For years Colorado policymakers have been between the proverbial rock and a hard place due to amendments added to the state constitution. Indulge me as I offer an overly simplistic summary of these constitutional amendments, presented in chronological order:
Gallagher Amendment – Amended in 1982, the purpose of the Gallagher Amendment was to stabilize mill rates levied on personal property owners. In short, the ratio between tax revenue generated by residential and non-residential properties was frozen in 1982 (the ratio was and still is 45:55 with 45% of all the revenue raised through property tax coming from residential properties and 55% coming from non-residential properties). However, over time, the sheer volume of residential properties and the individual value of each property have significantly increased since 1982. As a result, the taxable portion of residential properties has decreased from 30% in 1982 to 7.96% in 2015 and a greater tax burden is placed on non-residential properties.
The Taxpayer Bill of Rights (TABOR) – TABOR was amended to the state constitution in 1992 and requires that all voters approve proposed tax increases as opposed to allowing elected officials to enact tax hikes. TABOR’s purpose was to starve the beast, or restrict the flow of money to state government. It has been estimated that TABOR and Gallagher, working together, have resulted in an annual loss of $1.5 to $2.2 billion of public education dollars.
Amendment 23 – Amended in 2000, Amendment 23 was designed to ensure that public education in Colorado would always receive an increase to the base funding level equal to the rate of inflation plus 1%. Ironically, when Amendment 23 was added to the state constitution, Colorado was roughly $700 below the national average in per pupil funding. Today, Colorado is over $1,400 below the national average.
These three amendments seemed to peacefully co-exist from 2000 to 2010. However, with the Great Recession of 2008 and its subsequent decline in state revenue, the state legislature discovered in 2010 that it could no longer fund all of the social programs with the existing revenue streams. TABOR presented significant barriers to policymakers passing a tax increase to address the loss of revenues since any tax increase would have to be approved by Colorado voters. As a result, Colorado policymakers were left with one option – cut the state budget.
Amendment 23 proved to be a major obstacle in balancing the budget and ensuring other state obligations were sufficiently funded in 2010. Policymakers analyzed the wording of Amendment 23, which guaranteed an increase in funding for public education of inflation plus 1% to the current base funding level. Base became the focus as elected officials desperately looked for ways to make the state budget work despite the reduction in revenues.
The solution was dubbed the negative factor. The negative factor drew a line of distinction between the base funding and the factors incorporated in the state funding formula. The decision was made to only apply Amendment 23 to the base funding and exclude the factors from the constitutional guarantee of a funding increase of inflation plus 1%. In Colorado there is an identical per-student funding level for all 178 school districts and this figure continues to increase by inflation plus 1% even after the negative factor was instituted in 2010. However, factors that were no longer subject to the increase due to the negative factor included the different weights in the state funding formula for at-risk student populations, cost of living, and size of the school district. In addition, local contributions to a school district were also excluded from the inflation plus 1% increase.
In effect, the negative factor works in the following fashion. The state provides local school districts with full funding in accordance with Amendment 23 and then implements the negative factor, which requires school districts to return a portion of that full funding to the state. Over the years, the negative factor has resulted in over $5 billion dollars being redirected from school districts back to the state. For the current 2015-2016 school year the negative factor will reallocate $855 million dollars.
On September 21 the Colorado Supreme Court handed down a 4-3 decision rejecting a claim contending the negative factor was unconstitutional. The lawsuit, Dwyer v. State of Colorado, sought to end the use of the negative factor and restore public education in Colorado to the perceived proper levels of funding. However, the state supreme court interpreted the wording of Amendment 23 to only require the predetermined increased to the base per pupil funding as opposed to the total per pupil funding. The state supreme court interpreted base in the most restrictive manner possible, thus validating the practice of the negative factor.
This ruling is a disappointment for advocates of public education in Colorado given the fact that the state supreme court also ruled in favor of the state in the recent school finance lawsuit (Lobato). However, I am of the opinion that both Lobato and Dwyer are, ultimately, missing the mark. To illustrate this point I would like to stress that if the state supreme court had ruled that the negative factor was unconstitutional then policymakers would have faced a different dilemma. Instead of underfunding public education, policymakers would have had to cut other aspects of the state budget in order to properly fund public education. In short, there is not a cache of money sitting in some account that state policymakers could access to fund the negative factor. Instead, there is insufficient revenue in Colorado to properly fund all of the social programs throughout the state.
The proper solution for the state of Colorado is to tackle the issue of TABOR and the Gallagher Amendments. These two anti-tax amendments have successfully starved the beast and are now beginning to restrict the state revenue sources to a dangerous point. In public education across the state vital programs are being reduced or eliminated. In addition, class sizes are on the rise throughout the state. Despite all of these cuts, Colorado educators continue to do amazing work in the classroom. However, in order to truly have a “world class” system of education in Colorado policymakers and voters must be willing to add revenue to the state coffers.