Our Colorado Economic Futures Panel is taking a look at the web of tax and spending policies that our state has in place. One important area of consideration is K-12 education. The question on the table: If we keep doing what we are doing, what outcome can we expect?
Here’s a snapshot of what things look like in Colorado now:
As a share of your income, your total local and state taxes mean you’re paying less than citizens in 45 other states. That feels good.
About two-thirds of the taxes Coloradans pay go to the federal government. The remaining one-third is split about evenly between the state and local governments. Local taxes go for things that are more visible, like streets, parks and schools. That feels good, too, because you get to see where your property and local sales taxes go. The state gets the income tax from you and from state sales taxes. No property tax goes to the state
About 40 percent of the sales and income taxes you pay to the state come back to local schools for K-12 education. That feels great.
We’re a wealthy state. We’re No. 7 in the U.S. in per capita personal income, which makes us pretty high up there in the entire world.
So why are our schools and kids crying for something better? Why are you crying? Are we not getting what we are paying for? Or are we not paying enough? And if we are not paying enough, good grief, didn’t we pass Amendment 23 to get back on track?
Here’s some help.
Amendment 23, passed in 2000, assured us that we could beef up what goes to schools and kids. But in 2003, we ranked 34th in per pupil school spending in the U.S., even after Amendment 23 passed.
Why?
Yes, we had a recession but so did everyone else. But the real reason is because Amendment 23, which finally, totally, exasperatingly made all of us think, well, yes, we can get this K-12 education thing funded, runs into problems with other tax policies – policies that we initiated, voted for and endorsed. In exasperation, we voted for those policies to get what we wanted. But we’re not getting what we wanted.
We’re hung up. Our good-hearted piling on of citizen initiatives and legislation has created a mess.
Our legislature enacted permanent tax cuts when the economy was roaring. Back to our pockets, thank you.
The greatest increase in property values in our state has been in residential property – our homes. Residential property taxes fund K-12 education at the local level. We voted for the Gallagher Amendment in 1982. It set a limit on how much residential property owners will be assessed. Get this: Residential property is worth about 74 percent of all property in Colorado, but it pays less than half of the taxes. So yes, we homeowners win big time with controlled values on our property. But we really lose because the local share of school funding that comes mostly from property taxes can’t keep up with required school funding increases. Business doesn’t make up the difference because non-residential property values haven’t increased like residential. Since 1982 when Gallagher passed, we saved about $8 billion in residential property taxes – about half of which could have gone to schools. Make sense?
State government is caught, then, in having to make up the difference in funding schools. So the state has to keep coming up with more and more money. And keeping up with pupil growth (26 percent during the ’90s) was only part of the problem. Amendment 23 was passed to ensure funding for schools. Its funding requirements, which keep rising, even during times when revenues are declining because of the economic downturn, gobble up dollars that are needed for other critical areas like the judicial system, transportation, health and human services and higher education. And the funding of these other services can’t be restored when the economy improves because the Taxpayer’s Bill of Rights limit keeps spending at the reduced level.
What a mess. It’s not that it’s too complicated to understand. It’s that our needs are not being met. We want our children to be educated, smart and, ultimately, self-sufficient. But we should be worried that we are not investing enough in their well-being. And it’s largely the Front Range that has responsibility.
More than 80 percent of the people in the state live along the Front Range, so in a state that relies on income taxes and sales taxes for its economic viability, it stands to reason that the Front Range has a lot of power to make change for the good of the whole state.
We’ve come to a crossroads, particularly when it comes to our kids, in terms of what we give them today and what we’ll leave them with for tomorrow. We grasp for approaches to educate our kids, and that’s the right thing to do.
But we are not getting there by the current tax structure – a complex web of law that we created ourselves to answer the needs we saw in front of us. And now those needs change, and they are going to change into the future. Without a complete review of our tax system, we risk continued unintended consequences from our good motives. There hasn’t been a comprehensive look since 1959. It’s high time we fix this.
Cathey Finlon is CEO of McClain Finlon Advertising.
