Why are We Leaving Opportunities on the Table? A Tutorial on School Finance in Colorado Chris Stiffler Economist

Three basic pots of money in the State budget $25 billion total budget in FY $7.4 billion

General Fund Revenue Sources

What does the money buy? FY Colorado General Fund $10.3 billion

How We Fund Schools Today in Colorado

A little More Detail on Local $$$ Property Tax = Property Value X Assessment Rate X Mill Levy determined locally by market value set by the state by property category —e.g. residential, commercial established at local district level

Gallagher TABOR School Finance Act Amendment Ref. C 2007 Mill Stabilization 2009 Negative Factor The Timeline

Back to 1980s…. Local Share State Share Residential Assessment Rate 21%

The Context of Gallagher Solving a “Fairness” problem The residential property tax relief component was almost an after thought (45-55 split) Most of Gallagher is non controversial Periodic reappraisal Market value assessment

Response: Gallagher Amendment Still Had Two Options Between School boards could maintain local dollars by adjusting mills Local Property Tax = Property Value X Assessment Rate X Mill Levy 2. Legislators could raise taxes

Back to 1992…. Residential Assessment Rate 14.34%

Limits Options for Funding Policy Priorities Explanation: TABOR Major Provisions Limits The Legislature’s Responsibility for Tax Policy Limits Revenue Collections Sets Election Provisions

Gallagher TABOR Interaction Limerick: Because of the split Home assessment rates sure took a hit But by adjusting their mills They kept up local dollar bills But after TABOR that had to quit

Gallagher TABOR School Finance Act Amendment Ref. C 2007 Mill Stabilization 2009 Negative Factor The Timeline

Back to 2000 and A23 Residential Assessment Rate 9.74%

Context: Amendment 23 During the 2000’s, back to back recessions resulted in reductions in state revenue. Despite growing economy of the 1990’s, per pupil funding for schools in Colorado did not keep up with inflation. This had a lot to go with Gallagher, TABOR, and the School Finance Act.

Explanation: Amendment 23 Diverted a portion of state income tax to a reserve fund (State Education Fund) for schools For 10 years, it required per pupil funding to grow by inflation plus 1% Required growth in per pupil funding (categorical funding and base funding) of at least inflation in perpetuity

Gallagher TABOR School Finance Act Amendment Ref. C 2007 Mill Stabilization 2009 Negative Factor The Timeline

Back to 2009 Broncos were 8-8 under Josh McDaniels Residential Assessment Rate 7.96% (although it should have increased to 8.85% but TABOR prevented this)

Response: Negative Factor In effect, Amendment 23’s funding increase mandates have been nullified by Legislative interpretation since Funding for K-12 education in Colorado in 2015 was more than $855 million below where it would have been without the Negative Factor, which has reduced each school district’s yearly funding by about 15 percent.

Early 1980’s Today Local Share State Share State Share Residential Assessment Rate: 21% 7.96% (Should be higher)

Where Have We Been? Cuts Were Made During Tough Fiscal Times $1056

Where Have We Been? Money for budget is tied to economy Caseloads increase if money is available or not

The Conundrum: Rapidly Growing Economy Doesn’t Allow for Better Investments Colorado has one of the best economies in the country but that doesn’t translate into budget flexibility Instead Colorado makes cuts during bad times and gives back money to tax payers during good times.

TABOR Rebates Are Upon Us FY OSPB: $116.7 million above cap Leg. Council: $50.3 million below cap FY OSPB: $398 million above cap Leg. Council: $252.5 million above cap FY OSPB: $153.6 million above cap Leg. Council: $153.6 million above cap September 2015 Revenue Forecasts

Funding Shortage in K-12 Not Going Away Without Significant Changes

Questions? Colorado Fiscal Institute Get Involved: Join Our ing list