Property Tax and Educational Equity in Colorado’s School Finance System CRAIG HARPER JOINT BUDGET COMMITTEE STAFF FEBRUARY 15, 2019 CRAIG.HARPER@STATE.CO.US 303-866-3481 Page 1
P OTENTIAL L EGISLATION U NDER JBC C ONSIDERATION The Joint Budget Committee is currently considering two potentially complementary proposals to improve both taxpayer equity and educational equity in the school finance system. • Uniform Mill Levy: Amend the School Finance Act to effectively 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. • 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: The JBC has approved drafting both bills but has not yet reviewed bill drafts. No bill has been introduced. Many important details remain undecided. 2
“U NIFORM ” M ILL L EVY : S TATUTORY P ROPOSAL Previous discussions have focused on a statewide/constitutional change. The current discussion focuses on a statutory solution. The proposal would: • 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. • Avoid a statewide vote but require local votes in districts requiring increases. Goal: Uniform mill levy for districts that receive state aid for total program. 3
T AXPAYER E QUITY Basic Assumption: An equitable system would treat identical taxpayers (in this case measured by property value) similarly…or identically. • Because school finance is a state system and the State makes up the difference between the local revenues available and total program funding, this proposal assumes that identical taxpayers in districts receiving state funds should be paying identical amounts in total program property tax (not including overrides). • If property tax remains the foundation of the school finance system, the State should equalize local capacity based on an equitable system of taxation rather than subsidize inequitable tax rates. 4
T AXPAYER E QUITY : H OW D O W E F ARE ? FY 2018-19 R ESIDENTIAL P ROPERTY T AX P AYMENT ON S TATEWIDE M EDIAN V ALUE H OME VS . S TATE S HARE OF T OTAL P ROGRAM $800 100% 86.1% $678 $678 $659 $642 $620 78.1% 73.8% 80% $600 70.3% 57.7% 60% $400 41.1% $314 40% $200 17.1% 20% $56 $0 0% Adams Clear Denver Fremont Garfield Jefferson Pueblo County Creek (25.5 - Canon 16 (2.2 (26.3 City (27.0 14 (24.7 (12.5 mills) City (27.0 mills) mills) mills) mills) mills) mills) Residential Tax Payment $348,900 Home State Share of Total Program (%) 5
S TATUTORY E ND G OAL : S CHOOL F INANCE F ORMULA Statutory Total Program Goal: $7.8 B in FY 2018-19 6
H OW W E G ET T HERE : L OCAL S HARE – T HE F OUNDATION Statutory Total Program Goal: $7.8 B Local Local Share: Share: $2.5 B $2.5 B 7
H OW W E G ET T HERE : S TATE S HARE – F ILLS THE G AP BSF: Statutory $0.7 B Pre-BSF State State Actual Share Share: State Goal: $5.2 B Share: $5.2 B $4.5 B 8
H OW W E G ET T HERE : T OTAL P ROGRAM F UNDING BSF: Statutory $0.7 B Total Program Actual Actual Goal: State State $7.8 B Share: Share: $4.5 B $4.5 B Actual Local Local Funding: Share: Share: $7.1 B $2.5 B $2.5 B 9
FY 2018-19 T OTAL P ROGRAM P ER P UPIL F UNDING (O RIGINAL A PPROPRIATION – N OT WITH M ID -Y EAR ) $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 Adams Clear Denver Fremont - Garfield 16 Jefferson Pueblo County 14 Creek (87,980.5 Canon City (1,130.2 (80,984.8 City (7,134.9 (775.6 pupils) (3,662.8 pupils) pupils) (16,545.8 pupils) pupils) pupils) pupils) Local State BSF 10
S TATEWIDE L OCAL S HARE : H OW W E B UILD THE F OUNDATION Specific Property Local Ownership Tax: Share: Tax: $2.4 B $2.5 B $0.2 B 92.8% 7.2% 11
L OCAL S HARE : P ROPERTY T AX (W HETHER Y OU ARE A T AXPAYER OR A D ISTRICT ) Assessed Property Mill Levy (Tax Rate) Value (TABOR) (Gallagher) 12
FY 2018-19 A SSESSED V ALUE P ER P UPIL MAP 13
L OCAL S HARE : D ISPARITIES IN C APACITY FY 2018-19 M ILL L EVIES R EQUIRED TO F ULLY F UND T OTAL P ROGRAM 160.0 144.4 140.0 125.9 120.0 96.4 100.0 71.2 80.0 60.0 48.7 40.0 16.7 18.7 20.0 0.0 Adams Clear Denver Fremont - Garfield 16 Jefferson Pueblo County 14 Creek (87,980.5 Canon City (1,130.2 (80,984.8 City (7,134.9 (775.6 pupils) (3,662.8 pupils) pupils) (16,545.8 pupils) pupils) pupils) pupils) 14
