1. Measuring the Impact of Tax and Expenditure Limits on Public School Property Taxes

2. Colorado Continues to Face a Structural Imbalance

3. Source of the Structural Imbalance

4. TABOR and Sales Tax Changes Provide an Almost Complete Short-Term Solution

5. Closing the Remaining Gap
Requires addressing school finance
Address local share of school funding
Address the structure of the property tax system
Options will require
Better balancing state/local partnership for funding schools Or
Developing a replacement funding model for schools

6. System of Financing K-12 Education Remains Broken

7. The Dynamics Behind the Declining Levies The 2 school district limits of TABOR: 1. the property tax revenue limit 2. the mill levy limit

8. Scenario 1, Fluctuating Enrollments, Stable Tax Base
Mill levy can’t increase during periods of enrollment increase due to mill levy limit
State picks up the tab for program cost growth
Mill levy must decline during periods of declining enrollment due to property tax revenue limit reduction
In most cases, total program cost does not decline as fast as property tax revenue (due to increases in formula funding factors) so the state must make up the difference
The bottom line is that for these districts, state share increases while mill levies are reduced

9. Scenario 2, Stable or Mildly Fluctuating Enrollments, Wildly Fluctuating Tax Base
During periods of rapid tax base growth, mill levies must be reduced due to property tax revenue limit
During subsequent periods of tax base decline, levies can’t be increased due to mill levy limit
Lower local share means that the state needs to backfill more of the total program plus absorb the cost of funding formula increases
During later periods of tax base growth, mill levies are again forced to be reduced while maintaining the same state/local split
Mild enrollment fluctuations exacerbate the dynamics for these districts over time

10. Scenario 3, Substantial Tax Base Growth Not Accompanied by Enrollment Growth
Steady growth in tax base occurs in areas affected by recreational, gaming, and extractive industries.
The growth in tax values does not correspond to enrollment growth
Mill levies must be reduced due to the property tax revenue limit
To the extent the PSFA formula produces funding levels growing faster than the property taxes allowed by the limit, the state must make up the difference
Mild enrollment fluctuations can amplify these dynamics over time

11. Colorado Now Has 21 Districts Levying Fewer than 10 Mills; Eight in Top Quintile for Median Household Income
* State share increased from to

12. Our Current Research Focus: TEL Related Distortion to School Property Taxes
We investigated:
Distributional changes in effective tax rates
Changing incidence of the school property tax
District spending disparities; the use of override levies
Whether TABOR has limited taxes for all taxpayers

13. RESEARCH FINDINGS

14. Finding 1. As measured by effective tax rates, local property tax burdens to support the school finance act have become more unequal since the passage of TABOR.

15. Change in Effective Tax Rates on the Median Household, 2000-2014

17. Finding 2. As measured by effective tax rates, the local property tax to support base school programs has become more regressive.

19. Finding 3. District level funding disparities increased as the use of local override levies became increasingly prevalent in districts with falling effective property tax rates for base school programs.

20. Use of Override Levies Uneven Statewide

21. Is the Uneven Use of Override Levies Related to TABOR?
Dependent Variable: MILLS_OR_2014
Method: Stepwise Regression
Date: 05/14/15 Time: 10:28
Sample (adjusted): 1 176
Included observations: 170 after adjustments
Number of always included regressors: 1
Number of search regressors: 10
Selection method: Stepwise forwards
Stopping criterion: p-value forwards/backwards = 0.1/0.1
Variable
Coefficient
Std. Error
t-Statistic
Prob.*   C
0.2848
POP
2.68E-05
4.35E-06
0.0000
ED_ATT
AV_PER_PUPIL_14
-2.81E-06
8.72E-07
0.0015
PSFA_MILL_CHG
0.0013
CHG_EFF_RATE
0.0178
R-squared
    Mean dependent var
Adjusted R-squared
    S.D. dependent var
S.E. of regression
    Akaike info criterion
Sum squared resid
    Schwarz criterion
Log likelihood
    Hannan-Quinn criter.
F-statistic
    Durbin-Watson stat
Prob(F-statistic)
Selection Summary
Added POP
Added ED_ATT
Added AV_PER_PUPIL_14
Added PSFA_MILL_CHG
Added CHG_EFF_RATE
*Note: p-values and subsequent tests do not account for stepwise
        selection.
The use of overrides is more prevalent in districts that:
Are LARGER in population
Are MORE EDUCATED – as measured by educational attainment of head of household
Have LOWER assessed value per pupil – likely a vestige of Gallagher
AND HAVE SEEN THE LARGEST DECLINES IN EFFECTIVE TAX RATES SINCE THE PASSAGE OF TABOR

22. Finding 4. As a result of TABOR, taxpayers in 74 of the state’s 178 school districts (81% of taxpayers) currently pay more in school property taxes than they would if TABOR were never enacted.

23. THIS TAKES SOME EXPLAINING…
How Can a Limit Result in 81% of Coloradans Paying MORE in Property Taxes?
THIS TAKES SOME EXPLAINING…

25. Geographic Distribution of TABOR’s Distortion

26. Ten Districts Most Adversely Affected by TABOR’s Redistribution
Amount TABOR’s redistribution is costing the median household
Cheyenne Mountain School District 12, Colorado $
Elizabeth School District C-1, Colorado $
Academy School District 20, Colorado $
Poudre School District R-1, Colorado $
Windsor School District RE-4, Colorado $
Strasburg School District 31J, Colorado $
Northglenn-Thornton School District 12, Colorado $
Jefferson County School District R-1, Colorado $
La Veta School District RE-2, Colorado $
Douglas County School District RE-1, Colorado $

27. The Top Ten Beneficiaries of TABOR’s Redistribution and the Median Household Impact
Steamboat Springs School District RE-2, Colorado
$ (525.20)
Durango School District 9-R, Colorado
$ (477.48)
Eagle County School District RE 50, Colorado
$ (403.17)
Garfield School District RE-2, Colorado
$ (375.26)
Norwood School District R-2J, Colorado
$ (365.12)
Telluride School District R-1, Colorado
$ (364.15)
Ridgway School District R-2, Colorado
$ (353.75)
Bayfield School District R-10-JT, Colorado
$ (344.22)
Plateau Valley School District 50, Colorado
$ (247.37)
Silverton School District 1, Colorado
$ (229.96)
Steamboat ranks 28th in state in household median income (ACS year survey)

28. Summary of Findings
School base program property taxes now more unequal
School base program property taxes now more regressive
TABOR contributing to larger district disparity in the use of overrides
As a result of TABOR, 81% of Coloradans are paying more in base program school property taxes

29. Conclusion: Property Tax and the Financing of K-12 Education
2013 Lincoln Institute Conference Proceedings in Education Finance and Policy
Major themes
Unintended consequences on education finance from state level legislation
Potential for school finance and property tax policies to introduce distributional inequities into the system of public education finance
Importance of the property tax in the financing mechanisms for K-12 education
School finance in Colorado is a microcosm of phenomena occurring at varying degrees across the US.

30. Thank You
This research was supported by a grant from the Lincoln Institute of Land Policy