Taxpayer Equity and the Uniform Total Program Mill Levy Proposal CRAIG HARPER JOINT BUDGET COMMITTEE STAFF JANUARY 26,

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US 303-8 66-3481 Page 1 STATEWIDE MILL LEVY PROPOSAL Correct inequities in the school finance property tax system by referring a statewide measure to the voters that would: Return the State to a

1 Taxpayer Equity and the Uniform Total Program Mill Levy Proposal CRAIG HARPER JOINT BUDGET COMMITTEE STAFF JANUARY 26, 2018 C R AIG.HARPER@STA TE.CO.US Page 1 STATEWIDE MILL LEVY PROPOSAL Correct inequities in the school finance property tax system by referring a statewide measure to the voters that would: Return the State to a uniform (statewide) total program mill levy with each school district s total program mill levy set at the lesser of the statewide mill levy or the mill levy necessary to fully fund the district s total program with local revenues. Allow mill levies in districts that are fully locally funded (at less than the statewide mill levy) to float on an annual basis below the uniform mill levy in order to continue to fully fund the district without requiring state funds. Effect: Uniform mill levy for districts that receive a state share for total program. 2 1

2 TAXPAYER EQUITY Basic Assumption: An equitable system would treat identical taxpayers (in this case measured by property value) similarly or identically. Because school finance is a state system and the State makes up the difference between the local revenues available and total program funding, this proposal assumes that identical taxpayers in districts receiving state funds should be paying identical amounts in total program property tax (not including overrides). If property tax remains the foundation of the school finance system, the State should equalize local capacity based on an equitable system of taxation rather than subsidize inequitable tax rates. 3 STATUTORY END GOAL: SCHOOL FINANCE FORMULA Statutory Total Program Goal: $7.5 B in FY

3 HOW WE GET THERE: LOCAL SHARE THE FOUNDATION Local $2.4 B Local $2.4 B Statutory Total Program Goal: $7.5 B 5 HOW WE GET THERE: STATE SHARE FILLS THE GAP Pre-BSF State $5.1 B BSF: $0.8 B Actual State $4.2 B Statutory State Share Goal: $5.0 B 6 3

4 HOW WE GET THERE: TOTAL PROGRAM FUNDING Local $2.4 B Actual State $4.2 B BSF: $0.8 B Actual State $4.2 B Local $2.4 B Statutory Total Program Goal: $7.5 B Actual Funding: $6.6 B 7 TOTAL PROGRAM: BUILT DISTRICT BY DISTRICT ADJUSTED FOR ENROLLMENT (SIZE), AT-RISK, COST OF LIVING $18,000 $16,000 $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 FY Total Program Per Pupil Funding Weld - Pawnee (78.2 El Paso - Edison (187.8 Garfield 16 (1,100.6 Cherry Creek (51,888.7 Denver (86,

5 TOTAL PROGRAM: BUILT DISTRICT BY DISTRICT $18,000 $16,000 $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 FY Total Program Per Pupil Funding Weld - Pawnee (78.2 El Paso - Edison (187.8 Garfield 16 (1,100.6 Local State BSF Cherry Creek (51,888.7 Denver (86, STATEWIDE LOCAL SHARE: HOW WE BUILD THE FOUNDATION Property Tax: $2.2 B 92.8% Specific Ownership Tax: $0.2 B 7.2% Local $2.4 B 10 5

6 LOCAL SHARE: PROPERTY TAX (WHETHER YOU ARE A TAXPAYER OR A DISTRICT) Assessed Property Value (Gallagher) Mill Levy (Tax Rate) (TABOR) 11 MAP 12 6

7 LOCAL SHARE: DISPARITIES IN CAPACITY FY Mill Levies Required to Fully Fund Total Program Weld - El Paso - Pawnee (78.2 Edison (187.8 Mills Required to Fully Fund 15.0 Garfield 16 (1, Cherry Creek (51, Denver (86,957.4 Statutory Ceiling (27.0 mills) 13 PROPERTY TAX BASICS: MILL LEVY Total Program Mill Levy: The PROPERTY TAX RATE for each school district s total program (NOT including overrides approved by local voters). There is no local control of this mill levy. Each district sets its levy each year based on statute and each levy is certified by CDE. Most have been frozen since FY (S.B ) but had diverged earlier. Some continue to decrease. Currently range from 1.68 mills to a ceiling of 27.0 mills. One mill is equal to 1/1000 th so 27.0 mills is Assessed Value X Mill Levy = Property Tax 14 7

8 MILL LEVIES: HOW DID WE GET HERE? 1988: School Finance Act of 1988 instituted a statewide uniform mill levy to equalize local effort and reduce reliance on the local share. 1991: Districts had largely transitioned to a uniform levy of mills (except for districts fully funded at a lower level). 1992: Voters passed the Taxpayers Bill of Rights (TABOR) which constrains local revenues (growth limited to enrollment growth plus inflation) and reduces mill levies to stay under caps. Districts with rapid AV growth see mill levies drop and they cannot float back up. 2007: Mill levy freeze (S.B ) for most districts but doesn t correct existing inequities. 15 Mill Levy Primero School District Total Program Mill Levy and Assessed Valuation Assessed Valuation Mill Levy $600 $500 $400 $300 $200 $100 $- Assessed Valuation ($ millions) 16 8

State Share 100.00% 90.00% 80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.

