Tax Limits Cost Schools Billions, Lawmakers Told

December 14, 2009

Colorado schools, which are facing a 6 percent funding cut, would have had an additional $3 billion annually if constitutional limits on residential property taxes had not been enacted by voters in past decades, lawmakers were told Friday.

That revelation came during a meeting of the Joint Budget Committee, which was hearing a presentation from Department of Education officials. The 2010-11 budget Gov. Bill Ritter is proposing calls for a $260 million reduction in funding for public schools, which represents just over a 6 percent cut in total funding from the budget year that ends in June.

Sen. Evie Hudak, D-Westminster, was among a group of lawmakers who don’t sit on the Joint Budget Committee but who have been attending its hearings this year as legisla tors wrestle with balancing state spending.

Hudak had asked education officials how much more money in property taxes there would be now if voters had not approved the Gallagher Amendment in 1982 as a result of revolts over large jumps in property taxes. The amendment says not more than 45 percent of all property taxes can come from residential property, while the remaining 55 percent must come from taxes on commercial property.

The amendment also fixed the assessment rate – the percentage of a property’s market value that can be taxed – for commercial property at 29 percent. Meanwhile, the assessment rate for residential property, which had been at 30 percent before Gallagher, is adjusted annually to maintain the 45-55 split.

However, because of the Taxpayer’s Bill of Rights amendment voters adopted in 1992, the residential assessment rate can’t be raised without voter approval and only goes down. It’s now at 7.96 percent.

The Colorado Supreme Court upheld a 2007 law that froze mill levies and kept them from automatically decreasing under TABOR.

Education officials said that without the restrictions of TABOR and Gallagher, local property taxes would be generating nearly $3 billion more per year for schools. At the same time, the state’s share of school funding would drop from its current level of 63 percent to 11 percent, while local taxes would generate 89 percent of the funding instead of the current 37 percent.

"This is a very significant number that people need to know about," Hudak said in response to the figures. "Maybe the voters didn’t really think through how these two (amendments) would interact."

But Rep. Frank McNulty, R-Highlands Ranch, said talking about how much money there could have been was an "academic discussion."

That’s not the reality, he said.

"We’re talking about generating jobs, and what you’re talking about here is increasing property taxes," McNulty said.