P ROPERTY T AX B ASICS : M ILL L EVY Total Program Mill Levy: The PROPERTY TAX RATE for each school district’s total program (NOT including overrides approved by local voters). There is currently no local control of this mill levy. • Each district sets its levy each year based on statute and each levy is certified by CDE. Most have been frozen since FY 2007- 08 (S.B. 07-199) but had diverged earlier. Some continue to decrease. • Currently range from 1.68 mills to a ceiling of 27.0 mills. One mill is equal to 1/1000 th so 27.0 mills is 0.027. • Assessed Value X Mill Levy = Property Tax 15
M ILL L EVIES : HOW DID WE GET HERE ? 1988: School Finance Act of 1988 instituted a statewide uniform mill levy to equalize local effort. 1991: Districts had largely transitioned to a uniform levy of 40.08 mills (except for districts fully funded at a lower level). 1992: Voters passed the Taxpayers Bill of Rights (TABOR) which constrains local revenues (growth limited to enrollment growth plus inflation) and reduces mill levies to stay under caps. Districts with rapid AV growth see mill levies drop – and they cannot float back up. 2007: Mill levy freeze (S.B. 07- 199) for most districts but doesn’t correct existing inequities. 16
P RIMERO S CHOOL D ISTRICT T OTAL P ROGRAM M ILL L EVY AND A SSESSED V ALUATION 45 $600 Assessed Valuation 40 Assessed Valuation ($ millions) $500 35 Mill Levy 30 $400 Mill Levy 25 $300 20 15 $200 10 $100 5 0 $- 17
P RIMERO S TATE S HARE OF T OTAL P ROGRAM AND M ILL L EVY 100.00% 45 90.00% 40 80.00% 35 70.00% 30 State Share 60.00% Mill Levy 25 50.00% 20 40.00% 15 30.00% 10 20.00% 5 10.00% 0.00% 0 State Share Mills 18
FY 2018-19 T OTAL P ROGRAM M ILL L EVIES MAP 19
E L P ASO C OUNTY T OTAL P ROGRAM M ILL L EVIES 30.0 27.0 27.0 27.0 27.0 24.5 25.0 23.2 22.8 22.6 21.9 21.4 20.8 19.7 20.0 16.3 15.0 10.0 8.4 5.0 0.0 20
FY 2018-19 T OTAL P ROGRAM M ILL L EVIES 30.0 24.7 27.0 27.0 26.3 25.5 25.0 20.0 15.0 12.5 10.0 5.0 2.2 0.0 Adams Clear Creek Denver Fremont - Garfield 16 Jefferson Pueblo City County 14 (775.6 (87,980.5 Canon City (1,130.2 (80,984.8 (16,545.8 (7,134.9 pupils) pupils) (3,662.8 pupils) pupils) pupils) pupils) pupils) 21
FY 2018-19 R ESIDENTIAL P ROPERTY T AX P AYMENT ON S TATEWIDE M EDIAN V ALUE H OME VS . S TATE S HARE OF T OTAL P ROGRAM $800 120% $678 $678 $659 $642 $620 100% $600 80% $400 60% $314 40% $200 20% $56 $0 0% Adams Clear Denver Fremont - Garfield Jefferson Pueblo County 14 Creek (25.5 Canon 16 (2.2 (26.3 City (27.0 (24.7 (12.5 mills) City (27.0 mills) mills) mills) mills) mills) mills) Residential Tax Payment $348,900 Home 22
C URRENT N ON - RESIDENTIAL T OTAL P ROGRAM T AX P AYMENT $348,900 P ROPERTY V ALUE $3,000 $2,732 $2,732 $2,656 $2,584 $2,498 $2,500 $2,000 $1,500 $1,263 $1,000 $500 $226 $0 Adams Clear Denver Fremont - Garfield 16 Jefferson Pueblo County 14 Creek (25.5 mills) Canon City (2.2 mills) (26.3 mills) City (27.0 (24.7 mills) (12.5 mills) (27.0 mills) mills) 23
FY 2018-19 R ESIDENTIAL P ROPERTY T AX P AYMENT ON S TATEWIDE M EDIAN V ALUE H OME VS . S TATE S HARE OF T OTAL P ROGRAM $800 100% 86.1% $678 $678 $659 $642 $620 78.1% 80% 73.8% $600 70.3% 57.7% 60% $400 41.1% $314 40% $200 17.1% 20% $56 $0 0% Adams Clear Denver Fremont - Garfield Jefferson Pueblo County 14 Creek (25.5 Canon 16 (2.2 (26.3 City (27.0 (24.7 (12.5 mills) City (27.0 mills) mills) mills) mills) mills) mills) Residential Tax Payment $348,900 Home State Share of Total Program (%) 24
M ILL L EVY S UBSIDY R ELATIVE TO S IZE F ACTOR AND A T - RISK F UNDING B EFORE B UDGET S TABILIZATION F ACTOR (O RIGINAL FY 2018-19 A PPROPRIATION , $ IN M ILLIONS ) $450 $412.5 $400 $354.3 $328.7 $350 $300 $250 $200 $150 $100 $50 $0 At-risk Size Mill Levy Subsidy 25
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