What is the “mill stabilization plan” that Governor Ritter proposed and the legislature passed in 2007?
The short answer: SB07-199, proposed by the Governor and passed by the Legislature fixed a 1994 state school finance law that had the effect of automatically cutting local school property taxes (“mill levies”), even though local communities in most school districts had rejected such mill levy reductions by voting to allow the district to retain all revenues above the TABOR limit collected by those districts. The plan stopped the decade-long erosion of local financial support for public schools, and freed up state funds for education and other priorities.
The longer answer: In 2007, the legislature enacted a plan (S.B. 199) proposed by Governor Ritter to correct a flaw in the 1994 School Finance Act that has had the effect of slashing local support for public schools for well over a decade—despite votes in 175 out of 178 school districts to prevent exactly those cuts. The story starts with TABOR, which places strict limits on the amount of revenue a school district can keep. If a school district’s revenue exceeds its TABOR limit (perhaps as a result of rapid population growth or property values), the school district has to reduce its “mill rate” (i.e., the rate at which property is taxed), unless district residents vote to allow the district to retain all revenues above the TABOR limit (Such votes are known as “de-brucing”). In 175 of Colorado’s 178 school districts, the voters did vote to allow the district to keep all the revenue they raised under the mill rates at that time in order to maintain local support for their schools. Unfortunately, the 1994 School Finance Act had a provision that ignored and reversed all 175 local elections to “de-Bruce.” In effect, the Act “re-Bruced” those districts, requiring them to cut their mill rates in direct contradiction of the people’s will. That is, even though the people in 175 school districts asked to maintain local support, the state’s School Finance Act took away their right to do so. This School Finance Act flaw has had drastic and lasting effects:
- The state had to spend literally hundreds of millions of dollars just to replace the loss of the local share of school funding. As a result, although an ever-increasing portion of the state budget was being spent on school finance before passage of SB 199 (leaving fewer dollars available for other critical state programs), schools had little to show for it. The additional state funds were only replacing lost local dollars, and the schools didn’t even tread water.
- According to analysis done by Augenblick, Palaich and Associates, Colorado has lost $3.1 billion annually in local property tax relief since 1994 (if our property tax rate were the same rate as 1994 levels).
Governor Ritter’s plan simply gave effect—finally—to the will of voters who sought to freeze their mill rates several years ago. Notably, the stabilization of local mill levies only froze rates at their current levels—which, in many cases, were as much as 50% lower than they were when citizens voted to freeze them. As noted above, the mill rates in a number of districts actually dropped, under SB199.
For example, in Park County School District, mill levy rates are half of what they were in 1996.
After being challenged in a 2008 lawsuit, the Colorado Supreme Court ruled in March of 2009 that the mill levy stabilization legislation was constitutional, rejecting arguments that SB07-199 violated TABOR. The Court ruled that the 170+ local “de-brucing” elections satisfied TABOR’s requirement that tax increases be approved by the voters, and no statewide vote was required to freeze the mills as was accomplished by SB07-199.