Ritter's proposal to manipulate property taxes for schools not new

Plan was rejected as unpopular or illegal in the past

By Berny Morson, Rocky Mountain News
March 20, 2007
A property tax manipulation proposed by Gov. Bill Ritter last week to stabilize school funding has been considered by lawmakers at least since 2004.

But they rejected it as either illegal or unpopular, even as a crisis in funding education loomed larger with each budget year.

The idea's not new, that true -- but the rest is a little shaky. When Sen. Anderson figured out the problem in 2004, she tried it fix it in that year's School Finance Act.

It passed the Senate 29-6. And at least four of the "no" votes were on another issue.

Sen. Anderson was (and still is, except she's out of the legislature due to term limits) the wizard of school finance in Colorado. Rep. King made a point of opposing anything she supported and supporting anything she opposed.

Anderson recognized the steady shift from local funding to state funding and tried to fix it. King opposed it. He asked Legislative Legal Services if it was legal and I doubt he was very happy with the result: they wrote a memo explaining that it is clearly constitutional.

King continued to oppose it. Members of his party rarely dared to cross him, and he locked them down against Anderson's proposal. That's what killed it in 2004.

"The property tax is never a popular tax and it never will be," said former House Majority Leader Keith King, R-Colorado Springs. King opposed a 2004 proposal similar to the one Ritter has put forward.

"I think, frankly, Gov. Ritter is taking a huge political risk," King said.

This is probably true. But the right thing to do isn't always politically safe. We could ignore the problem, count on term limits to make it somebody else's problem, and let the budget go bust in 2011.

That's pretty much what the legislature did a few years ago (not just with school funding -- they cut taxes, kept spending and fiddled while Colorado's budget burned.

We inherited the fiscal disaster and didn't like it much, so we're trying to avoid passing problems on to later legislatures.

Colorado schools are funded by a combination of local property taxes and state aid.

At the heart of the current problem is a Gordian knot of state constitutional amendments and statutes that drives school spending up while driving property taxes down. The result is an increasing demand for state money to fill the budget gaps in the 178 school districts.

That situation is unsustainable, Ritter warned last week. Projections show a $100 million deficit in the state school fund by the 2011-12 school year, Ritter said.

The state has a few funds that pay for schools. I think this is a reference to the State Education Fund that was created by Amendment 23. It can't run a deficit, but if it runs out of money, it can force us to spend a lot of the state budget on schools. If we don't fix the funding gap, the legislature will have to spend 85% of its budget on schools in 2011.

That would pretty much wipe out state services other than education.

Ritter wants to repeal part of a 1994 school finance act that pushes down the school portion of the local property tax. He would freeze property tax rates indefinitely at current levels, bringing in an estimated $65 million more per year.

If his measure passes, property owners will forgo tax reductions beginning in 2008.

Freezing the rate won't stop increases in the bills homeowners receive. Taxes could go up if property values appreciate in future assessments.

Former Sen. Norma Anderson, R-Lakewood, added exactly the proposal Ritter now champions to a 2004 school finance bill she sponsored.

She still supports the idea.

"It would slow that shift (of school funding) to the state," she said.

The state used to pick up one-third of school costs and local property taxes the rest, Anderson pointed out. Now, the state pays about two-thirds.

Soon, the state will be picking up 80 percent of school costs, she said.

"I give Gov. Ritter credit for bringing it on," Anderson said of the proposal.

But King said the proposal probably runs counter to the Taxpayer's Bill of Rights, the 1992 constitutional amendment that limits tax increases and the amount agencies may spend.

That comment runs counter to the memo King requested from Legal Services. We won't know for sure unless we pass it, somebody sues and the Supreme Court maked a ruling -- until then we're relying on a couple of legal analyses (including the one for King) that say it's constitutional.

King was the House sponsor of the 2004 school finance bill Anderson carried in the Senate. He was instrumental in removing Anderson's tax rate freeze from the measure.

A 2004 opinion by legislative legal advisers said the rate freeze would be legal since most of the 178 school districts have already voted to exempt themselves from the spending caps contained in Tabor.

King disagrees. While the districts voted to exempt themselves from the spending caps, they did not necessarily suspend Tabor provisions that apply to the tax rate that Ritter wants to freeze, King said.

The immediate cause of the funding problem is a 2000 constitutional amendment requiring the state to increase school funding each year by inflation plus 1 percent.

Voters approved Amendment 23 during a boom economy. It went sour almost immediately, and legislators found themselves dipping into a reserve fund for education in order to cover burgeoning Medicaid, prison and higher education costs.

The fund never recovered.

While Ritter and the lawmakers refer to the problem as a crisis for education, exactly the opposite is the case, budget experts say.

Ritter and the lawmakers do not refer to the problem as a crisis for education. In fact, we explain over and over that education is least likely to get hurt when the crisis comes -- it's more likely every other area of state services that will pay.

Because of Amendment 23, schools will continue to be funded, even when the education fund is $100 million in the hole.

"We might not have a dime to spend on everything else in the state, but it's not a school crisis," said Rep. Jack Pommer, D-Boulder, a member of the Joint Budget Committee. "What would happen is, somebody could go to court and there would be no judge or the state colleges wouldn't open, because the Constitution protects the K-12 schools."