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Coloradans said no to tax increases for schools, roads, and bridges in the 2018 midterm elections. So, this year lawmakers are taking a different approach. Proposition CC asks voters to allow the state to permanently keep tax revenue that exceed spending limits set by Colorado’s Taxpayer Bill of Rights (TABOR), rather than issuing occasional refunds to taxpayers.
The ballot measure is provoking a fierce battle over whether Colorado’s fiscally conservative method of raising and spending money over the past three decades still meets the needs of a fast-growing state. Progressives want to eliminate some of TABOR’s provisions to enable public spending to keep pace with Colorado’s growth. Conservatives advocate for holding the line on government growth amid a Democratic sweep of state government.
While the measure only affects state-level funding, 174 of Colorado’s 178 local school districts, 51 of 64 counties, and 230 of 274 municipalities have already won voter approval to lift the TABOR spending cap, according to the Bell Policy Center. Proposition CC would allow the state to do the same.
What Is TABOR?
Colorado’s Taxpayer Bill of Rights (TABOR) is a constitutional amendment approved by voters in 1992 with a goal of limiting government growth. It sets a cap on how much tax revenue the state can keep and spend every year based on annual increases in inflation and population growth.
Any tax revenue that exceeds the yearly TABOR cap has to be refunded to Colorado taxpayers and is called a TABOR tax refund. Since 1992, the state has collected revenue above the TABOR limit only nine times. If a TABOR tax refund seems unfamiliar, that may be because the last time Coloradans received one was in 2015, with refunds ranging from $13 to $41, depending on income.
Separate from its spending cap, TABOR also requires Colorado voters to approve any proposed tax increases or bond measures. This provision is unaffected by Proposition CC, which does not make any changes to the Colorado Constitution.
What Does The Ballot Measure Say?
The language for Proposition CC asks: “Without raising taxes and to better fund public schools, higher education, and roads, bridges, and transit, within a balanced budget, may the state keep and spend all the revenue it annually collects after June 30, 2019, but is not currently allowed to keep and spend under Colorado law, with an annual audit to show how the retained revenues are spent?”
According to the Colorado blue book, a “yes” vote on Proposition CC changes state law. Starting in the 2019–20 budget year, it allows Colorado to keep all of the tax money it collects over the TABOR limit to spend on education and transportation.
A “no” vote for Proposition CC means that the current law remains unchanged, and any tax money the state collects over the TABOR limit gets refunded to taxpayers.
How Does the Measure Impact Tax Refunds?
Colorado is set to refund $428 million in excess taxes for the current 2019 tax year, which is before Proposition CC would take effect. Refunds are expected to range from $10 to $629 for single filers, depending on income. This year’s TABOR limit is about $14 billion.
Beyond the 2019 tax year, the Colorado blue book projects state taxes to exceed the TABOR limit by $310 million in the fiscal 2020 budget year and $342 million in FY 2021. A newer legislative forecast from September, however, reflects lower revenues of $542 million over three years as economic growth slows, with refunds ranging from $20 to $62 for single filers in FY 2020. No individual refunds are expected for FY 2021 and FY 2022.
An important note: Some opposition literature states that Proposition CC will allow Colorado to “keep your tax refunds forever.” This is misleading. Proposition CC only applies to TABOR tax refunds. Proposition CC would not change any state or federal income tax refunds you would get after filing your annual tax returns.
How Would The Money Be Spent?
The Colorado General Assembly passed two bills in 2019 mandating that if passed, funds retained under Proposition CC will be split equally among public schools, higher education, and transit, with an annual financial audit to verify how the money is spent.
Because revenue retained under Proposition CC is not guaranteed each year, funding for public schools must be used for nonrecurring expenses like classroom improvements and must be distributed on a per pupil basis.
Money awarded for transit will be transferred to Colorado’s Highway Users Tax Fund (HUTF), with 60 percent going to the state, 22 percent to counties, and 18 percent to cities. State lawmakers will determine how to distribute funds for higher education.
What Is the Argument for Proposition CC?
Proponents of Proposition CC say the measure enables the state to make critical investments in underfunded areas like K–12 education, higher education, and transportation.
While a budget surplus in recent years enabled Colorado to improve state funding in these areas, the state is still lagging behind in its investments, according to Democratic Speaker of the House KC Becker. “Right now, we have economic growth and yet the state doesn’t get to benefit from it,” she says.
Depending on the statistic, Colorado ranks between 40th and 45th in the country for per-pupil investments in K–12 education and places 48th for higher ed spending, Becker says. “In transportation we are at the bottom of the barrel as well,” she adds. “When we have the number one economy in the country, it just doesn’t make sense for us to be investing such low amounts.”
Proponents also say that Proposition CC maintains Coloradans’ right to vote on new state taxes and rate increases, which provides a continuing check on future government spending.
What Is the Argument Against Proposition CC?
Proposition CC opponents say that while it’s not a tax increase, the measure will still result in an overall higher tax burden for Coloradans by eliminating their TABOR refunds.
Opponents also argue that Colorado’s education and transportation needs should be funded within the existing state budget, which is still growing. “We think we’re going to have more dollars in this next budget year than we do in the current budget year,” says Republican Senate Minority Leader Chris Holbert.
Holbert also points out that comparing Colorado’s per-pupil funding to other states is misleading, because different states fund schools in different ways. He says that Colorado can afford to increase funding for K–12 education, higher education, and transportation without eliminating TABOR refunds. “We have the funds to allocate more money to those three areas and remain at the TABOR cap,” he says.
Proposition CC opponents also say the measure removes Constitutional protections for taxpayers by asking citizens to permanently give up TABOR refunds, rather than approving changes on a year-to year basis.
This Still Seems Complicated
Proposition CC may seem complex at first, but the questions it raises are essential to any democracy: How should government raise and spend money on behalf of its citizens? In Colorado, at least, the answers are still evolving.
(MORE: What you need to know about Proposition DD, on the November 2019 ballot)