Backers label Proposition NN a measure to boost school funding while opponents warn that it will eliminate Taxpayer’s Bill of Rights refunds for Colorado residents. But it likely would have significant impacts to the state’s business community too.
The proposal — the only one of 14 questions on the November ballot that was referred by the Legislature rather than by citizen petition — would raise the TABOR revenue cap annually by the amount that Colorado spends on K-12 education. That would boost the cap by $4.6 billion initially — essentially ending refunds the state issues to residents when revenues exceed the cap — and generate some $450 million more by the next fiscal year for education and for programs that support children.
Proponents — which include education and fiscally progressive organizations but also unions and the Colorado Association of Home Builders — argue that education is underfunded and suffering and that Prop NN addresses that without increasing tax rates. Kevin Vick, president of the Colorado Education Association, points to studies showing Colorado pays its teachers less than any other state as compared to similarly educated professionals and said this money can raise salaries and boost retention.
“We wanted to make sure this was very specially tailored and that people could know and trust where their money was going,” Vick said in an interview, adding that Colorado’s high cost of living has contributed to high turnover among teachers, according to surveys. “Even a modest boost in salaries changes that equation, because these are people who want to stay in the system. But the economics of education are so far out of balance.”
Will new room in budget lead to increase in business fees?
Penn Pfiffner is one of the leaders with the Your Family’s Future Alliance.
If voters pass Prop NN, the newly retained revenue, estimated at $521 million for the 2027-28 fiscal year, would go first to reimburse local governments for Homestead property-tax exemptions and other property-tax reductions passed in recent years. Then it would go to direct educational costs including teacher pay, teacher retention, class-size reduction and access to career-and-technical-education courses. Finally, as much as half of what is newly retained would go to programs that support children, prioritizing childcare and full-day preschool.
While that sounds good, it glosses over several facts, say opponents, who include fiscally conservative and limited-government groups as well as some business groups like the Colorado Chamber of Commerce. It would take money out of the private sector and lead to job loss. The loss of spending limits could further hurt economic competitiveness. And with billions of dollars of new room under the state TABOR cap, it gives legislators the opportunities to impose new fees, which often are targeted at businesses.
“They would be able to say ‘Well, we can raise revenue now that there’s essentially no cap. What would be a good target to raise fees on?’” said Penn Pfiffner, a former state House member and leader with Your Family’s Future Alliance, which opposes the measure. “The answer: Probably business. So, businesses could say ‘If we pass NN, I’m just putting a big target on my company.’”
Prop NN is not the first time Colorado public officials have tried to boost education funding. Voters have rejected three income-tax measures and two revenue-retention questions over the past 15 years that would have boosted education funding. Another initiative on this November ballot, Amendment 87, would create a graduated income-tax system in which higher-earning businesses and residents pay higher tax rates and would raise education funding.
How Prop NN would work
What makes Prop NN unique, however, in the mechanism it uses. It doesn’t ask voters to let the state keep revenue above the TABOR cap so much as it resets the TABOR cap in a huge way by exempting education funding. This, in many ways, would give K-12 funding a new top priority among all state expenditures, pushing to it hundreds of millions of new dollars each year that otherwise could be going back to individual taxpayers.
Studies have estimated that the average Coloradan will lose about $7,300 over the next decade in TABOR refunds — money they won’t be able to put to their own needs, Pfiffner said. The proposal basically lifts the 34-year-old TABOR cap on state revenues that has kept government spending in check — a cap that government advocates call overly restrictive but that many business and conservative groups have appreciated as a backstop to the increasing regulatory efforts coming from the Capitol, he said.
The business-focused Common Sense Institute estimated in a report that by taking $850.9 million in refunds out of the private sector over the next two years, Prop NN could result in lost gross domestic product between $12 million and $120 million. That in turn could lead to a private-sector employment loss between 460 and 2,227 jobs and a loss of between $376 million and $473 million in personal income.
“There really is no remaining control on spending left. That’s not going to attract businesses or workers,” Pfiffner said. “When you see the environment shifting away from this being a good place to start a business and a good place to come and find a career, you’re really hurting the economy in the long run.”
Education as a business booster
Colorado Education Association President Kevin Vick speaks at a rally.
Vick and other supporters counter, however, that boosting education spending will have a positive impact on the economy long-term. And it will address several concerns that businesses now may have with the state’s education system, he added.
First, he noted, one of the four stated purposes for the new “positive factor” education spending required under the proposal is career and technical education, which will help to produce the skilled talent that employers now say is too difficult to find. Budget squeezes have compelled numerous school districts to cut such career-focused classes over the past 20 years, and this boost in funding could lead to the restart or new start of certificate programs aimed particularly at students not going directly onto four-year colleges, he suggested.
Also, at a time when site selectors and national analysts have stated that Colorado is becoming less competitive for job expansions or relocations, a boost in education funding could help to remove doubts that some companies have about the state, he said. Colorado leads the nation in the percentage of its workforce with a bachelor’s degree or greater, but it still ranks 39th in high-school graduation rate and has the third-worst gap in educational attainment by race, according to U.S. News & World Report.
“Invariably, one of the top three questions that an employer looking at coming into the state would ask is: How are the schools?” Vick said. “You would see there’s some work to do there. So, this should be a boost to employers looking to come to this state.”
Prop NN’s redirect of refunds
But with so much new room under the budget cap, employers worry that the fees that have become a larger part of the state budget could increase in ways they may not be anticipating. State agencies have used increases in fees on pollution emitters to pay for monitoring and inspection programs, and they’ve used fees on businesses impacting lakes and streams to fund clean-water regulatory programs.
Prop NN also cuts most of the required allocation to schools from the increased cap after 10 years, allowing legislators to put the money wherever in the general-fund budget they would like as long as the positive factor is funded to the level of the previous year.
Asked whether keeping potential TABOR refunds could hurt the same families who rely on public schools to educate their children, Vick said that those families repeatedly have shown their priority for funding education in raising local mill levies over the years. Some studies have argued that Colorado is $4 billion short of funding its education needs adequately, and he believes that voters understand that spending money this way equates to benefitting them and the state economy.
“Huge tax increases” or education-funding boost?
“You’re not just trimming at the edges at this point on funding. You have gaps that you can’t fill,” he said. “I think people understand how far behind we are on education funding.”
Yet the CSI report argued that test scores have fallen at all grade levels since 2013 despite the fact that real school-district spending per pupil has risen by 21%, leaving questions about whether more spending really improves the education system. And Pfiffner noted that the number of students in Colorado schools is declining even as proponents call for greater funding — while there is an acknowledged increasing affordability crisis faced by the very residents who are being asked to give up their TABOR refunds.
“That’s 700 dollars per year that taxpayers will lose — the same amount as the 750-dollar check Governor (Jared) Polis sent out as a TABOR refund some years ago during Covid,” Pfiffner said. “Hundreds and hundreds of dollars every year per taxpayer? What they’re saying they’re selling is just not worth having these huge tax increases