University of Denver

May 24, 2005We're keeping our Colorado taxes in our pockets.
But are we helping the kids be prepared for jobs?

By Cathey Finlon

In an effort to just get the whole state government thing to go away, Colorado voters finally found a way to take all responsibility away from their elected legislature. Saying, “you can’t trust the b….s,” and after hamstringing state government with a bunch of conflicting tax limiting laws, Colorado voters decided to keep all the taxes dedicated for K-12 education and initiate home schooling. That way, all the dollars can be kept at the local level—and controlled directly by those who benefit.

After all, study after study has indicated that the Colorado populace is just plain smarter than anyone else anywhere. So who better to teach the kids? Colorado parents will just buy their own books. It’s all on the honor system. Aspen kids will get lots of books, computers and team sports. Antonito kids, well, if everybody in the state donates their newspaper when they’re on vacation, it’s a start. If you don’t have kids, well, great, renovate your house! What’s great is that our Governor and the legislature won’t have to worry about achieving benchmarks for a quality education: You get to set your own benchmarks.

Seems absurd? Of course it is. However, the Colorado constitution requires the state to equalize K-12 education so that kids in poorer communities get dollars for education that can’t be raised locally. As important, we want to continue to be the best and brightest state in the country—that’s our reputation. The payoff for our children and us is clear. If we’re smarter and better educated, and we don’t overwhelm our environment with too many of us, we get to have a future. A pretty nice one. Smarter workers, better jobs, beautiful Colorado.

Our Colorado Economic Futures Panel is taking a look at the web of tax policies that we have in place. One important area of consideration is K-12 education. The question on the table: if we keep doing what we are doing, what outcome can we expect.

Here’s what we’re doing. You be the judge.

It’s simple. A few guidelines will help.

• As a share of your income, your total local and state taxes mean you’re paying less than citizens in 45 other states. That feels good.
• About 2/3 of the taxes Coloradan’s pay go to the federal government. The remaining 1/3 is split about evenly between the state and local governments. Local taxes go for things that are more visible, like streets, parks, and schools. That feels good too, because you get to see where your property and local sales taxes go. The state gets the income tax from you and also state sales taxes. No property tax goes to the state.
• About 40% of the sales and income taxes you pay to the state come back to local schools for K-12 education. That feels great.
• We’re a wealthy state. We’re #7 in the US in per capita personal income. Which makes us pretty high up there in the entire world.

So why are our schools and kids crying for something better? Why are you crying? Are we not getting what we are paying for? Or are we not paying enough? And if we are not paying enough, good grief, didn’t we pass Amendment 23 to get back on track?

Here’s some help.

Amendment 23, passed in 2000, assured us that we could beef up what goes to schools and kids. But in 2003 we ranked 34th in per pupil school spending in the US, even after Amendment 23 passed.

Why?

• Yes, we had a recession but so did everyone else.
• The real reason is because Amendment 23, which finally, totally, exasperatingly made all of us think, well, yes, we can get this K-12 education thing funded, runs into problems with other tax policy—that WE initiated, voted for, and endorsed. In exasperation, we voted for those policies to get what we wanted. But we’re not getting what we wanted.

We’re hung up. Our good-hearted piling on of citizens’ initiatives and legislation has created a mess.

Here is where it’s a mess.

• Our legislature enacted permanent tax cuts when the economy was roaring. Back to our pockets, thank you.
• The greatest increase in property values in our state has been residential property—our homes. Residential property taxes fund K-12 education at the local level. We voted for the Gallagher amendment in 1982. It set a limit on how much residential property owners will be assessed. Get this: Residential property is worth about 74% of all property in Colorado, so it pays less than half of the taxes. So yes, we homeowners win big time with controlled values on our property. But we really lose because the local share of school funding that comes mostly from property taxes can’t keep up with required school funding increases. Business doesn’t make up the difference because non-residential property values haven’t increased like residential. Since 1982 when Gallagher passed, we saved about $8 billion in residential property taxes — about half of which ($4 billion) could have gone to schools. Make sense?
• State government is caught then in having to make up the difference in funding schools. So the state has to keep coming up with more and more money. And keeping up with pupil growth (26% during the 90s) was only part of the problem. Amendment 23 was passed to assure funding for schools. Its funding requirements, which keep rising even during times when revenues are declining because of the economic downturn, gobble up dollars that are needed for other critical areas like the judicial system, transportation, health and human services and higher education. And the funding of these other services can’t be restored when the economy improves because the TABOR limit keeps spending at the reduced level.

What a mess. It’s not that it’s too complicated to understand. It’s that our needs are not being met. We want our children to be educated, smart and ultimately, to be self-sufficient. But we should be worried that we are not investing enough in their wellbeing. And it’s largely the Front Range that has responsibility. More than 80% of the people in the state live in the Front Range—so in a state reliant on income taxes and sales taxes for its economic viability, it stands to reason that the Front Range has a lot of power to make change for the good of the whole state.

We’ve come to a crossroads as citizens of Colorado, particularly when it comes to our kids, what we give them today, and the state we’ll leave them with in the Big Tomorrow. We grasp for approaches to educate our kids and that’s the right thing to aspire to. But we are not getting there by the current tax structure—a complex web of law that we created ourselves to answer the needs we saw in front of us. And now those needs change and they are going to change out into the future. Without a complete review, we risk continued unintended consequences to our good motives. There hasn’t been a comprehensive look since 1959. It’s high time we fix this.

Cathey Finlon is CEO of McClain Finlon Advertising, the largest independently owned advertising agency in the Rocky Mountain region. Finlon is also a partner in Linhart McClain Finlon Public Relations, which she founded with Sharon Linhart. She is a past chair of the Denver Metro Chamber of Commerce.