On its face, the question Colorado voters will be confronted with this November is a simple one:
Should taxes go up to inject more money into the state’s schools?
They’ll have the chance to weigh in through a $1.6 billion statewide tax hike, and through a host of local measures. They’ll also have choices between Democratic candidates up and down the ballot who largely support the idea of new taxes for schools, and Republicans who largely don’t.
But the question isn’t that simple.
In reality, the matter of how to fund schools is perhaps the most vexing question in Colorado politics, and one that policy experts on both sides of the aisle say is so politically fraught and technically complicated that’s it’s hard even to know where to begin to answer it.
“You’ve got this really big emotional thing, and it’s really, really complicated, and then because of the nature of how we’re organized and governed — 178 school districts across 100 legislators — the politics of it get really complicated, too,” said Rep. Paul Lundeen, a Republican from Monument. “It makes it potentially the knottiest, thorniest, Gordian policy knot you could possibly have tied.”
The causes are numerous, complicated and date back decades. The consequences are wide-ranging and fundamentally unfair to children and taxpayers alike.
A Colorado Sun analysis of U.S. Census and Colorado school finance data found that today’s system transfers wealth not from the rich to the poor, or from urban areas to rural, but seemingly at random — and often to the benefit of the state’s wealthiest communities.
Some residents are getting huge tax breaks, dictated not by need, but by the mathematical whims of state formulas. Others are paying 10 times or more in taxes than their neighbors and receiving the same basic level of school services.
The solutions being offered to voters, either by political candidates or in the form of a ballot initiative, could help with things like four-day school weeks, teacher shortages and ballooning class sizes. But what voters won’t have is the option to fix the incoherent tax policies at the heart of Colorado’s school finance woes.
The fundamental problem with how Colorado funds its schools is this: Today’s system wasn’t crafted by well-intentioned policy experts, who weighed the pros and cons and settled on the best approach.
It wasn’t even created through the messy art of political compromise, which often sacrifices the ideal for the possible. Instead, the way Colorado funds its schools was dictated by accidents of math — and no one stepped in to intervene until it was too late.
One could write a tome on how we got here. But the abbreviated history goes something like this:
In 1988, every school district was directed by the legislature to adopt the same property tax rate of 40 mills. (Today that would be nearly $900 in taxes on the median home worth $312,000.)
Voters added a bunch of contradictory things to the state constitution, limiting taxes while increasing spending. Lawmakers wrote school finance formulas of their own to make sense of the resulting mess. And the math took over, slashing taxes here and there, as booming economic conditions dictated, but never hiking them back up when more money was needed.
Thirty years later, here are some of the consequences:
Some Coloradans pay significantly higher local school taxes than others. This isn’t dictated by wealth or their own district’s economic need, but by where they live — and what their local economy looked like decades earlier. Consider the property taxes on a $312,000 home. If you live in the Primero School District of Las Animas County, where the tax rate is 1.68 mills, your annual property tax bill was $38 last year. If you live in the Deer Trail School District of Arapahoe County, where the base rate is 27 mills, that same $312,000 home costs $611 a year in taxes, according to a Joint Budget Committee analysis.
As local tax rates fell, the state stepped in. In 1989, local school districts collected 57 percent of school funding, and the state chipped in 43 percent. Today, that ratio has flipped, with the state providing the lion’s share. Last fiscal year, local tax dollars made up just 36 percent of the pie.
But no matter how much a district’s residents pay in taxes, they receive roughly the same school services they would have otherwise. The state is required to backfill each district to a certain funding level per pupil. Then, on top of that, some districts receive more based on other factors, like size or how many students they have with special needs. These factors, too, can have regressive side effects, like a cost-of-living adjustment that effectively transfers money from inexpensive rural areas to wealthier places that have a higher cost of living.
There’s no clear pattern to it. Urban doesn’t necessarily subsidize rural, and rich districts often don’t subsidize the poor. El Paso County alone has 14 different school districts and 11 different tax rates. Property tax payments on the $312,000 home there range from $191 to $611, according to the JBC. And the biggest driver of what a community can generate in local taxes has nothing to do with residential wealth; commercial property taxes are significantly higher than residential ones in Colorado, so a poorer area with lots of industrial or retail property can often generate more tax dollars than a wealthy suburb.
But, there are some alarming consequences for taxpayers. A Colorado Sun analysis found that the nine wealthiest districts by median income all receive a larger share of their funding from the state than the average district. None of those districts charge taxpayers the highest base rate of 27 mills, and three have lower taxes than the statewide average. Meanwhile, in Denver Public Schools, the typical resident makes $56,258 — slightly less than the state’s median income — yet is required to pay the highest base tax rate in the state.
