Colorado voters would be asked to give up tax refunds when state revenue exceeds constitutional caps and instead send the extra money to the state’s K-12 schools, under a proposal being developed by two Democratic lawmakers.
Colorado’s Taxpayer’s Bill of Rights limits the growth of state government according to population growth and inflation. Money collected above that cap when the economy is strong must be returned to taxpayers. These refunds are separate from income tax refunds for people who withheld too much from their paychecks. In some years, there are no refunds. Last year, every person who filed income taxes received a $750 check — refunds celebrated at the time by Democratic Gov. Jared Polis and Democratic lawmakers.
A bill expected to be introduced this week in the Colorado House would ask voters to agree to end the practice of giving TABOR refunds and put the money into school budgets for the purpose of hiring and retaining teachers.
“We need to figure out how to fund our public schools, and salaries are 85% of school district budgets,” said state Rep. Cathy Kipp, a former school board member from Fort Collins who is co-sponsoring the bill with state Sen. Rachel Zenzinger, an Arvada Democrat who chairs the powerful Joint Budget Committee. “We think this could have a huge impact and really help with our teacher shortage.”
The most recent state economic forecasts predict Colorado will have more than $2 billion above the cap this fiscal year, and between $469 million and $1.5 billion above the cap in 2023-24. An economic downturn could change those numbers.
State revenue exceeding the TABOR cap goes first to property tax exemptions for seniors and then to a new voter-approved affordable housing fund. Kipp and Zenzinger’s proposal would not change that. Education would be third in line for excess funding.
Colorado Politics first reported the proposal Tuesday.
Both Kipp and Zenzinger said the proposal would not change the state’s underlying school funding challenges because it would not provide a steady source of money.
“It’s not a sustainable solution,” Zenzinger said. “It’s more in keeping with what we have done in the last couple of years, which is to prop up education through one-time funding.”
But Zenzinger said it would put an end to funding schools below constitutional requirements while returning money to taxpayers.
“Last year in particular, we saw unprecedented excess revenue, and it was just so frustrating to not be able to fully cover public education,” she said.
Colorado lawmakers have increased school funding significantly in recent years but it still doesn’t meet constitutional requirements. Since the Great Recession, Colorado lawmakers have held back more than $10 billion under what’s known as the budget stabilization factor.
And there are major questions about whether current state funding levels are sustainable.
In the 2022-23 budget, Colorado lawmakers held back $321 million from a more than $5 billion in state K-12 funding in the face of high inflation and a Polis-backed deal to limit property tax increases, which would have helped support school funding as well.
Republicans — who have said Democrats could fully fund schools now if they reconsidered their other priorities — are expected to fight this new proposal.
Michael Fields, president of the conservative Advance Colorado Institute, who has led successful efforts to reduce the state income tax and kill proposals to raise taxes for education, said in a press release that Coloradans value their tax refunds and want more accountability for how schools spend the money they get now.
In 2019, Colorado voters rejected Proposition CC, a referred measure that would have ended TABOR refunds and divided that revenue among K-12, higher education, and transportation projects. They’ve also rejected statewide income tax increases to fund schools. Last year, a proposal to dedicate one-third of 1% of income tax revenue to K-12 schools failed to make the ballot despite polling well.
“In 2019, Coloradans made it clear that they want to keep their refunds,” Fields said. “After receiving their $750 refunds last year, we imagine that voters will be even more willing to defend TABOR, and the same coalition that was assembled to defeat the last proposal will be prepared to defeat this one.”
Kipp said she thinks voters will be more receptive to forgoing tax refunds to fund schools now.
“Since the pandemic, people are much more aware of the issue facing our schools, and people are more aware that our teachers are very underpaid,” she said.
The bill is designed as a statutory measure, which only requires a simple majority to place on the ballot, not the two-thirds majority required for a constitutional measure. The governor does not need to sign off.
Democrats have a large majority in both chambers of the Colorado General Assembly, and Kipp said she already has 36 co-sponsors. At the same time, she doesn’t expect the proposal to race through the legislature. Instead, she expects it to be one idea amid larger negotiations related to school funding and tax policy.
Democratic leaders have made affordability — especially in health care and housing — the theme of this session, and Polis has pledged more property tax relief. Some Democrats may balk at ending tax refunds when Coloradans face rising costs for daily goods and have supported tax cuts on the ballot.
In a legislative preview held by the Colorado Sun Wednesday, House Speaker Julie McCluskie said it may be time to talk about how the TABOR cap is calculated to help the state pay for education and health needs and noted that voters have allowed many cites and school districts to remove their own TABOR-imposed and keep all revenue raised by existing taxes.
Zenzinger called the proposal a conversation starter and one that’s within the bounds of TABOR.
“If we want to do something different with those revenues, we have to ask the voters,” she said. “That’s the whole point: to ask voters. They may say yes, and they may say no.”
Melanie Asmar contributed reporting.
Bureau Chief Erica Meltzer covers education policy and politics and oversees Chalkbeat Colorado’s education coverage. Contact Erica at firstname.lastname@example.org.