With the special session done, Colorado’s next tax debate is already starting

· Nov. 27, 2023, 4:00 am
220613-COLORADO-CAPITOL-STATEHOUSE220613-COLORADO-CAPITOL-STATEHOUSEHart Van Denburg/CPR News
The Colorado State Capitol.

Colorado’s special legislative session took four days to finish and affected hundreds of millions of dollars of taxes — but only for next year.

That means the next debate is already beginning on what to do next. Democrats are hoping that a new group of 19 lawmakers and officials from across the state will come up with a solution that could set tax policy for years to come.

“I think that we obviously need to come up with a long-term solution to this,” said state Sen. Kyle Mullica, a Democrat.

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The goal, Mullica said, is “to bring in these diverse perspectives from throughout the state to really try to solve this problem.”

The new tax commission is the result of a new law, HB23B-1003, passed during the special session in mid-November. It’s part of a broader response to an expected rise in property owners’ tax bills next year. Some homeowners could see their burden increase by 30 percent or more next yeara stark change after decades in which state law shielded them from the effects of rising property values.

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Democratic state Sen. Kyle Mullica, in the Senate, March 10, 2023.

Democrats have been criticized in recent years for their approach to the issue. Their earlier proposals, including the failed Proposition HH, were crafted largely behind closed doors and introduced in the final days of the legislative session. Prop. HH in particular failed to win the support of a broad coalition of interests.

With the tax commission, more of the negotiations may happen in public. But it’s also coming as outside groups propose their own answers to the property tax question — some of which could end up on the November 2024 ballot.

Who will be on the commission?

The new group will include seven members appointed by Democrats, six appointed by Republicans, and several more from various interest groups.

The commission is expected to convene by December and submit initial recommendations to lawmakers in March 2024. It will not have the power to make changes to the law itself, but it can make recommendations for the state legislature to implement.

Republicans said they’re interested but skeptical of the new commission. No Republican lawmakers voted for the measure that created the commission on final passage.

“The reason I couldn't vote for it was the Democrats put a couple advocacy organizations that do nothing but advocate for more taxes, higher taxes,” said state Sen. Paul Lundeen, the Republican minority leader. 

Lundeen was referring to two provisions in the law forming the commission. One guarantees a seat for a group representing teachers, likely to be the statewide teacher’s union. Another seat will represent a wide group of interests: “low-income individuals, seniors, individuals with fixed incomes, or residential tenants,” the law states.

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Republican Senate Minority Leader Paul Lundeen speaks against proposed gun control measures, in the Senate, March 10, 2023.

Lundeen dismissed the idea that renters should be represented, saying that they have only a “peripheral” connection to property taxes and would be better served by broader improvements to the cost of living.

State Sen. Julie Gonzales, a Democrat, countered that the current property tax system has impacted everyone because it hasn’t delivered enough money for schools and roads.

“If we are going to have this conversation around property tax policy, we should make sure that everyone who’s impacted has a seat at the table and has the ability to eat,” she said.

Meanwhile, representatives of local taxing districts hope the creation of the commission means state lawmakers will listen more closely to them this time.

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Democratic state Sen. Julie Gonzales at the Capitol, March 1, 2023.

“They need to hear from the local governments of how it works, why it works, what doesn't work, and what works, and continue a really collaborative dialogue. Again, nothing really ever gets done if we're just going to dictate how things are going to be done without listening to the people that are involved,” said Ann Terry, executive director of the Special District Association of Colorado, which will be represented on the commission.

In all, the commission will include four state lawmakers; five county commissioners; representatives for cities and special districts; representatives of school administrators and teachers; a fire chief; a county assessor; the state property tax administrator; a representative of low-income people, seniors or renters; a representative for property owners; and a representative for business.

What exactly can the commission do?

In recent years, state lawmakers have only used a couple of approaches to property taxes. In general, they have granted discounts on the taxable value of properties. They have also provided state money to schools and other local districts to make up for the effects of cuts on their revenues.

Some want to see the state go further, perhaps setting a cap on how fast property tax bills can rise. As part of Prop. HH, Democrats proposed a soft limit — the measure would have encouraged local governments to cut their local tax rates when tax bills rise too fast.

On the other hand, some want to see the state get out of property taxes altogether. Property taxes are paid to local governments, not the state.

“One of the biggest lessons I learned from the last year of working on this is that it really makes no sense for the state to be getting in the middle of what is fundamentally a local government priority — and that is balancing their own budgets and determining what they need in property tax revenues compared to what their expenses are,” said state Rep. Chris deGruy Kennedy, a Democrat.

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Democratic state Rep. Chris deGruy Kennedy, at the Capitol, March 2, 2023.

Lundeen said the state needs to take action on taxes because local governments haven’t done it themselves.

“They said, ‘We'll take the 20, 30, 40, 60 percent increase and we're going to spend it,’” Lundeen said, mentioning fire districts that he said used the money on million-dollar fire trucks.

In the meantime, local districts still have several weeks to potentially lower their mill levies ahead of next year. Some already have said they will.

Meanwhile, state Sen. Chris Hansen, a Democrat who has been central to the conversation, suggested that the commission should think about how to allow for more local and regional flexibility on property taxes.

Outside groups have their own ideas

But even as that group sets to work, pressure from the outside is building. Business leaders, political conservatives, and progressives all are putting forward their own plans that could dramatically change the state’s fiscal system.

Michael Fields is advancing one of those measures with his conservative group, Advance Colorado. And he said that even with the special session’s cut to property tax rates, voters will still be hungry for change. (Many property owners will still see their bills increase by hundreds of dollars or more next year.)

“People are still going to be mad and still support a larger reform, a long-term solution, which is why we're going to the ballot next year,” Fields said.

The options on the table include:

  • Advance Colorado’s Initiative #50 would create a statewide cap on property taxes. When property tax revenues collectively grow more than 4 percent in a year, state and local governments would have to make changes to cut them back. Local governments could grant tax refunds, for example, or the legislature could approve discounts in some or all of the state, among other options. The group has already gathered enough signatures to make the ballot next November.
  • A proposal from the business group Colorado Concern would limit the growth of individual households’ tax bills. Taxable values on homes would be reset to 2020 levels, and they would not be allowed to grow faster than 2.5 percent yearly until the home is sold. The measure has not qualified for the ballot as of publication.
  • A proposal from the progressive Bell Policy Center would move in the opposite direction, blocking the state from making changes to local property tax revenues. The measure has not qualified for the ballot as of publication.
  • The new property tax commission will draft a set of recommendations for legislation that could be passed next year, potentially including a ballot measure for Nov. 2024

It’s still unclear just how many of those ideas will ultimately go before voters. Only Initiative #50 has gathered enough signatures to make the ballot so far. The other groups have yet to go through that expensive process.

Scott Wasserman, of the Bell Policy Center, hopes he might convince lawmakers to take up his group’s idea and place it on the ballot directly. 

And Mike Kopp, of Colorado Concern, said he would decide what to do with his own measure based on what the legislature does in its new session, which begins in January.

“If they go big next session, well, that will change the whole context and we would consider at that point where we are,” he said. “But no, just to be very clear, this board at Colorado Concern is very much prepared to go the distance.”

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