Bloomberg News

Colorado Voters May Raise Taxes by $3 Billion to Aid Schools

September 12, 2011

Sept. 12 (Bloomberg) -- Colorado voters will decide in November if they want to pay higher taxes to pump almost $3 billion into a state education system that ranks 40th in the nation in spending per pupil.

Proposition 103 would increase the income-tax rate to 5 percent from 4.63 percent and the sales and use levy to 3 percent from 2.9 percent for five years, according to the Legislative Council, a nonpartisan research arm of the Colorado General Assembly. Supporters of the measure gathered 142,000 signatures to place it on the ballot.

“We had an overwhelming response,” said Democratic state Senator Rollie Heath, who sponsored the initiative after the Legislature cut $500 million from the education budget over the last three years. “People said, ‘It’s about time. We’ve gone too far.’”

Colorado is the only state with an initiative on the November ballot that would raise income taxes, according to the National Conference of State Legislatures. A 1992 amendment to the state constitution bars the Legislature and local lawmakers from increasing taxes without voter approval. Coloradans last year voted not to lower their income tax.

The amendment -- known as the Taxpayer Bill of Rights, or Tabor -- and a measure passed in 1982 that restricts property- tax growth have placed more responsibility for education funding on the state, which now pays 64 percent of those costs. In 1993, the state’s share was 55 percent, according to a study released Aug. 31 by the Center for Colorado’s Economic Future at the University of Denver.

‘Crisis Mode’

Colorado spent $1,809 less per pupil in kindergarten through 12th grade than the national average of $10,591 in 2009, the most recent year for which data are available, according to the Washington-based National Center for Education Statistics. Only 10 states spent less. Before 1982, state spending was about equal to the national average, according to the center.

“No other state suffers this unique situation,” said Jane Urschel, deputy executive director of the Colorado Association of School Boards. “We’re in crisis mode.”

About $200 million in cuts in the 2012 fiscal year forced some of the state’s 178 school districts to fire teachers, suspend textbook purchases, institute transportation fees, freeze salaries, lower graduation requirements and reduce the school week.

‘Beyond the Bone’

In Jefferson County, the state’s largest district with about 86,000 students across 780 square miles, administrators trimmed almost $40 million from this year’s budget. About 206 teachers, support staff and administrators lost their jobs as a result. The district also reduced funding for capital projects by $3 million, closed two elementary schools and increased class sizes.

“If Proposition 103 doesn’t pass, we will be looking at another $35 million in cuts,” said Cindy Stevenson, the district’s superintendent, in a telephone interview. “We’re beyond the bone.”

Opponents, including Republican House Majority Leader Amy Stephens, argue that raising taxes will stall the state’s recovery from the recession by causing businesses to think twice about hiring more workers or relocating to Colorado.

“We have to be able to compete against Utah, against Texas and against New Mexico,” Stephens said. “Jan Brewer is wooing companies left and right to Arizona,” she said, referring to that state’s Republican governor.

Colorado’s Democratic governor, John Hickenlooper, “has no plans to endorse or oppose” Proposition 103, Eric Brown, a spokesman, said in an e-mail.

Throwing an Anchor

Raising taxes over five years would slow Colorado’s economy and lead to 27,000 fewer people working by 2016, according to a study by Eric Fruits, president of Economics International Corp. in Portland, Oregon. He was hired by the Colorado-based Common Sense Policy Roundtable, a research organization with several business leaders on its board.

“Raising taxes is always going to be like throwing an anchor behind you,” Fruits said. “It will always create a drag on the economy.”

Supporters of the measure may face an uphill battle, if results from last year’s election are any indication. Two-thirds of Washington voters in November cast ballots against levying an income tax on the state’s top 1 percent of earners. Washington has no state income tax. They also approved a measure that ended sales tax on candy and bottled water, and excise taxes on carbonated beverages.

Fed Up

Still, there are some signs that voters are fed up with service cuts that result from tax reductions, said Jennifer Burnett, a program manager at the Council of State Governments in Lexington, Kentucky, in a telephone interview.

In Massachusetts in 2010, voters rejected a measure that would have reduced the sales tax to 3 percent from 6.25 percent. Colorado residents said no to Proposition 101, which would have lowered income-tax rates as well as vehicle levies and fees.

Coloradans were content to keep taxes where they were because they’re already low, Burnett said. Colorado ranked 40th among states in the top marginal income-tax rate for the 2011 tax year, according to the Washington-based Tax Foundation.

Heath, the sponsor, disagrees that Proposition 103 would lead to slower job growth. He cites scores of Colorado teachers who lost their jobs in the last decade after school districts were forced to cut budgets when they received less state money. If the referendum passes, state legislators will be charged with allocating money collected to both K-12 and higher education.

“If we’re the only state in the country that passes a measure like this and the headlines are ‘Colorado Bucks Trends and Decides to Fund Education,’ it will have a positive effect,” he said.

--Editor: Mark Schoifet, Jerry Hart

To contact the reporter on this story: Jennifer Oldham in Denver at joldham1@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net


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