Colorado Legislative Strategies Updates 10.20.23

COLORADO LEGISLATIVE STRATEGIES NEWSLETTER
 
October 20, 2023

​Introduction
 
It’s October and we all know what that means. No, not that the tree colors are looking beautiful. No, not that it’s arguably the best month of the year for sports. Of course, October means that it’s election time!
 
Ballots were sent out in the mail starting this week and voting is now underway. Most people usually drop off their ballot in the final week, but some people could have already filled it out and dropped it off or mailed it back, and in person voting centers will be open starting on Monday. 
 
Campaigns are also now in full swing. Commercials are going up on TV and numerous mailers are going out as both Yes and No campaigns are trying to persuade voters. The Governor himself will even be doing a debate (he’s in favor of both ballot measures) on Monday night. 
 
This newsletter will get you up to speed on the two measures on the ballot, but probably needs a disclaimer – this is going to TABOR heavy. 
 
Briefly before we dive in, the Taxpayer Bill of Rights, or TABOR, is a constitutional amendment that was passed by voters in 1992 and it does a whole lot of stuff. It’s the reason these two measures were put on the ballot in the first place. It’s the reason why only tax measures are on off year ballots. And both ballot measures deal with allowing the state to keep and spend money already collected above the cap that TABOR currently allows. 
 
There are no citizen initiated ballot measures this election and both of these measures are legislative initiated statutory changes. You might recall Senate Bill 303, which created Prop. HH, leading to a Republican walkout in the House on the final day of last session in protest at how fast the proposal was being pushed through the legislative process.
 
Now here’s a look at Propositions II and HH.

​Proposition II
 
We’ll take on Prop. II first because this one is much more straightforward. In the simplest terms, a yes vote means $23.65 million will go to preschool programs, and a no vote means $23.65 million will be refunded to wholesalers and distributors of cigarette/tobacco/nicotine products.
 
In 2020 voters approved a new tax on cigarette/tobacco/nicotine products. TABOR required such a vote and TABOR also required that the ballot language include a specific amount that was estimated to be generated by the new tax. Anything over that amount, the state can’t use without further voter approval. Well it turned out the tax generated an extra $21.5 million (and that has now also generated $2.15 million in interest). 
 
This measure has largely flown under the radar because frankly most people aren’t paying much attention to this election, and anyone who is paying attention is preoccupied with Prop. HH. Moreover, the margin between supporters of funding preschool programs and supporters of giving money back to people selling nicotine products probably isn’t that close. 
 
Proposition HH
 
Now to the big one, Prop. HH, which is anything but simple. Ostensibly, Prop. HH is about reducing property taxes but under the surface it’s really more about the state retaining taxpayer money above what the TABOR cap currently allows. 
 
First we’ll tackle the property tax part of the measure, and we’ll also touch on some of the other parts that have been added to the measure as well, and then we’ll get into how it changes the TABOR cap. Keep in mind though that the legislature could have simply passed everything that is in this measure without voter approval except for the part that changes the TABOR cap.
 
Put another way, the changes to the TABOR cap are the real reason for this ballot measure and everything else in the measure is essentially added on to try to help win support. 
 
Property taxes are a hot topic right now because the appreciation in home values across the state has caused gigantic increases in property tax burdens. This measure in no way lowers property taxes but this measure makes property taxes lower than they otherwise would be under current law. The relief is a smaller increase in property taxes.
 
Additionally, the measure makes the senior homestead property tax exemption portable, which will allow seniors who qualify for the exemption to take it to a new home they purchase instead of losing the property tax relief if they chose to downsize. 
 
Both of these property tax provisions are popular ideas (who doesn’t favor paying less property tax) and they are both things the legislature could have already passed on their own. But the problem is they cost a lot of money and there just isn’t that much money laying around available to spend on property tax relief. But there is a big pot of TABOR refund money sitting there… 
 
Before we dig into all the implications for future TABOR refunds, there are a couple other things in the measure to mention that have also been added (even though the legislature could have already passed them on their own). One is money for rental assistance – they had to throw something in there for renters. And the other is changing the TABOR refund mechanism for this year’s TABOR refund, which will benefit people who make lower incomes. 
 
Okay, now to how all of this gets paid for. Regular newsletter readers should be able to picture the chart in every recap of the economic and revenue forecasts. All the tax revenue the state collects makes the bars go higher but there is a line cutting across the bars that represents the TABOR cap. Anything over that line is required to be refunded to taxpayers. 
 
The TABOR cap grows by calculating population growth plus inflation. Technically speaking, the TABOR cap is called the Ref. C cap because voters in 2005 approved a change to the TABOR cap. And if this measure passes then the new TABOR cap will be called the Prop. HH cap.
 
Referendum C allowed the state to retain and spend all revenue collected (no TABOR cap) between 2005-2010 and imposed a new (higher than otherwise) cap going forward. 
 
In recent years, economic activity has pushed us well above the current cap and has caused historic refunds. But such large general fund set-asides cause the money available in the budget to be quite tight. Thus we have been chronically underfunding education and don’t have money available to spend on property tax relief when a historic rise in home values occurs. 
 
Enter the central component of Prop. HH – make the TABOR cap grow by an additional one percent each year and take that extra money that the state would otherwise be sending out as refunds and spend it on property tax relief (backfilling local governments) and education. 
 
However, raising the TABOR cap by an additional one percent each year has the potential to wipe out some future TABOR refunds. It really depends on economic conditions though, which are the biggest driver of how much tax revenue the state collects and must refund. 
 
You might have heard of “de-Brucing.” So named because Douglas Bruce was the driving force behind getting TABOR passed. De-Brucing refers to the act of eliminating the TABOR cap – allowing that government to retain and spend all of the revenue that it is already collecting. The vast majority of counties, cities, and school districts have passed these measures. 
 
The state tried to do it in 2019 with Prop. CC but that failed. Now that state is back in 2023 with a novel way to try to essentially de-Bruce. And this has obviously stirred up the opposition. 
 
Opponents to Prop. HH have been consistently beating the drum that this measure will lead to the elimination of future TABOR refunds, which are seen by many voters as taxpayer protection. 
 
Furthermore, the money saved in property taxes could be outweighed for many voters by losses from the elimination of future TABOR refunds. Plus the many voters who are renters will not benefit from any of the property tax relief but will still see the loss in future TABOR refunds. The popularity of TABOR refunds and the overall complexity of the entire ballot measure are definitely working in the opponents’ favor. 
 
Lastly, even if Prop. HH passes, it's still not necessarily in the clear. There was a challenge to Prop. HH under the single subject rule that the Colorado Supreme Court said they would not fully consider until there is a challenge after it’s passed into law. There was even a similar proposal filed for the 2024 ballot that the Title Board recently said required substantial changes. But that legal fight only happens if Prop. HH is able to overcome the opposition and win a majority of votes, which does not look likely. 
 
Conclusion
 
For more information on these ballot measures check out the Blue Book. Additionally, check out this Prop. HH Calculation Tool to see exactly how much you potentially save in property taxes and lose in TABOR refunds. 
 
Make sure to get that ballot completed and turned in by 7pm on Tuesday, November 7! 🗳️