on the job in 1982 as the town's first financial manager, the region was at the end of a major energy boom.

Even as Mr. Bestor was hired to manage the excess, the sudden downturn gave him a different assignment: making sure the city survived. "For the first three years I was here, things got progressively worse," he said. "The boom and bust went good for us. Well, the boom did anyway,"

By 1984, even as things were getting worse, the city was able to use its cash for a new city hall and town library.

All of that was possible, he said, because the city was able to detect early in each fiscal year how revenue projections were going. When the numbers came up short, the town's officials cut programs.

Today, Rifle is still waiting for recovery but it is in remarkably good condition with about $3.5 million in the bank -- nearly twice the annual budget -- and virtually no debt.

'Like the Depression'

Sixty miles east, Mesa County officials cannot say the same.

"The world's not all rosy," said Mesa County Commissioner John Leane, a former commodities trader.

The housing market has stabilized, new construction is up, and Main Street is busy again. But a few weeks ago local officials got what they hope is the last shock of the 1980s recession: Unocal Corp. shut a major shale oil operation, costing the local economy some 400 jobs. It was enough to remind Mr. Leane of how hard the last decade was.

"There was a night and day difference between now and then," said Mr. Leane, whose county has 93,800 residents spread over 3,300 square miles. "I'd never seen anything like the bust that occurred out here. It was like the Depression."

The tough times forced local officials to cut services and to raise a broad range of traditional fees, ranging from higher parking fines to increased building permit fees.

Others were more creative: Aurora taxed candy bars; Littleton started a storm drainage utility tax; Brighton raised the fee for police escort of funerals; and Fort Lupton boosted the cost of plots in the city cemetery.

Mr. Hutt, Denver treasurer, said higher taxes and fees came only after tight budget writing showed voters two options: reduced services or higher taxes.

There was little grumbling in Denver in 1988 when the city nearly tripled its employment tax for the first time since the levy was implemented two decades earlier.

"When taxes were raised, it was with the understanding that we had done everything else first," Mr. Hutt said.

Others believe the proliferation of fees may foster support for efforts to pass taxing and spending limits.

Mr. Bruce said that while the state's economy was in bad condition, local governments continued to raise new revenues. The 1990s, he said, might be the time when government is held accountable for its spending in the past decade.

Even though eight tax-limiting amendments have failed since 1962, Mr. Bruce plans to keep trying. He noted that in the last two elections the support has grown slowly, adding, "I think it's going to pass. It's inevitable."

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