Colorado Supreme Court clears way for property tax increases, more school funding

Photo shows half the pale blue glass dome and the upper level of the Colorado Supreme Court chambers at the Ralph Carr Judicial Center in Denver, Colorado.
A Colorado Supreme Court decision paves the way for more school funding in years to come. (Hyoung Chang / The Denver Post)

Legislators can raise school district property taxes without getting new voter approval, the Colorado Supreme Court ruled Monday.

The decision marks a major victory for supporters of school finance reform who have watched Colorado struggle to fund its schools, even as K-12 education takes up a growing share of the state budget

With news of the Supreme Court’s blessing, state senators Monday approved a bill that would gradually increase local taxes in many school districts, generating more than $91 million for schools next year and more than $288 million a year when fully implemented.

The extra money will come from local taxpayers, not state coffers. Republicans Sens. Kevin Priola of Brighton, Bob Rankin of Carbondale, and Don Coram of Montrose joined Democrats in what was otherwise a party-line vote.

The immediate impact will be a relatively modest 1.2% increase in the $7.8 billion Colorado planned to spend on schools next year. But the new revenue is expected to ramp up quickly. 

Supporters expect that with this change, Colorado will get close to funding its schools as the constitution requires in the next five years. Advocates hope the extra money makes it more politically feasible to increase funding for students living in poverty, those learning English, and those with disabilities.

“This is a major win for Colorado kids,” said Leslie Colwell of the Colorado Children’s Campaign, which has called for school finance reform for years. “For decades the educational opportunities that have been available to students have been largely determined by ZIP Codes and local property wealth. The Supreme Court decision affirms that the legislature can begin to solve this problem and moves us closer to serving all kids.”

The Colorado Supreme Court decision comes in response to a formal inquiry that the legislature sent to the high court. Legislators wanted to know if they could return local school district taxes to levels that voters had previously agreed to without holding a new election. Colorado’s Taxpayer’s Bill of Rights typically requires a vote of the people to raise taxes, but in this case, tax rates had been reduced in error, supporters of the change said. 

The Supreme Court agreed.

“The voters have previously approved what the General Assembly is attempting to implement, and we have made clear that, in such circumstances, corrections like these are permissible without additional voter approval,” Justice Richard Gabriel wrote for the majority.

State Sen. Rachel Zenzinger, chair of the Senate Education Committee and a sponsor of the bill, said she was “overjoyed” at the ruling after spending many years working on school finance.

“This is very exciting because it’s going to allow us to insert some fairness back into the system,” she said. “This is going to allow us to address some long-standing inequities, and it’s going to go a long way toward rebalancing the state and local share.”

The legislation, which heads now to the desk of Gov. Jared Polis, proposes to return mill levies, or property tax rates, to the levels they were at in the 1990s. At that time, most school districts got voter permission to keep revenue from existing taxes. That should have led to tax rates remaining flat, but the Colorado Department of Education instead interpreted the 1994 School Finance Act to require property tax rates to go down, until the legislature froze mill levies in 2007.

Rates would go up by no more than one mill a year until they get back to the previous level. One mill is the equivalent of $1 for every $1,000 of taxable home value. 

Taxpayers in school districts that already collect the maximum 27 mills would not see any change. Nor would those whose local taxes already cover the full cost for schools.

Chief Justice Brian Boatright dissented. He argued that just because voters agreed to let their school districts keep revenue from existing taxes several decades ago, that doesn’t mean they intended to lock in those tax rates indefinitely. 

“Put simply, due to the mill levy increase, property owners will pay more taxes from one year to the next,” he wrote. “That is the very definition of a tax increase under our constitution.”

The impact for taxpayers will depend on how home values change. 

The owner of a $400,000 home in Englewood, for example, currently pays about $626 a year to support the school district. Next year, with the levy one mill higher, that same homeowner would pay closer to $655, a 4.6% increase, or more if their home value increased as well. Once Englewood reached the maximum of 27 mills, school district taxes on a $400,000 home would be $772 a year.

Conservative group Colorado Rising State Action is working to place a measure on the ballot that would reduce assessment rates, which would reduce how much property value is taxable. If successful, that could reduce the revenue from the mill levy increases. Executive Director Michael Fields predicted the court decision would only help his cause.

The impact of the court ruling on school districts depends on many factors. Denver, for example, will get an extra $9.5 million overall but lose state funding, according to a legislative analysis. The suburban Adams 12 district will get an extra $4.2 million, all of it from the state, because its taxpayers already pay the maximum. 

Advocates hope that over time, the mill levy change will reduce the amount the state holds back and restore balance by shifting some costs back to school districts. They also believe it’s fairer for school districts to pay similar tax rates. 

“The decision handed down today will help us start to make up for years of deeply inequitable funding processes that have hamstrung certain districts like mine in Pueblo and held our schools back,” state Rep. Daneya Esgar, one of the bill’s Democratic sponsors, said in a statement. “It’s long past time to make fair and robust investments in our children and the future of Colorado.”

Most Republicans opposed the effort. Along with conservative advocacy groups, they argued that the proposal would undermine TABOR and open the door to other tax increase maneuvers. 

The court majority rejected that argument, but the justices also emphasized that their decision applied only to the specific circumstances of the case. They said it should not be taken as a rejection of TABOR. 

“Allowing the mill levy corrections before us will not open the door to ‘trickery’ by the General Assembly,” they wrote. “Nor may the General Assembly simply label any past mill levy as ‘incorrect’ as a cover for raising taxes without prior voter approval.” 

“Rather, we simply conclude, in the unique circumstances presented, that the General Assembly may act to effectuate mill levies that voters have previously approved but that, due to an error, were not given full effect.”

Colwell said she hopes the new money allows for progress on changing Colorado’s school funding formula.

Because districts get credit for factors like cost of living, the current formula sometimes sends more state money to well-off districts than to ones serving lots of students in poverty, but changing that has been challenging because no district wants to get less than it currently receives. 

But now the school funding pie will be larger.

“I’m hopeful that the next phase of this conversation will be about how we can spend new revenue differently,” Colwell said.

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