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Colorado was solidly blue before last Tuesday’s election, which tightened the Democratic grip on state government and produced upsets in some previously Republican congressional districts.
But perhaps the most important outcome of the state’s election had little to do with parties and candidates. Voters passed two ballot measures that will loosen the shackles that a 34-year-old constitutional amendment clamped on state government spending, including support of K-12 schools.
The two ballot measures, Amendment 87 and Proposition NN, could bring the state government more than $2 billion in the first full year, much of that earmarked for education. (For perspective, the current Colorado state budget is $49.5 billion. Spending on K-12 schools this year is about $10.2 billion, some $5.6 billion from the state. Another $798 million is spent on early childhood programs, including Colorado’s modest universal preschool program.)
Here’s a high-level look at the two measures:
- Amendment 87 was placed on the ballot through petitions gathered by a coalition of liberal good-government groups. It replaces the state’s current flat income tax rate with graduated tax rates that will fall primarily on high-income earners. It’s projected to raise about $2 billion in the first full year for K-12 education, health care and early childhood programs.
- Proposition NN, proposed to voters by the Democratic-majority legislature, will divert “surplus” funds now earmarked for tax refunds to K-12 education for 10 years, after which diversions can be used for education and other purposes. The first year of the diversion is estimated at $500 million.
The two measures were developed separately, so there are unintended consequences of both having been approved. That means specific gains for education – and any other programs — are going to be difficult to calculate. Here’s why:
- The measures interact with each other in complicated ways, along with a third initiative, Proposition 137, which diverts some tax revenues for conservation programs.
- There also are interactions with two existing large credits for low-income taxpayers, which tap those same surplus funds.
- Supplement versus supplant issues will likely need to be worked out.
- Future impacts are tricky to predict because there aren’t surpluses every year, depending on fluctuations in state revenues and inflation rates.
Executive branch and legislative staff budget experts are scrambling to calculate the impacts before the next state revenue forecasts are issued on Dec. 18 and the 2027 legislative session convenes on Jan. 11.
The most recent revenue forecasts, released in September, estimated lawmakers would have to close a $1.5 billion shortfall to balance the 2027-28 budget. Approval of Amendment 87 and Proposition NN will change that calculation – but nobody yet knows by how much.
Understanding the importance of what voters passed Tuesday requires a history lesson about Colorado’s numbingly complex taxation and spending structures.
In 1992 voters approved a constitutional amendment named the Taxpayer’s Bill of Rights, ever since known as “TABOR.” While the amendment is full of obscure and tricky provisions, two key requirements are at its core: Any tax rate increase has to be approved by voters, and annual government spending can increase only by population growth and inflation. Any revenues collected above that have to be refunded to taxpayers. (That’s the “surplus” referenced above.)
The second big constitutional shoe dropped in 2000, when voters passed Amendment 23. Its core provision requires annual state support of K-12 schools to increase by inflation and enrollment growth.
So, those two votes mean Colorado’s constitution simultaneously limits growth in overall state spending but requires growth in a major part of the state budget.
Passage of A87 and Prop NN could ease that conflict, but it’s important to note neither repeals TABOR. A87 will add new revenues that aren’t subject to TABOR, and Prop NN targets the TABOR surplus. Neither touches the requirement that voters approve tax rate increases.
A full TABOR repeal has never been proposed, and voters have rejected seven large tax increase ballot proposals since 2008. Most of them would have raised education funding.
So, what will passage of A87 and Prop NN mean for schools?
One key question is whether additional funding will guarantee and speed implementation of a new school funding formula approved by the legislature in 2024. Among other things, the new formula is intended to shift additional funding to districts with higher concentrations of at-risk students.
But lack of revenue forced lawmakers to implement the new formula over several years. The schedule calls for 45% implementation in 2027-28.
Another key question is whether K-12 will have to compete with Medicaid for A87 funds. Colorado Medicaid spending has exploded in recent years, threatening to squeeze out spending for other state programs. The administration of lame-duck Gov. Jared Polis has been working hard to cut Medicaid cost growth, and a special legislative committee is developing plans to rein in Medicaid spending. Regardless of A87 revenues, legislative budget experts warn that Medicaid spending will still need to be restrained.
Finally, Colorado school districts face a challenge that policymakers at the Capitol haven’t yet been willing to discuss.
As in many states, Colorado school district funding is calculated based on enrollment. That trend is looming as a fiscal trap, because the statewide student count has plummeted from about 913,000 in the 2019-20 school year to 870,000 last year. Further declines are projected.
Several large school districts along the heavily populated Front Range corridor are proposing school closures, to the consternation of parents. Some of those districts have asked their voters for extra funding from local property taxes. Denver voters approved an increase this election. But voters in Jefferson County, the largest district in Denver’s western suburbs, failed to pass an increase.
So future school funding debates will need to take enrollment declines into consideration.
At a post-election caucus, one Democratic senator described passage of A87 and Prop NN as a “generational opportunity” for addressing state budget challenges. But the real impact of that opportunity remains to be seen.
