Colorado Senior Lobby is picking up where we left off last year with the very successful Senior Homestead Exemption event. Building on that, on August 12th, we’ll provide updates on the Homestead Exemption legislative activity, and put it into the context of how it fits into the state budget, how it gets paid for and why that is a recurring issue.
Most of our state budget is run not by the people we elect to represent us, but by algorithms which are in effect formulas. Also, Constitutional and federally imposed funding mandates impact our state budget, along with self-imposed revenue and spending caps, also determined by algorithms.
Colorado voters are often asked to make major decisions on tax policy. Be an informed voter. Attend “Death and Taxes – Understanding One of Them”, on August 12th – CLICK HERE
Here is a brief introduction on what you will hear about at this event:
At its most basic level, Colorado’s tax structure is simple: we have a state income tax (first enacted in 1937 as a graduated tax and modified in 1987 to a flat 5% (with a little tinkering since – it’s currently 4.63%). And we have a state sales tax enacted in 1935 and a use tax enacted in 1936.
We moved on from a little tinkering with these simple taxes to a lot of complicating. As just one example, we have 560 sales tax jurisdictions in our state, in addition to the state sales tax. Existing law allows for a maximum combined (state plus local and special districts) sales tax of a total of 10%. The average, however, is 7.44%. Denver is 8.31.
In addition to these taxes, local governments (mainly counties and special districts) levy property taxes. Our state’s road to tax complexity beyond income, sales and use taxes began with a simple enough idea back in 1982. When Colorado voters approved a referred (by the General Assembly) constitutional amendment significantly revising how property taxes are collected, they also approved a provision known as the Gallagher Amendment.
Its purpose was to guarantee that most of the property tax burden was shared by commercial versus residential property. It has done that. But there have been unforeseen consequences, as often accompany nearly every law.
Then came TABOR in 1992, which has interacted with the Gallagher provisions and created a new layer of complexity in the ability of local governments to increase total property taxes to pay for essential services: schools, fire and police, streets.
TABOR’s aim was to limit the ability of all Colorado government entities to increase revenues and to restrict their ability to make additional investments in their communities without specific voter approval. It did this by limiting a given year’s revenue and spending to a percentage (the rate of inflation plus population growth – an algorithm) of the previous year’s limit. Any revenue above the limit must be returned to taxpayers. This eventually led to what has become known as “de-Brucing” proposals in most of Colorado’s county and city governments – these allow the jurisdiction to retain and spend all revenues collected with existing taxes and fees typically for very specific purpose.
Then, in 2000, two new constitutional amendments were passed by the voters. One, Amendment 23 had an original intent to mandate an annual increase in the K-12 education budget of inflation + 1%. The perceived need for Amendment 23 was actually brought on by the impact of TABOR on Gallagher, which effectively restricted the ability of local taxing authorities to increase mill levies, essentially creating a gradually declining ceiling on local taxes for schools (and putting growing pressure on the state to make up the difference).
To give this a little more perspective: in 1983, the property tax base for the entire state of Colorado was $17.12 Billion with the residential portion being $7.42 Billion and the non-residential being $9.76 Billion. The most current numbers are: $116.04 Billion for the entire state, with the residential portion being $53.28 Billion and the non-residential being $62.76 Billion.)
Back to the year 2000, the Senior Property Tax Exemption was also passed as a constitutional amendment. It was designed to give homeowners over age 65 with ten years residency in their home a break on their property taxes to help them stay in their homes. In 2006, permanently disabled veterans of any age were added to that. This was an admirable goal and it added another mandated state expenditure. There is a provision by which the legislature may vote to “zero out” the senior exemption. This has been done six times between 2002 and 2019.
Then, in 2005, under the pressure of the conflict between these and other mandated expenditures and the TABOR spending limit, Colorado voters passed another constitutional amendment regarding taxes: Referendum C. The result of this was a ten-year “de-Brucing” of state revenues and a change in the way the TABOR revenue and spending limit is calculated. Originally, each year’s limit was based on the lesser of the prior year’s limit or the revenue collected for that year. During a year when revenues declined from the previous year this resulted in the following year’s limit being calculated from a lower base, that is, the limit for all future years essentially was ratcheted down. Referendum C removed that “ratchet down effect” by effectively setting annual allowable revenue increases on a new base period (the amount of revenue collected in fiscal year 2007-08). Annual allowable revenue increases would be built on that new base period, essentially allowing the state to keep more revenue before reaching the TABOR limit.
In 1992, when TABOR was created, the entire state budget was $5.76 Billion. The amount of State revenue subject to TABOR caps was 60%. It is less than half of that – 29% today, and the state budget today is $34.2 Billion.
Most of the difference between the 60% and the 29% comes in the form of revenue collected by Cash Funds for designated state enterprises. Cash funds are special purpose funds. One example is tuition for state colleges that exist outside of the General Fund. They are funded with taxes, user fees, and fines earmarked for specific purposes and programs. In FY 2017-18, cash fund revenues totaled $12.5 billion, or 36.6 percent of total state revenue. Of this amount, $10.2 billion is exempt from the TABOR limit.
Now, in 2019, we probably have another measure on the fall ballot called Proposition CC. The intent of this measure is to use the TABOR provision that allows governments to retain and spend “voter-approved revenue changes” to allow the state to retain the “excess” revenue it would otherwise be required to refund to taxpayers under TABOR. The measure requires the state to use those funds specifically for education and transportation.
To learn more join us on August 12th at “Death and Taxes: Understanding at Least One of Them.”
You will: see, hear, and interact with a select group of lawmakers, policy experts and fellow citizens as we, together, unravel the mysteries of how these laws and constitutional amendments: GALLAGHER (1982), TABOR (1992), SENIOR PROPERTY TAX EXEMPTION (2000), AMENDMENT 23 (2000), REFERENDUM C (2005), and Proposition CC (2019) together, impact your lives, your schools, your roads, fire departments, and law enforcement in significant and meaningful ways. And what every voter needs to understand about Proposition CC, coming on the fall ballot.
Buy your Event Ticket – CLICK HERE
And why is Colorado Senior Lobby the organizer of this event?
Colorado Senior Lobby is an all-volunteer organization. We work to inform and educate Coloradans on the legislative proposals that make a difference to over one million of Colorado’s older citizens and to advocate for what really matters to us. For questions about Colorado Senior Lobby or for information on the event, call 303-832-4535 or explore our website – About Colorado Senior Lobby
Article submitted by Robert Brocker and Rich Mauro
About the authors: Robert Brocker and Rich Mauro are board members with Colorado Senior Lobby. Bob Brocker is the president of Colorado Senior Lobby, a Board member of A Little Help and DRCOG Advisory Committee on Aging. Bob is a retired railroad executive and is now a full-time volunteer advocate for Colorado’s older adults. Rich Mauro is a Senior Policy and Legislative Analyst at Denver Regional Council of Governments and a Board Member of Colorado Senior Lobby.
– Information sources are available on request.