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Breakdown of Colorado's fiscal policies

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Posted at 3:13 PM, Sep 21, 2020
and last updated 2020-09-21 22:48:17-04

COLORADO — Every election there's usually some question relating to Colorado's fiscal policies. Whether it's "de-brucing" or finding other ways to fund schools, a lot of it comes down to key fiscal policies in Colorado's constitution. Which for people who move to the state, it can be a lot to digest. Here's a breakdown of some of those policies, cartoons included.

Taxpayers Bill of Rights (TABOR)

"TABOR" explained in 1 minute

What it does:

  • Requires voter approval for tax increases and debt
  • Limits how much revenue state government can retain each year
  • Bans certain taxes such as a statewide property tax and local income tax

Part of the reason Coloradans see so many questions on their ballots every year is that any tax increases and debt must go to a vote of the people. It's just one part of the Taxpayers Bill of Rights, commonly known as TABOR which voters passed in 1992. TABOR also limits how much the government can grow by putting a cap on how much revenue the state can collect each year. The base of the state's revenue must be equal to the lesser of the previous fiscal year's revenue, and cannot grow more than inflation and population. Any money above the cap is returned to taxpayers.

In 2005- voters added on another aspect of the TABOR revenue cap known as Referendum C. This allowed Colorado to retain and spend additional revenue under TABOR for five years. Anytime after that it allows the state to set the cap equal to the highest state revenue for a fiscal year.

Gallagher Amendment

Gallagher Amendment

What it does:

  • Maintains 45/55 split of state's property tax base. Homeowners make up 45 percent and non-residential property makes up the rest.
  • Lowered residential assessment rate from 21 percent to 7.1 percent
  • Impacts school funding as local property taxes fund schools and state back-fills what local communities don't have.

Another fiscal policy that gets a lot of attention in Colorado impacts how much property owners pay in taxes. In 1982, state voters approved what's known as the Gallagher Amendment. At the time, homeowners made up 45 percent of the state's property tax base, and non-residential property made up 55 percent. At the time, the residential assessment rate, which is used to calculate how much property taxes someone owes was 21 percent. The intent behind the Gallagher amendment was to take some burden off of homeowners with property taxes by keeping the 45/55 split. This resulted in a drop in the residential assessment from 21 percent to 7.1 percent today. The non-residential property, which includes businesses and vacant land, has a residential assessment rate of 29 percent. Oil and Gas has an assessment rate of 87.5 percent.

Supporters say it follows the intention of removing the burden off of homeowners when it comes to property taxes. Opponents say with Colorado's residential growth, it doesn't allow the state to benefit from an increase in residential property development, hurting the state in tough economic times.

Amendment 23/Budget Stabilization Factor

Amendment 23/Budget Stabilization Factor

What these do:

  • Requires an increase in education funding annually with inflation
  • The budget stabilization factor reduces total program funding to school districts

Coloradans in 2000 approved a process to try and prioritize education funding with Amendment 23. The amendment requires base per pupil funding to increase every year with inflation. Through 2011 it required an increase of inflation plus one percent. When the great recession hit it caused some challenges to increase education funding and still keep other state resources funded during an economic downturn. Which is why in 2010 lawmakers came up with the Budget Stablization Factor also known as the Negative Factor. The factor is a percentage applied to the total program funding of schools and reduces the amount of funding from the state each district gets. The factor acts as an IOU and the amount of money schools should be getting is tracked every year. For fiscal year 2020-2021 the negative factor is about 14 percent, which equals out to about $1.17 billion. This is an increase of $601 million the year prior.