Colorado’s Edu­ca­tion Fund­ing in 2013 – Com­pli­cated and Undecided

Colorado’s edu­ca­tion bud­get is slightly bet­ter for 2013–2014 and the state may be able to increase the K-12 edu­ca­tion fund­ing slightly. How­ever, if law­mak­ers in Wash­ing­ton don’t reach an agree­ment on the “fis­cal cliff” by March 1, 2013, Col­orado could lose $8.2 mil­lion in fed­eral edu­ca­tion funds.


In Jef­fer­son County, we are for­tu­nate that Issues 3A&3B passed in Novem­ber 2012, but these are only a tem­po­rary fix to larger bud­get issues. Jef­fco (like all school dis­tricts) still relies heav­ily on state fund­ing and the changes men­tioned above will affect Jef­fco, even with 3A&3B.


Read fur­ther to learn the back­ground of Col­orado edu­ca­tion fund­ing and visit the Leg­isla­tive sec­tion to fol­low cur­rent edu­ca­tion bills in the Col­orado House and Senate.


How did Colorado’s Edu­ca­tion Fund­ing Get So Complicated?

If you look at the graph below, you’ll see that edu­ca­tion fund­ing per pupil has decreased by $1800 over the last 25 years. TABPR, the Gal­lagher Amend­ment and Amend­ment 23 all changed the way that schools are financed. Some of these changes were inten­tional; some were unfore­seen side effects of the amend­ments (as in Gallagher).



What is the Gal­lagher Amendment?

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The Gal­lagher Amend­ment, passed in 1982, was designed to main­tain a con­stant ratio between the prop­erty tax rev­enue that comes from res­i­den­tial prop­erty and from busi­ness property.


The effect of Gal­lagher was to reduce the assess­ment rate (the per­cent of prop­erty value that is sub­ject to tax­a­tion) when­ever res­i­den­tial prop­erty val­ues increased faster than busi­ness prop­erty val­ues. As a result of the Gal­lagher Amend­ment, the assess­ment rate for res­i­den­tial prop­erty has declined by about two-thirds since 1982 due to pop­u­la­tion growth and increases in res­i­den­tial real estate values.


The net effect has been a marked decline in rev­enues col­lected from prop­erty tax, which prior to Gal­lagher, pro­vided the major­ity of school funding.

What is TABOR?

Passed in 1992, TABOR is the “Tax­payer Bill of Rights,” which imposes the strictest rev­enue and spend­ing lim­its in the nation. TABOR:

  • Pro­hibits any tax increase with­out a vote of the people;
  • Places strict lim­its on how much rev­enue the state can keep and spend;
  • Requires any rev­enue col­lected in excess of TABOR’s rev­enue lim­its – at every level of gov­ern­ment includ­ing school dis­tricts – to be refunded to the tax­pay­ers, unless the vot­ers decide to “de-Bruce” (i.e., allow the gov­ern­ment to retain the “excess”). This pro­vi­sion of TABOR was sus­pended at the state level for five years (2006–2011) as a result of the pas­sage of Ref­er­en­dum C.
How have Gal­lagher and TABOR com­bined to affect pub­lic schools?

Schools are funded by a com­bi­na­tion of local (prop­erty) and state rev­enues. The Gal­lagher Amend­ment for­mula has lim­ited local rev­enues by cut­ting the res­i­den­tial assess­ment rate by two-thirds since its pas­sage in 1982.


From 1982 until 1992 dis­tricts could make up for the lower assess­ment rate by increas­ing their mill rate (prop­erty tax rate). In addi­tion, the state had the flex­i­bil­ity to increase state spend­ing to make up for the amount that prop­erty taxes used to cover.


But with the pas­sage of TABOR in 1992, a com­bi­na­tion of bud­get for­mu­las made it increas­ingly dif­fi­cult to fund schools. TABOR’s rev­enue lim­its auto­mat­i­cally cut mill rates in dis­tricts across Col­orado, and at the same time, TABOR lim­ited the state’s abil­ity to prop up school fund­ing with state dollars.


Note that the com­bi­na­tion of Gal­lagher and TABOR has shifted the bur­den of school fund­ing from local prop­erty taxes to the State Gen­eral Fund. Thus, the State’s Gen­eral Fund pro­vides more than 60% of school fund­ing whereas it used to be less than 40%. This explains the dra­matic increase in the por­tion of the Gen­eral Fund now spent on schools.

What is Amend­ment 23?

In 2000, the vot­ers passed Amend­ment 23 to reverse a decade of bud­get cuts expe­ri­enced by Col­orado school dis­tricts through­out the 1990s. Amend­ment 23 guar­an­tees min­i­mum annual per pupil fund­ing increases of “infla­tion +1 per­cent” through 2011, and “infla­tion” after that.


After nine years of Amend­ment 23, we are finally spend­ing about as much per child as we did in 1989, adjusted for infla­tion. Notably, Amend­ment 23 uses an infla­tion mea­sure that is much lower than the actual cost increases that school dis­tricts encounter because of what they pur­chase: health care, energy, trans­porta­tion, pen­sions, etc. As a result, dis­tricts’ actual pur­chas­ing power is far below 1989 levels.


Over the years, Amend­ment 23 has been treated as a ceil­ing for fund­ing – rather than as a floor as it was intended to be. Now it appears that the leg­is­la­ture will rein­ter­pret parts of Amend­ment 23 in a way that allows them to lower that floor/ceiling by up to a bil­lion dollars.