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Try, try again: Latest attempt at Colorado school funding measure would raise $1.6 billion with income, corporate tax increases

Colorado voters could see a $1.6 billion tax increase for education on their November ballots.

Backers of a major school funding measure have been cleared to gather signatures by the Colorado Secretary of State’s Office. The measure – going by Great Schools, Thriving Communities – would increase the corporate tax rate and increase income taxes for people who earn more than $150,000 a year, as well as change how residential property is taxed for schools.

“Colorado schools are severely underfunded right now, and this initiative is a way we can ensure that every student has access to the supports they need for success,” said Susan Meek, a spokeswoman for Great Education Colorado, one of the groups supporting the measure.

Colorado’s Taxpayer’s Bill of Rights requires that voters approve any tax increase, and voters have twice before rejected statewide school funding measures, most recently in 2013.

To get on the ballot this time, supporters need 98,492 valid voter signatures. Amendment 71, approved in 2016, requires that those signatures be gathered in every state Senate district in the state, imposing – by design – a logistical and financial hurdle on all constitutional amendments. (A federal judge has suggested that requirement might violate the U.S. Constitution, and it’s not clear right now whether it will remain in effect.)

The tax measure calls for:

  • Raising the corporate income tax rate from 4.63 percent to 6 percent.
  • Raising the income tax rate from a flat 4.63 percent to between 5 percent and 8.25 percent for people earning more than $150,000. The highest tax rate would be paid by people earning $500,000 or more.
  • Setting the residential property assessment rate at 7 percent for schools. That’s lower than it is now but higher than it is predicted to be in 2019 because current law has the unintended effect of gradually reducing the residential assessment rate.
  • Setting the non-residential property assessment rate at 24 percent, less than the current 29 percent.

According to a fiscal analysis by the state, the average taxpayer earning more than $150,000 would pay an additional $519 a year, while those earning less would be unaffected. The average corporate taxpayer would pay an additional $11,085 a year. The change in property taxes would vary considerably around the state, but based on the average statewide school levy, many property owners would pay $28 more on each $100,000 of actual value in 2019 than they otherwise would. Commercial property owners will see a decrease, and total property tax revenue collected by school districts would go down statewide.

If approved, the taxes would generate an estimated $1.6 billion that would go into a new “Quality Public Education Fund.” The vision is that this money would be distributed to schools in accordance with a new school finance formula backed by nearly all of the state’s superintendents and under consideration in the legislature this year.

The new funding formula, which would increase per-pupil funding in accordance with student characteristics like being gifted and talented or learning English as a second language, only goes into effect if voters approve the tax measure. If that plays out, no school district would lose money on the deal, and some would see significant increases in funding.

If lawmakers don’t pass a new funding formula, but voters approve the tax measure, schools would still get more money. The ballot measure calls for an increase to the base amount of per-pupil funding, plus extra money for students with particular needs, money for public preschool, and money for full-day kindergarten.

Full funding for kindergarten has been an elusive Holy Grail for education advocates in Colorado.

“Our measure is addressing the needs of the kids head on,” said Donald Anderson, one of the backers of the tax increase. “You can see where we’re raising this money and you can see where it’s going, and it’s very transparent in a way that voters will be able to get behind.”

Anderson is a stay-at-home father of two children in the Poudre School District in Fort Collins who has been active on school issues.

The ballot measure also contains a provision that requires the state to keep spending what it already does. That is, lawmakers can’t lean on this new money source and divert existing education spending to other needs.

Luke Ragland of the conservative education reform group Ready Colorado supports the idea of weighted student funding contained in the proposed new finance formula, but he doesn’t think Colorado’s education system needs a huge infusion of cash – if voters even go along with the idea.

“I don’t understand why the presumption is that spending more money will make things better,” he said. “Spending money on the same things won’t produce different outcomes.”

The education spending measure could be sharing space on a crowded ballot with a governor’s race, a transportation measure, and more.

The most recent attempt to raise money for schools – Amendment 66 in 2013 – was rejected by 65 percent of voters. That measure affected all taxpayers by imposing a 5 percent income tax rate on those earning up to $75,000 and a 5.9 percent rate on those earning more. It also involved a change to the funding formula, but one that caused some districts to lose money.

Is this a good time to try again for an education tax increase? Backers of the idea say there’s only one way to find out.

“We have one of the best economies in the nation right now, and it’s the perfect time to be investing in our students,” Meek said.

In the money

Here’s how Colorado schools would spend an extra $100 million from the state

PHOTO: Helen H. Richardson/The Denver Post
Hannah Moore, 8, shows off her moves during practice for an after school talent show that is part of the Scholars Unlimited After School program at Ashley Elementary school on March 10, 2017 in Denver, Colorado. Scholars Unlimited is an after school and summer program funded by the 21st Century Community Learning Center Grant, which is threatened to be cut entirely under the White House's budget cuts. The 21st Century Community Learning Center Grant served almost 20,000 students in Colorado between 2015 and 2016 and 76 percent of students showed academic improvement. (Photo by Helen H. Richardson/The Denver Post)

Legislators on the Joint Budget Committee unanimously decided this week to set aside $100 million to “buy down” the budget stabilization factor.