The net result is that lower-income taxpayers are often subsidizing the low tax rates of wealthier homeowners. Poor and middle class Coloradans frequently pay higher local taxes than the rich. And then their state income and sales taxes are disproportionately benefiting districts where wealthier Coloradans send their children.
Meanwhile, the state isn’t even meeting its constitutional spending requirements. This year’s budget falls $672 million short of the state’s annual growth requirements, adding to an I.O.U. that now totals billions since the Great Recession.
Lisa Weil, the executive director of Great Education Colorado, readily acknowledges the shortcomings of the $1.6 billion ballot initiative her group is supporting.
The measure, Amendment 73, would amend the state constitution, but wouldn’t untangle all of Colorado’s constitutional knots. It doesn’t fix a property tax system that leaves two Colorado taxpayers paying dramatically different amounts for the same services, nor does it touch a state funding formula that critics say prioritizes size and cost-of-living factors over the specific needs of children, such as those with special needs.
“Amendment 73 does not fix the entire thing,” Weil said. “It couldn’t be single subject and fix the entire thing. There are huge inequities.”
But, she added, “from the standpoint of a student, it doesn’t matter which formula did what to which district. … Every year that we don’t do this, kids are dropping out and they’re not going to be in the workforce in five years. We’ve got to fix what we can, when we can, as soon as we can to put Colorado back on course.”
So here’s what it would do: Income taxes would go up on those making more than $150,000, and higher earners would pay higher and higher rates. It also would freeze the residential assessment rate at 7 percent, preventing the Gallagher Amendment from making further cuts to residential property taxes — but only for schools, not for other government entities. The non-residential assessment rate would fall to 24 percent, giving businesses a property tax cut. The corporate income tax rate would increase to 6 percent from 4.63 percent.
And here’s what it would mean: The state would finally be able to wipe out its annual school funding shortfall, formerly known as the negative factor, and keep up with the spending increases that the state constitution already requires. It would also give lawmakers ample revenue to address the existing inequities in the School Finance Act, without having to cut anyone’s funding to do so.
“We are doing the thing the legislature can’t do, which is expand the pie in a meaningful way,” Weil said.
Opponents counter that a lack of money isn’t necessarily the problem — it’s that the $9 billion Colorado spends on schools each year isn’t distributed fairly.
“To me it cements the inequities in the system in place,” said Luke Ragland, president of Ready Colorado, a conservative education advocacy group that opposes the tax hike. “There are so many problems with how we’re getting revenue in our schools and how we’re distributing it. To think that we would just drop a $1.6 billion money bomb into that system, it’s unfathomable that anybody would think that’s a good idea.”
Ragland points to things like the cost-of-living factor, which in its most galling form diverts money from struggling parts of rural Colorado to expensive ski resort towns. And, he says, an ongoing rise in administrative costs undercuts the argument that new taxes are needed to increase teacher pay, as advocates insist.
In 2008, over 59 percent of the money spent by schools went to instructional needs. Today, that’s fallen to 55 percent, according to an analysis conducted for the legislature.
“In Colorado, voters aren’t going to just drop $1 billion into something that they know — and everyone knows — is broken,” Ragland said. “They simply won’t. They shouldn’t.”
On the campaign trail, candidates in both parties have offered vague promises of reform. But the public debate has been simplified, as it often is, to the question of taxes.
Some top lawmakers worry the tax question is premature. A bipartisan legislative interim committee has been studying a complete overhaul of the School Finance Act, but the process has been slow, and lawmakers haven’t reached the point that they’re ready to present solutions.
“We (need to) achieve the political will to make those changes first before (voters) pull out their pocketbooks,” said Rep. Alec Garnett, a Denver Democrat who supports new taxes for schools, but doubts the amendment will pass. “And I think that’s one of the mistakes that was made.
“I think the voters are going to say ‘You want more money into a school finance formula? OK, well change it.’ ”
Garnett co-chairs the interim committee with Lundeen, the Republican from Monument. Both say the committee is making progress — but recent momentum has been put on pause until after the election.
“The way we got here was not overnight, and not simple. So the way we’re going to get out of here is not going to be overnight and it’s not going to be simple,” said Lundeen, who opposes the tax increase. “It’s going to take a willingness to tackle this gigantic challenge. And it is a very politically challenging situation because of the nature of all of the winners and losers that are pre-baked into the formula.”
To Weil and other supporters, that’s part of the appeal of the tax hike. Trying to change the formula without new money is a zero-sum game: some districts get more, others get less, and negotiations on how to do so invariably break down. But a ballot measure of this magnitude would make all districts a “winner,” allowing lawmakers to improve the formula without districts having to “fight over the crumbs,” as Weil puts it.
The question is whether taxpayers will be willing to make that commitment, when the people paying for it have already been divided into winners and losers themselves.
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