America's Property Tax Advisor

Colorado Supreme Court: House Bill 21-1164 Does Not Violate TABOR

BY ALEX MARTINEZ, DENVER, JUNE 2021

Colorado taxpayers in 127 school districts throughout the state can expect a tax hike with the passage of House Bill 21-1164. This bill requires the phasing out of tax credits that were initially provided to lessen the impact in counties electing to De-Bruce through voter approval. 109 districts will see an increase of 1 mill, while the remaining districts will see an increase of less than 1 mill, according to the bill’s Fiscal Note.

 

Concurrently with the approval of House Bill 21-1164, the Colorado Supreme Court struck a preemptive chord by affirming through interrogatory, the constitutionality of House Bill 21-1164. While the majority of the court concluded that further voter approval was not required as a result of De-Brucing, Justice Boatright, dissenting, reasoned that voter approval is required when any new tax, tax increase or mill levy above the previous year occurs. House Bill 21-1164, by eliminating the tax credit, does just that in 127 school districts.

 

History

 

The Taxpayer Bill of Rights (TABOR) was approved by the Colorado electorate in 1992 as an amendment to the state constitution, in order to constrain unbridled tax increases. In its simplest interpretation, TABOR requires voter approval whenever tax increases over the previous year are contemplated. During the next few years, taxing authorities fearing continued erosion of the tax base, appealed to the voters to De-Bruce (waive TABOR limitations). 176 school districts received voter approval.

 

In response, the Colorado Department of Education (CDE) directed the school districts to reduce the levy to comply with TABOR restrictions effectively ignoring the TABOR waivers. This resulted in lower local funding but shifted more of the cost of education to the state level. The imbalance has continued. In 1993, local school districts covered approximately two thirds of K-12 education costs. Today, the local share is about one third.

 

Last year, the legislature passed a bill requiring school districts to restore the levies to the levels in place when the waivers were approved, having determined that the CDE’s directives were erroneous. Restoring the levies to their previously approved levels will result in an additional $91.7 million in property tax revenue to fund the local share of the total cost of K-12 education. The question is, who will bear the cost?

 

House Bill 21-1164

 

This bill concerns reductions in the property tax credits that apply to school districts’ total program mill levies for purposes of funding the “Public School Finance Act of 1994”.

 

Key Provisions:

 

  • Corrects the total program mill levies for school districts not subject to revenue restrictions but whose mill levies were erroneously reduced

  • Requires CDE to adopt a schedule to phase out previous tax credits for each affected school district

  • Maximum of phase out levy not to exceed 1 mill annually

  • Ensure full phase out in 19 years

 

Exact annual impact to local taxpayers will be school-district specific. The City and County of Denver (Denver Public Schools) will see in the first year a shift of $21,416,429 in funding for K-12 education from the state share to the local share. Boulder/St. Vrain will see a shift of $11,559,477, while Jefferson County and Douglas County will see a shift of $8,365,468 and $7,686,309, respectively. These school districts represent the greatest shift as a result of the bill’s passage.

 

Conclusion

 

House Bill 21-1164 has the direct effect of raising the mill levy by a maximum of 1 mill annually for all affected school districts by eliminating the previously imposed tax credit. It will restore De-Bruced funding levels expected to raise $91.7 million in property tax revenue in its first year to fund the local share of K-12 education.

 

Proponents of House Bill 21-1164 argued that its implementation is not a tax increase but a correction of an “erroneous” directive by the CDE in 1993. The Colorado Supreme Court agreed in principle by asserting in its majority opinion that “Accordingly, we perceive no basis for requiring a second election to ask voters re-approve what they have already approved.”

 

Justice Boatright, dissenting, explained that due to the levy increase, property owners will pay more in taxes from one year to the next. “That is the very definition of a tax increase under the constitution. Therefore, in my view, this bill violates our constitution by raising tax rates without voter approval.”

 

Supporters of House Bill 21-1164 agree that the Supreme Court reached the correct decision. De-Brucing had the direct effect of voter approval notwithstanding when it was given. Critics of the Supreme Court’s decision expressed that “like most decisions involving TABOR, the majority opinion is an exercise of politics, not law.”