Education Property Tax Legislation for 2020: Input Needed

1. Education Property Tax Legislation for 2020: Input Needed Craig Harper Joint budget Committee staff September 13, 2019 Craig.harper@state.co.us 303-866-3481 Page 1

2. Why are we here? • The Joint Budget Committee is currently considering two legislative proposals to reform Colorado’s property tax system supporting education. The Committee has asked for stakeholder input to shape and improve the legislation for introduction early in the 2020 legislative session. • Uniform Mill Levy: Amend the School Finance Act to return the State to a “uniform” (statewide) total program mill levy with each school district’s total program mill levy set at the lesser of the statewide mill levy or the mill levy necessary to fully fund the district’s total program with local revenues. The mill levy would be uniform for any district receiving state aid for total program. • Override Equalization: Provide a State match for mill levy override revenues raised in districts with lower property values (per pupil) to increase equity in mill levy overrides for lower-property-wealth districts. Matching system could be added to the uniform mill levy. • Note: Tracie sent out the 2019 Session bill drafts prior to this meeting.

3. Foundational Principles • As presented to the Joint Budget Committee, the proposal to return to a uniform mill levy rests on the following basic principles: • A tax system should have an intentional design and a coherent policy. • Tax equity should be evaluated at the level of the taxpayer (via the tax rate), not the school district (via total percentages of state vs. local share contributed). • For school finance, the state role is to equalize for differences in the tax base rather than the tax rate. Equalizing for the tax rate is distorting the school finance system and increasing pressure on the state budget, and can harm students in certain communities. • It took decades to get this far into this mess. It will probably take significant time to get out of it. • The role of the state is to set the tax policy for the statewide system. Local taxes are under local control, and the revenues stay local.

4. The Current System

5. Responding with Poll Everywhere Pollev.com/TAXPOLICY 37607 TAXPOLICY Text voting Web voting

7. Tax Policy Problem and Its Impact on Colorado’s School Finance System Page 1

8. Problem: Tax Policy Formulas in Colorado's Constitution and uneven growth in assessed value have created a patchwork of tax rates, undermining the sustainability and sufficiency of the local property tax funding base for public education.

10. Taxpayer View: Uniform Mill By moving to a uniform mill levy, the proposal would implement an intentional system to treat identical taxpayers (in this case measured by property value) in districts receiving state share identically.

11. “Uniform” Mill Levy: Statutory Proposal • Return the State to a “uniform” (statewide) total program mill levy with each school district’s total program mill levy set at the lesser of the statewide mill levy or the mill levy necessary to fully fund the district’s total program. • Authorize school districts to raise local total program mill levies (with voter approval) to reach the “uniform” level, with a phase-in period for districts with significant increases. • Assume that districts are levying mill levies according to the legislation and distribute state aid accordingly. • Allow mill levies in districts that are fully locally funded (at less than the statewide mill levy) to “float” on an annual basis below the uniform mill levy in order to continue to fully fund the district without requiring state funds. • Goal: Uniform mill levy for districts that receive state aid for total program.

12. Key Questions for Feedback

16. “Uniform” Mill Levy: Big Outstanding Questions • How should the bill phase in the mill levy for districts facing larger increases? For example, should it cap the increase at a certain number of mills per year, or a percentage of the gap?

18. “Uniform” Mill Levy: Big Outstanding Questions • How do you feel about incentivizing school districts and what ideas do you have?

20. “Uniform” Mill Levy: Big Outstanding Questions • What else would you like to share with the JBC on this topic?

22. Mill Levy Override Equalization Provide a State match for mill levy override revenues raised in districts with lower property values (per pupil) to increase equity in mill levy overrides for lower-property-wealth districts. Matching system could be added to the uniform mill levy. Theory of Change: The reliance on override funding without any state equalization is distorting the system and contributing to inequities because the tool requires significant assessed value to provide meaningful increases in funding. Equalizing local effort in low property wealth districts will incentivize local contribution and mitigate some of these disparities.

23. Override Equalization: Big Questions Do you agree that override equalization is needed? Do you support the concept? Would you support using a portion of the state funds made available through the uniform mill levy proposal to support override equalization? Other thoughts on the override equalization proposal?

25. Thank You! Craig Harper Joint budget Committee staff Craig.harper@state.co.us 303-866-3481