Financing Public Schools In Colorado (The Intersection With TABOR and Gallagher) Presented To: School Finance Partnership Presented By: Rudy Andras Economist - Vice President RBC Capital Markets

$ in millions Douglas County Fiscal Year 11/12 Funding Will Be At The FY 08/09 Level, Even As Funded Pupil Growth Was In Excess Of 4,100 Pupils School Finance Act Funding WITHOUT Schools Funding Crisis (funding at Amendment 23 required level) School Finance Act Funding WITH Schools Funding Crisis Note: School Finance Act funding excludes Online pupil funding (a pass-through funding source). Amendment 23 Additional 1% Funding Begins

$ in millions Cheyenne Mountain Fiscal Year 11/12 Finance Act Funding Will Approach The Level Of 5 Years Ago School Finance Act Funding WITHOUT Schools Funding Crisis School Finance Act Funding WITH Schools Funding Crisis

$ in millions Englewood Schools Fiscal Year 11/12 Funding Will Equal The Level Experienced 16 Years Ago School Finance Act Funding WITHOUT Schools Funding Crisis School Finance Act Funding WITH Schools Funding Crisis $990,000 Override Election $1,600,000 Override Election

“This Is A Fine Mess We’ve Gotten Ourselves Into!”

Tax Policy (School Funding) Avenue Tax Bill Street

Tax Policy (School Funding) Avenue Tax Bill Street Gallagher (1982) TABOR (1992) Amendment 23 (2000)

School Funding BEFORE Amendment 23 Local Revenue: Property Taxes Vehicle Ownership Taxes Constrained By: Gallagher Biennial Reappraisals TABOR School Finance Formula For: Cities, Counties, Special Districts General Fund: Legislature Allocates Funding Subject To 6% Approp. Limit: For: Roads, Prisons, Higher Ed., Other Priorities SCHOOLS State Revenue: Income Taxes Sales Taxes Other Revenue/Taxes DISTRICT

(4) Required elections. Starting November 4, 1992, districts must have voter approval in advance for: (a) Unless (1) or (6) applies, any new tax, tax rate increase, mill levy above that for the prior year, valuation for assessment ratio increase for a property class, or extension of an expiring tax, or a tax policy change directly causing a net tax revenue gain to any district. (7) Spending limits. (a) The maximum annual percentage change in state fiscal year spending equals inflation plus the percentage change in state population in the prior calendar year, adjusted for revenue changes approved by voters after Population shall be determined by annual federal census estimates and such number shall be adjusted every decade to match the federal census. (b) The maximum annual percentage change in each local district's fiscal year spending equals inflation in the prior calendar year plus annual local growth, adjusted for revenue changes approved by voters after 1991 and (8) (b) and (9) reductions. (c) The maximum annual percentage change in each district's property tax revenue equals inflation in the prior calendar year plus annual local growth,* adjusted for property tax revenue changes approved by voters after 1991 and (8) (b) and (9) reductions. Relevant TABOR Provisions Affecting K-12 Funding * Note: For school districts local growth equals pupil growth.

Tax Policy (School Funding) Avenue Tax Bill Street Gallagher (1982) TABOR (1992) Amendment 23 (2000)

School Funding AFTER Amendment 23 Local Revenue: Property Taxes Vehicle Ownership Taxes Constrained By: Gallagher Biennial Reappraisals TABOR School Finance Formula For: Cities, Counties, Special Districts General Fund: Legislature Allocates Funding Subject To 6% Approp. Limit: For: Roads, Prisons, Higher Ed., Other Priorities SCHOOLS State Revenue: Income Taxes Sales Taxes Other Revenue/Taxes Education Fund: 1/3 of 1% of Taxable Income (Diverted From State Surplus – assumes surplus) Instead Of Being Refunded This Funding Used For: Amendment 23 Requirements: 1. Inflation + 1% - 10 years 2. Inflation - Thereafter 3. Inflation + 1% - 10 years 4. Inflation – Thereafter 5. New Programs – Depends On Change In Variables Affecting Education Fund Balance Plus: Requires State General Fund Spend A Minimum 5% More Each Year For 1 st 10 Years Statewide Per Pupil Base Categorical Programs Special Ed. Gifted/Talented Transportation ESL, etc. New Textbooks Lower Class Size Other Initiatives SCHOOLS 5% Minimum Increase * DISTRICT

(4) Required elections. Starting November 4, 1992, districts must have voter approval in advance for: (a) Unless (1) or (6) applies, any new tax, tax rate increase, mill levy above that for the prior year, valuation for assessment ratio increase for a property class, or extension of an expiring tax, or a tax policy change directly causing a net tax revenue gain to any district. (7) Spending limits. (a) The maximum annual percentage change in state fiscal year spending equals inflation plus the percentage change in state population in the prior calendar year, adjusted for revenue changes approved by voters after Population shall be determined by annual federal census estimates and such number shall be adjusted every decade to match the federal census. (b) The maximum annual percentage change in each local district's fiscal year spending equals inflation in the prior calendar year plus annual local growth, adjusted for revenue changes approved by voters after 1991 and (8) (b) and (9) reductions. (c) The maximum annual percentage change in each district's property tax revenue equals inflation in the prior calendar year plus annual local growth,* adjusted for property tax revenue changes approved by voters after 1991 and (8) (b) and (9) reductions. Relevant TABOR Provisions Affecting K-12 Funding * Note: For school districts local growth equals pupil growth.

Reason For The Increase in School Finance Equalization Backfill Independent Of Mill Levy Decline

The Mill Levy Rate Ratchet Down In School Finance … Jeffco R-1 School District Example

… Combined With Gallagher To Keep Finance Act Tax Bills Stable.

More Concrete Examples: Hanover Durango Alamosa Aurora

Hanover School District Operating Levy Rate History Mills

Hanover School District Assessed Value History $17.5 Million $52.5 Million $6.3 Million

$238 $219 $217 $401 $62,000 Home Value $100,000 Home Value $110,000 Home Value $123 $82 Without Bonds With Bonds If One’s Objective Is To Virtually Eliminate Property Taxes Paid To Support Hanover Schools, THEN VOTE NO, DEPRIVING HANOVER’S STUDENTS OF FACILITIES ENJOYED BY ALL OTHER STUDENTS