DENVER– Majority Democrats in the state legislature are pushing a school-funding bill that would gradually increase property taxes in school districts across Colorado. But before the bill has even been fully debated, proponents are asking the Colorado Supreme Court to give an okay to avoid sending the measure to the ballot for voter approval.
In 1994, two years after the Taxpayer Bill of Rights (TABOR) passed, the Colorado Department of Education (CDE) began interpreting the new limits on property tax revenues that school boards could collect and subsequently ordered some districts to reduce their property tax mill levies to comply with the new revenue limits.
TABOR is an amendment to the state Constitution requiring, among other things, voter approval for new or increased taxes.
The school funding law was revised 12 years later to eliminate a “rachet-up” effect those CDE-mandated mill levy changes made on state government’s share of school funding. In Colorado, schools are dual-funded using a complex formula by district property taxes and state funds to equalize per-student revenues.
But now proponents of House Bill 21-1164 are calling CDE’s 1994 actions “void” and want to go back in time, reset district mill levies to their pre-1994 levels and then collect taxpayer money at the increased levels for the 12 years they ignored what CDE was doing.
Correcting “wrongly interpreted” mill levy adjustments
Sponsored by House Majority Leader Daneya Esgar, D-Pueblo and House Speaker Alec Garnett, D-Denver, the bill claims that mill levy adjustments ordered by the CDE from 1994 through 2006 were “wrongly interpreted” and that the CDE adjustments were “not authorized by statute and are void for purposes of determining a district’s correct mill levy.”
“I think that there’s a little bit of disingenuousness when the legislature says, ‘This is clearly a mistake,’” said Dan Burrows, Director of the Public Trust Institute in an interview with Complete Colorado last week. “The legislature just let it go on for years and years and was perfectly happy with it. It wasn’t until they realized that it was making the state portion of funding go up and the local portion go down that suddenly the state said, “Hey, we could save some money if we made the locals put in a bigger portion of this.”
The Public Trust Institute is a non-profit public interest law firm based in Colorado.
During the 2020 legislative session House Bill 1418 was signed into law by Governor Polis. The bill made substantial changes to the complex issue of school funding, citing the COVID-19 pandemic in part as the driver of additional costs to public schools to serve distance learning needs. It also increased the local share of school funding paid by district taxpayers by $77.3 million in fiscal year 2020-21.
The 2020 bill also reset the mill levy for all school districts. In order to prevent a violation of TABOR, districts were required to grant a property tax credit to offset any additional revenues from the mill levy increases. In this way the legislature avoided having to submit the mill levy reset to the voters as required for all tax increases under TABOR.
The new bill requires CDE to phase out the property tax credit to landowners over time, so as to “give full effect to the restoration of the correct number of mills” “as quickly as possible” by no more than one mill each tax year through 2040.
For FY 2021-22, which begins July 1, the fiscal note for HB 1164 says that the “local share,” which is paid by property taxes, would increase by $91.69 million.
Under TABOR, this is a tax increase that must be approved by voters, but the proponents of the bill are claiming that it’s not a tax increase but rather a correction of errors committed by the CDE from 1994 to 2006.
“The question now is can the legislature pass a bill that essentially says we’re resetting everything to 1993,” said Burrows.
Getting around TABOR
Legislative proponents have submitted that question to the Colorado Supreme Court in the form of an “interrogatory” asking the Court to answer the following question:
“Given that most school districts obtained voter approval to retain all excess property tax revenue but were required, without legal authority, to subsequently reduce their total program mill levies, can the General Assembly, having already mandated that those school districts reset their total program mill levies to the levels that would have been in effect for the unauthorized reductions, now require such school districts to: (a) gradually eliminate the temporary property tax credits as provided in House Bill 21-1164; and (b) do so without again obtaining voter approval?”
Colorado is one of a handful of states whose constitutions allow legislators to pose questions to the state supreme court and ask for an advisory opinion that, in this case, would “short circuit” the standard legal process by adjudicating the constitutionality of a law the legislature hasn’t even fully debated yet, much less passed into law.
“Asking for this shortly before the legislative term is ending and asking the court to deal with it hastily, without developing a record, without adversarial parties or anything like that, what they’re trying to do is establish a precedent that will essentially quash any lawsuit that’s filed in a particular locale,” said Burrows.
“They are adjudicating the rights of people who aren’t even before the court and may not even know that their rights are being adjudicated,” Burrows continued. “I doubt your average homeowner in Lake County even knows that this has been submitted to the Supreme Court.”
“I think that part of the problem is that the constitutionality of this statute could vary district by district. Colorado has 170 some districts, and whether this is constitutional or not I think heavily depends on what particular ballot issues have been voted on by the people of that district over the past almost 30 years,” Burrows said. “The idea that there’s one answer that applies to all 172 districts that are going to be affected by this doesn’t make a lot of sense to me.”
The Colorado Supreme Court has accepted the interrogatory and briefs by interested parties were due April 8, with reply briefs by the General Assembly due by April 15.
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