This number – $822 million in 2017-18 – is the amount by which Colorado underfunds its schools when compared to the constitutional requirement that spending on education increase every year based on student count and inflation. It’s more commonly known as the negative factor, though lawmakers are trying to get away from that term.

For several years now, lawmakers have held the negative factor steady, but this year, as Colorado has more money to spend than it has had in a long time, Gov. John Hickenlooper wanted to make a dent in it and requested the $100 million reduction. To be clear, a $100 million reduction in the negative factor is $100 million more that the state would send to districts. Technically, this number will be finalized in a separate piece of legislation, the School Finance Bill, which is coming any day now.

But state Rep. Millie Hamner, the Dillon Democrat who chairs the Joint Budget Committee, wanted to give some reassurance to educators that the money will be there in the budget. 

“It would send a message to our K-12 community that we are not spending that money and have set it aside,” she said.

And educators have been clamoring to hear that message. The Colorado School Finance Project has been running a social media campaign for the $100 million buydown using the hashtags #k12needsco and #kidsmattertoo.

The non-profit asked school superintendents around the state to say what they would do with the extra money, which translates to an additional $114 on average for each enrolled student, compared to holding the budget stabilization factor steady. The answers are identified by region, but not by district.

Here’s a small sample of the responses:

You can read all of them here.

The Joint Budget Committee has set total program spending on education at $7.75 billion before the negative factor is applied, up from $7.45 billion this year, a 4 percent increase. Of total program spending, the state will pay $4.4 billion, with the rest coming from local property taxes. This doesn’t include voter-approved tax increases known as mill levy overrides.

That translates to average per-pupil spending of $7,959, compared to $7,662 this year. A budget stabilization factor of $722 million would yield an average per-pupil amount closer to $8,074. 

The smaller budget stabilization factor is significant beyond just one budget year because state law says that this number shouldn’t get larger from one year to the next. However, Colorado superintendents are also pushing for a tax increase and change to the distribution of school money. It will take more than an additional $100 million spread among 870,000 students to address all the needs they identify in their responses to the Colorado School Finance Project.

Hickenlooper had also requested an additional $200 million for the state education fund, with the intention that that money be used to offset costs to districts from proposed changes to the public pension system and expected reductions in property tax revenue in rural communities.

The Joint Budget Committee instead voted to set aside $225 million to deal with costs associated with fixing the Public Employees Retirement Association’s unfunded liability – but in the general fund rather than the state education fund and not specifically to help schools, where retirement costs account for a big chunk of the personnel budget.

The committee also agreed to set aside $30 million to help small rural districts with low tax bases and was supportive of setting aside $10 million to address rural teacher shortages, though some of the details are still being worked out.

What's fair

Colorado’s state-authorized charter schools could get more money next year

Students at The New America School in Thornton during an English class. (Photo by Nic Garcia)

Charter schools authorized at the state level by the Charter School Institute are likely to get more money in the 2018-19 budget year. That’s one year before most other charter schools will see benefits from last year’s charter school funding equity bill.

That bill was a major compromise out of the 2017 session, and it requires school districts to share money from voter-approved tax increases with the charter schools they’ve authorized, starting in 2019-20. The bill also created the mill levy equalization fund to distribute state money to the Charter School Institute’s 41 schools. Because no local school board approved these schools, they wouldn’t otherwise be eligible for revenue from these increases, known as mill levy overrides.

Charter School Institute administrators came calling for their money this year, though, with a request for $5.5 million from the general fund. They arrived at this number by identifying institute schools within the geographic boundaries of districts that already share some extra revenue with their local charters and assuming institute schools got a similar share.

Institute Executive Director Terry Croy Lewis called it a “first step” toward parity that would bring institute and district-authorized charter schools to the same level in advance of the new law going fully into effect in 2019. Lewis said it seemed like a fair approach because the parents at institute-authorized schools often live within the geographic boundary and pay taxes at the same rates as parents whose children go to traditional schools or district-authorized charters.

However, the charter equity bill says that extra money for institute schools has to be distributed on an equal per-pupil basis. The original approach, which created more equity among schools in the same geographic boundary, created more disparities among institute schools in different regions – and the law might not have allowed it.

“I don’t think you can define equity in this conversation because equity cuts a lot of different ways,” said state Sen. Dominick Moreno, a Commerce City Democrat and member of the Joint Budget Committee.

Budget analyst Craig Harper suggested to the Joint Budget Committee that separate legislation might be necessary to allow the distribution proposed by the Charter School Institute, something no lawmakers wanted to see after the bruising fight over the charter school equity bill.

Instead, the Charter School Institute revised its proposal to distribute the money among its schools on a per-pupil basis, regardless of geography and whether the local district already shares money.

What sort of difference does this make?

In the first distribution scenario, Early College of Arvada, located in the Westminster district, would have gotten nothing – because Westminster doesn’t currently share money with its own charters. Under the new proposal, the school would get $131,233 based on its pupil count. Meanwhile, Colorado Early College – Fort Collins, which would have gotten $621,357 because the Poudre district already shares money, would instead get just $374,952

Lingering confusion over the distribution question led JBC members to postpone a decision several times before they voted 4-2 this week to include the $5.5 million request in the 2018-19 budget.

It still has to survive the extended battle over the budget that takes place in the full House and Senate each year.