The Unintended Consequences of Amendment 73

Editorial by Ken Brownlee, Mesa County Assessor

The Business Times

Amendment 73 was designed to raise $1.6 billion for Colorado schools. But because of the unintended interaction with the Gallagher Amendment, the ballot measure would divert money from all other taxing districts to schools.   

Most of the increased funding for schools proposed by Amendment 73 comes from changes in state income taxes. But if the measure passes in November, it also will fund schools by funneling property tax revenues away from fire departments and other special districts’ budgets to give it to schools.

The so-called Gallagher Amendment to the Colorado Constitution was passed in 1982. One of its tenets was to relieve the property tax burden of residential property owners.

Property taxes are determined by multiplying the actual value of a property by the assessment rate by the mill levy. The Gallagher Amendment set as a target that residential property owners were to pay 45 percent of total property taxes statewide. This was to be accomplished by floating the residential assessment rate (RAR).

This was later modified by the Taxpayer Bill of Rights, another amendment to the Colorado Constitution, so the residential assessment rate only went down, not up. So the target effectively was no more that 45 percent, but that’s a different issue.

When the Gallagher Amendment was passed, the residential assessment rate was 21 percent and the non-residential rate was 29 percent. The residential assessment rate has come down over the years as housing values have appreciated, particularly on the Front Range. Two years ago, the RAR was 7.96 percent. Last year it was 7.2 percent — a 10 percent drop. Next year it’s predicted to go to 6.11 percent.

Amendment 73 would freeze the RAR for schools only at 7 percent and drop the non-residential rate to 24 percent. Since roughly half of property taxes go to school funding, this effectively raises the RAR for half of all the special districts so the other half must decrease enough to average to the target rate.

Additionally, lowering the
non-residential rate puts more downward pressure on the RAR. There are hundreds of other special districts — including fire districts, libraries, water districts, drainage districts and municipalities. All of these districts will receive less property tax funding so school districts get more unless the Legislature ignores the constitutionally mandated 45-55 split.

The authors of Amendment 73 didn’t intend to do this. The measure wasn’t supposed to affect other districts. But such is the problem with competing constitutional amendments made without sufficient thought.

Ken Brownlee, Mesa County Assessor

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