Amendment 73 offers a solution to Colorado’s underfunded public education system by using a combination of increased income and corporate taxes, with a possible property tax offset, its proponents claim.
The Aspen School District’s board of education unanimously supported the measure last week through a resolution that includes references to Colorado ranking 48th out of 50 in personal income invested in education, and that districts must no longer be used to fill the financial gap in the state’s general fund.
Statewide, the proposal is touted as a way to provide a guaranteed revenue source that would equitably fund all schools. In the budget year 2017-18, $6.6 billion was distributed to Colorado preschool through 12th grade education, according to the official voter 2018 State Ballot Information Booklet. It’s known informally as the voter “blue book.”
Of that, $6.6 billion, “the state share was $4.1 billion and the local share was $2.5 billion,” it notes.
An argument on the proponents’ side is that since “the 2010-11 budget year, the budget stabilization factor has cut education funding by a total of $7.2 billion.”
One of the arguments presented by the con side, in information provided by the Colorado Association of School Boards, is: “Increasing the state income tax rate could negatively impact the state’s economy. Businesses will have less money to invest in their workers and individuals will have less money to spend, save and invest.”
Voters will make their own decision on the lengthy ballot for the Nov. 6 election.
If passed, Amendment 73 it could provide an additional $3.3 million annually in additional ongoing revenue to the Aspen School District, BOE member Susan Marolt said Monday.
The measure was created through a citizen petition, and monies generated would be placed in a restricted account called the “Quality Public Education Fund.”
“We think it’s good for all the kids in Colorado and will specifically benefit students in the Aspen School District,” Marolt said. The ballot petition did not originate locally.
Schools in Colorado are financed through a formula using state, local and federal sources that consider the number of pupils and cost of living, among other factors; the funding comes through income, sales and property taxes and other ways special districts assess property owners, according to information from the voter book.
School finance is complicated by the state’s Gallagher Amendment that attempts to balance the valuations of residential and non-residential properties.
School finance director Kate Fuentes said Monday the “net number” for per pupil funding in the Aspen School District last year was $10,527. The funded pupil count for 2017-18 was 1,658.4 students, which was down slightly from the prior year.
Since the Great Recession, Colorado has used a budget-stabilization formula that was termed “the negative factor” to not fully fund its obligation to school districts.
Fuentes confirmed that since 2009, the school district has lost $18 million in state funding due to conditions created by the negative factor. For 2018-19, that negative factor is projected at 8.66 percent of the budget, she said.
School board member Marolt, who is currently the board’s secretary, said passage of Amendment 73 “would help to make up for the negative factor that’s been denied from school districts for so long.”
Tangled up in Gallagher
Growth on the Front Range is especially contributing to the Gallagher Amendment condition, which has a ripple effect statewide.
Lowering the residential rate “creates an erosion downward of what the residential assessment is,” according to Fuentes. In essence, fewer dollars are generated to support special districts such as schools and fire.
The taxable rate is 7.2 percent for residential and 29 percent for non-residential properties, said Larry Fite, chief appraiser in the Pitkin County Assessor’s Office. According to information in the blue book, the residential assessment rate was once as high as 21 percent.
Whether the school measure would create complications as to how different assessment districts operated, especially in light of Gallagher, remains to be seen, according to one analysis.
Throughout the summer, a committee of the Colorado Assessors’ Association met to discuss potential changes to Gallagher.
Three proposed bills, ranging from repealing Gallagher to backfilling property tax loss for certain special districts, have remained under consideration, according to information provided by a CAC member.
Particular to this measure, the conclusion of an Aug. 20 study conducted by Steve Miller, Larimer County assessor, noted that “Amendment 73 may negatively affect the property tax revenues of all authorities that are not school districts if the Gallagher ratio is to be maintained. There is no language in Amendment 73 that exempts Amendment 73 assessed valued from the Gallagher ratio.”
Amendment 73, requires at least 55 percent of the vote to pass, according to the blue book.
Changes to income, corporate taxes
Another facet of the measure is the proposal to increase income tax rates for individuals who earn over $150,000 annually.
“Colorado’s current individual and corporate income tax rate is a flat 4.63 percent,” says the voter information book.
“Beginning in 2019, the measure creates a graduated individual income tax rate for taxable income above $150,000, and increases the corporate tax rate from 4.63 percent to 6.0 percent,” it continues.
That could generate $1.6 billion for state schools during the first year of implementation, 2019-20, it notes.
In a recent study published by the Colorado Association of School Boards, 88 percent of Pitkin County residents have an annual income below $200,000. According to their figures, the average household income in the county is $125,593.
Of the 12 percent of county residents who earn over $200,000, they would pay an additional $60 in income tax annually should the measure pass.
But as part of the balancing act attempted by Amendment 73, if that person owned a $750,000 home, there would be a savings of $7 to $14 in property taxes should it pass.