America's Property Tax Advisor

Colorado Bill Promotes School Finance Equity

BY JOE MONZON, DENVER, APRIL 2021

Colorado lawmakers are debating a bill that proponents say would ultimately make the state’s K-12 school finance system equal across all districts.

 

If approved, property owners in some school districts will see gradual tax increases over the next two decades that will generate hundreds of millions of dollars a year for public education.

 

Background

 

Colorado’s school finance system uses state finances to equalize per-student funding across the state. When the system was put in place in 1988, local taxpayers covered about two-thirds of the cost and the state paid the remaining third.

 

Over time, the ratio has changed with the state now picking up two-thirds of the cost of public education. This occurred because the Taxpayers Bill of Rights (TABOR) capped how much tax revenue could grow each year. If a school district expected to bring in money above the cap with appreciating assessed values, it had to reduce its mill levy. As a result, mill levies dropped, and districts were left with widely differing school property taxes.

 

HB 21-1164

 

House Bill 21-1164 is based on the theory that local tax rates should have never declined so much. It requires the Colorado Department of Education to adopt a correction schedule to begin phasing out the tax credits in the 2021 property tax year. The correction schedule would apply consistently to each affected school district and must require each district's tax credit to phase out as quickly as possible but by no more than one mill per year.

 

"Out of 178 school districts in the state, 127 were affected by this error. There are some that may need to go up one or two mills, but there are others that honestly need to go up 20 mills. No taxpayer or school district deserves that burden slammed on them, so we spread it out over 20 years," explained House Majority Leader Daneya Esgar.

 

Before the bill can become law, the Colorado Supreme Court will need to rule on whether it is constitutional.