9 State Share % 90.00% 80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Primero State Share of Total Program and Mill Levy Mill Levy State Share Mills 17 MAP 18 9

LOCAL SHARE: RURAL RESIDENTIAL DIFFERENCES Kevin lives in Deer Trail 173 pupils/$13,554 per pupil Christina lives in Primero 187 pupils/$12,278 per pupil 19

10 LOCAL SHARE: RURAL RESIDENTIAL DIFFERENCES Kevin lives in Deer Trail 173 pupils/$13,554 per pupil Christina lives in Primero 187 pupils/$12,278 per pupil 19 Christina and Kevin both own $312,400 homes. Christina s rate is 1.68 mills. She pays $38 in property tax. Kevin s rate is 27.0 mills. He pays $611 in property tax

11 Christina and Kevin each have a total program goal of $1,000. Christina is paying $38 towards the local share. The state share has to cover $962. Kevin is paying $611 towards the local share. The state share has to cover $ $16,000 $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 FY Total Program Per Pupil Funding (After BSF) Primero (Christina) Deer Trail (Kevin) FY State Share Per Pupil (After BSF) FY Local Share Per Pupil 22 11

LOCAL SHARE: RURAL BUSINESS DIFFERENCES Vance has a business in Parachute (Garfield 16 School District) 1,100 pupils/$7,875 per pupil Amanda has a business in Monte Vista (Rio Grande County) 1,119

12 LOCAL SHARE: RURAL BUSINESS DIFFERENCES Vance has a business in Parachute (Garfield 16 School District) 1,100 pupils/$7,875 per pupil Amanda has a business in Monte Vista (Rio Grande County) 1,119 pupils/$7,619 per pupil 23 Vance and Amanda both own $300,000 businesses. Vance s rate is 2.2 mills. He pays $669 in property tax. Amanda s rate is 27.0 mills. She pays $8,100 in property tax

Vance and Amanda each have a total program goal of $10,000. Vance is paying $669 towards the local share. The state share has to cover $9,331. Amanda is paying $8,100 towards the local share.

13 Vance and Amanda each have a total program goal of $10,000. Vance is paying $669 towards the local share. The state share has to cover $9,331. Amanda is paying $8,100 towards the local share. The state share has to cover $1, LOCAL SHARE: URBAN RESIDENTIAL Carolyn lives in Fort Collins (Poudre School District) 28,021 pupils/$7,046 per pupil Eric lives in Cherry Creek 51,888 pupils/$7,386 per pupil 26 13

14 Eric and Carolyn both own $312,400 homes. Eric s rate is 22.0 mills. He pays $499 in property tax. Carolyn s rate is 27.0 mills. She pays $611 in property tax. 27 Eric and Carolyn each have a total program goal of $1,000. Eric is paying $499 towards the local share. The state share has to cover $501. Carolyn is paying $611 towards the local share. The state share has to cover $

15 EL PASO COUNTY: 14 SCHOOL DISTRICTS 29 $700 $600 $500 $400 $300 $200 $100 $0 EL PASO COUNTY: MEDIAN HOMEOWNER ($312,400) PROPERTY TAX PAYMENT $191 $611 $611 $611 $471 $485 $516 $524 $445 $495 $553 $610 $526 $

16 WELD COUNTY: 12 SCHOOL DISTRICTS 31 WELD COUNTY: MEDIAN HOMEOWNER ($312,400) PROPERTY TAX PAYMENT $700 $600 $611 $611 $500 $440 $382 $400 $417 $300 $262 $245 $275 $200 $100 $97 $116 $127 $140 $

17 HOW WE GET THERE: OVERRIDES Actual State $4.2 B Local $2.4 B Override: $1.0 B Override: $1.0 B Actual State $4.2 B Local $2.4B Statutory Total Program Goal: $7.5 B Actual Funding with Overrides: $7.6 B 33 8,000,000,000 7,000,000,000 6,000,000,000 5,000,000,000 4,000,000,000 3,000,000,000 2,000,000,000 1,000,000,000 - Total Program and Override Funding History Local Share State Share Total Override Revenue

18 Total Program and Override Funding Percentages 100% 80% 60% 40% 20% 0% Local Share Total Override Revenue State Share 35 HOW MILL LEVIES AND OVERRIDES INTERACT Overrides can offer an option for local voters to choose to contribute more to education but raise equity concerns. But the interaction with property values and the school finance mill levies is key. 121 districts have mill levy overrides in FY , totaling more than $1.0 billion in revenue. Overrides are not a viable tool for districts with low property values (assessed value per pupil). The rates required to raise significant revenues are prohibitive. Overriding in a low mill levy district is easier than in a high mill levy district. We are asking voters very different questions. With the current system, taxpayers statewide are subsidizing low mill levies and effectively subsidizing overrides in those districts

19 Questions? 37 19

Tonight s Topics. I. Assessed Value Mill and Mill Levy III. Property Taxes (examples) IV. Assessed Value and Mill Levy i. A look back, a look ahead

Tonight s Topics. I. Assessed Value Mill and Mill Levy III. Property Taxes (examples) IV. Assessed Value and Mill Levy i. A look back, a look ahead Tonight s Topics I. Assessed Value II. Mill and Mill Levy III. Property Taxes (examples) IV. Assessed Value and Mill Levy i. A look back, a look ahead Assessed Value, Mill Levy, and Property Taxes Assessed