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Lots of ways to raise your taxes

The 24 proposed ballot measures that would raise state income taxes to boost funding for K-12 education suggest a wide and bewildering variety of ways to do that.

Four of the proposals would keep the state’s current flat tax system but raise the rate to 5.35 percent from the current 4.63 percent. The other 20 plans would create progressive income taxes with either two tiers or five. Those suggest larger percentage increases in higher income brackets.

Some of the measures would tinker with existing constitutional structures, including Amendment 23, which mandates annual increases in base K-12 funding.

Despite the variations, most of the proposed constitutional amendments would arrive at about the same destination – an increase of around $1 billion in new revenue. All new revenue would be earmarked for education and couldn’t be spent on other programs. The state currently collects about $5.2 billion a year from individual income taxes.

The proposals are driven by a coalition of education, civic and business groups as part of a campaign to both modernize the state’s school funding formula and also increase revenue for K-12 schools. The measure that would change the formula, Senate Bill 13-213, is working its way through the Senate. (See this EdNews story for the bill’s current status.)

But because the state constitution forbids the legislature from raising taxes itself, the additional revenues required by SB 13-213 would have to be approved by voters. (If the bill passes but voters reject additional taxes the new formula wouldn’t go into effect.)

Sixteen of the tax increases are proposed by Colorado Forum, a group of business and civic leaders that works on constitutional and fiscal reform. The other eight are proposed by Great Education Colorado, a group that advocates for increased school funding. Both are part of a larger coalition called the School Finance Partnership, which has been working on school reform and funding since the spring of 2011.

“We are very hopeful we can get something done” to improve school support, said Gail Klapper, director of Colorado Forum.

Why were so many plans filed?

Trying to amend the state constitution is a tricky legal process dictated by complicated rules governing the scope and wording of proposed ballot measures. So groups sometimes file multiple versions so they have backups in case one version is successfully challenged. (Disputes over ballot measures periodically end up before the Colorado Supreme Court.)

Drafting ballot measures also is a political process, and different versions often are filed to acknowledge the priorities of individual interest groups within a coalition and to create alternatives whose potential popularity can be tested in public opinion surveys and focus groups. A key reason why all the measures would generate about $1 billion in revenue is because previous polling and focus groups indicated that’s about the most the public would support.

“We wanted to make sure there are as many options as possible,” said Lisa Weil, policy director for Great Education.

Proposals had to be filed by March 22 to be considered for the November 2013 ballot, so Colorado Forum and Great Education covered their bets by filing multiple versions. (The two groups are cooperating, not competing in the effort.)

“We are very appreciative of everything that Colorado Forum is doing,” Weil said. “We are looking forward to working with them.”

After the measures undergo multiple reviews that begin Thursday and run through late April, a single measure is expected to be chosen for submission to voters. Proponents will have to gather at least 86,105 required signatures by Aug. 5.

“People are chomping at the bit to work on an increase for education,” said Liane Morrison, executive director of Great Education.

What the proposals would do

In addition to various tax rates, the 24 plans offer different mechanisms for using the additional revenue.

The 16 Colorado Forum plans sort into four groups. Every proposal would raise taxes and also create what’s called the Education Achievement Fund, which would receive the new revenues and be used to fund various elements of the SB 13-213 formula. Here are the other features of the four groups:

  • In addition to raising taxes, a first group also would earmark 43 percent of the state general fund every year for K-12 education and also change another section of the constitution that currently acts to drive down school district property tax collections.
  • A second group would raise taxes and stabilize district property tax collections.
  • A third group would raise taxes and include the 43 percent earmarking of the general fund for schools.
  • The fourth group would just raise taxes and put the additional revenue in the achievement fund.

Revenue raised by the four plans would range from about $811 million to just over $1 billion, Klapper said, although she cautioned those estimates might be low. (Legislative staff will calculate estimated revenues for each proposal during the review process.)

In addition to different tax rates, the main variation among the eight Great Education plans is that some would give education an added boost. The Taxpayer’s Bill of Rights section of the constitution requires that certain surplus revenues be refunded to taxpayers. (State revenues haven’t grown enough in recent years to trigger that.) Some versions of the proposals would instead transfer such surpluses to K-12 spending.

The Great Education proposals would use the existing State Education Fund as the holding account for new education revenue.

And there are more proposals

Three other proposals related to SB 13-213 and school funding also have been filed.

One proposes putting the original text of SB 13-213 to the voters as a change to state law. It was filed by Kelly Brough, CEO of the Denver Metro Chamber of Commerce, and Tamara Ward, CEO of Colorado Concern, a group of business executives.

Brough said last week, “Our rationale for filing the title was to protect our ability to ensure SB 213 is preserved … if the bill doesn’t pass or changes significantly” in the legislature. “Our title was filed to address … the reality that the fate of SB 213 at the Capitol is very uncertain. If SB 213 passes and is signed by the governor our title is not needed. If none of the tax increases go forward in 2013, our ballot title is not needed.”

And two measures were filed by tea party activist Steve Dorman. One would increase income taxes by only .0001 percent to fund SB 13-213, and one would raise state sales taxes by 10 percent to fund teacher pensions.

Education & the constitution

The state constitution currently includes three elements that affect education funding.

Amendment 23 – This provision requires that base K-12 funding increase by enrollment growth and inflation every year. Additional school funding isn’t covered by that requirement, and the legislature actually has cut school funding in recent years because of tight state revenues. It’s estimated that school support is about $1 billion below what it would have been without those cuts.

Some of the Colorado Forum proposals would repeal the A23 multiplier and replace it with a requirement that 43 percent of the state general fund be devoted to K-12 every year.

Taxpayer’s Bill of Rights (TABOR) – This part of the constitution sets limits on state revenue and spending increases and requires voter approval of new taxes. Several of the proposals would create significant exemptions from TABOR for education spending.

Gallagher Amendment – This section was intended to set ratios between business and residential property taxes. In combination with TABOR, which was passed later, it’s had the effect of driving down residential assessment rates and shifting a higher percentage of school costs to the state. Some of the Colorado Forum proposals include a provision that would create a floor below which residential assessment rates couldn’t drop.

And … the single subject rule – An unavoidable hurdle for ballot measure proponents is what’s called the “single subject rule,” which limits the content of a measure and requires the full content be listed in a measure’s title. More than one past measure has fallen afoul of this rule.

Proponents of the school tax measure believe their single subject is “school finance” and that they can pass the test. “We’re hopeful it will fall under that single subject,” said Trey Rogers, a lawyer who is working with proponents.

Sticking with a single subject is the reason why proponents want to tinker with the Gallagher Amendment only as it applies to school taxes. The fluctuation of property taxes for counties, cities and special districts wouldn’t be changed.

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