It’s been more than a week since the Colorado Legislature adjourned. This strange session was interrupted by the COVID-19 shutdown order, and re-convened after Memorial Day to pass a 2021 budget. By then everything had changed: Colorado’s unemployment rate had risen over 10 points and tax revenue projections were in free fall. Black Lives Matter demonstrations swirled around the Capitol.
The Legislature passed a budget so deeply cut that, according to one witness, there wasn’t a dry eye in the House when they took the final vote. But our legislators needed to do more to rescue our economy.
Hail Mary pass
The U.S. economy in the midst of the pandemic is unpredictable. We haven’t seen unemployment levels this high since the Great Depression, but the stock market flourishes under federal policy that favors the wealthy. Colorado can’t engage in deficit spending, so cutting the budget for 2021 to align with predicted revenues was necessary. But less state spending means a further drag on the economy. Most new taxes can hurt the economy, too. Where to find revenue that will not?
Colorado has the 12th lowest residential property tax rate of the 50 states, at about .6% of the home’s market value. That’s about half of the national average of approximately 1.2%, less than a third of New Jersey’s, the highest. It stands to reason that Colorado homeowners could pay a little more. Raising property taxes is a fairly equitable way to increase state revenue, because the tax tends to fall harder on the wealthy than the poor.
There’s just one problem. The Gallagher Amendment to the Colorado Constitution prevents the state Legislature from adjusting property tax assessments. So the Legislature threw a Hail Mary pass by referring to the November ballot a measure to repeal the Gallagher Amendment.
What Gallagher does
The Gallagher Amendment meant to maintain a balance between commercial property tax revenues and residential tax revenues by controlling their assessed value. Assessed value is the percentage of the market value of real estate subject to property tax.
In the early 1980s, home prices were rising rapidly. The Gallagher Amendment sought to prevent homeowners from becoming burdened by property taxes, maintaining a rough equity between taxes on businesses and taxes on residences. It does this by pegging the assessment rate of commercial property at 29% of market value. Then the assessment rate of residential property increases or decreases by the amount needed to hold the ratio of commercial to residential revenue at 55-to-45%.
But Colorado experienced rapid population growth and increasing housing prices, so the market value of residential real estate grew fast. To preserve the ratio of revenues mandated by Gallagher, the residential assessment percentage was pushed ever downward. In 1982, when Gallagher passed, the residential assessment rate was 21%. Today it is just under 8%.
How Gallagher limits our economy
Shrinking property tax revenue with respect to the overall size of the economy stresses Colorado’s public service economy. Hardest hit are our schools. Before Gallagher, property taxes were the primary source of funding for K-12 schools. Through the 1980s, school districts offset the decrease in assessed value by increasing the mill levy — but the Taxpayer Bill of Rights put a stop to that in 1992. There’s a brilliant explanation of the TABOR/Gallagher vicious cycle at greateducation.org.
As TABOR and Gallagher together starve our schools, the state made up deficits in school funding out of its general fund. That gave the state less latitude to start innovative projects and keep up critical infrastructure. Many members of our Legislature still cling to the myth that there’s hidden government waste somewhere that can be eliminated, so we can still fund our schools and our roads. But there’s no hidden waste. It’s all been cut to the bone. Colorado’s revenue base is out of proportion to its economy. During hard times, we can no longer expect to maintain our Colorado way of life.
Voters in the end zone
I recently had the privilege of interviewing State Rep. Jonathan Singer, who has just finished his final term in the House. SCR20-001, the resolution to ask the voters this November to repeal the Gallagher Amendment, had not yet passed. So I asked him whether he would vote for it in the House.
Singer said, “If we don’t come up with a fix, kiss your fire districts, ... your school districts, kiss any bells and whistles in your school districts goodbye. We may lose entire school districts, if we don’t fix Gallagher. And that’s not an exaggeration.”
Whole school districts. We know where they are. They’re in the mountains. They’re on the plains in Congressional District 4. Their legislators are Republicans, and they’re as anti-tax as you can get. But they supported this referral in numbers: Senate 28-to-6, and House 51-to-14. Rural Coloradans need schools and hospitals just the same as residents of the urban Front Range.
Next, I asked Rep. Singer, if he is the chosen Democratic candidate for Boulder County commissioner this fall, what he will say about Gallagher. Many of his supporters have big Boulder County houses and aren’t excited about having their property taxes go up. Some of them have already come out against it.
But Rep. Singer said, “Our St. Vrain Valley School District supports this, and in all likelihood I’ll be supporting it, too.”
Singer says we, the voters, need to step up to this challenge.
I say so, too: we need to catch this Hail Mary pass. With Gallagher out of the way, assessments can be adjusted when the present emergency is over, to provide relief to house-rich and cash-poor residents. But first, our schools, our hospitals and our infrastructure need saving, even if some of us have to tighten our belts.
Our children are our future. We’ve made it hard enough for them already. When the time comes, vote to repeal the Gallagher amendment. I will. Will you?