Colorado Legislative Council Staff



TABOR Refund Impact

 State General Fund Revenue and Expenditure Impact

Local Revenue and Expenditure Impact

Drafting Number:

Prime Sponsor(s):

LLS 98-543

Sen. Lamborn


Bill Status:

Fiscal Analyst:

February 6, 1998

Senate Finance

Steve Tammeus (866-2756)



Summary of Legislation


FY 2003/04

FY 2004/05

State Revenues

General Fund - State Income Tax

Other Fund



State Expenditures

General Fund - School Finance Act

Other Fund



FTE Position Change



Local Government ImpactSchool finance property taxes would decrease by an estimated $457.7 million, while nonschool property taxes would be $412.5 million lower.

* one-half year impact based on a total income tax revenue estimate of $30.8 million for tax year 2004.

            This bill exempts all personal property from property taxation effective January 1, 2003. If approved by the General Assembly, the provisions of the bill will be placed on the 1998 General Election ballot.

            The bill will become effective upon voter approval at that election. Therefore, this bill is assessed as having a conditional state and local government fiscal impact.

State Revenues

            Property taxes are deductible for business taxpayers as a business expense on state income tax returns, and for individual taxpayers who itemize deductions. The reduction of property taxes will increase the taxable incomes, and subsequent state (and federal) income tax liabilities, of those business taxpayers benefitting from a property tax exemption and those residential taxpayers benefitting from a reduction in the residential assessment rate.

            Due to the provisions of this bill, Legislative Council Staff estimates state income tax revenue to the General Fund would increase by an estimated $15.4 million in FY 2004-05 (one-half year impact based on a total income tax revenue estimate of $30.8 million for tax year 2004). Similarly, the total taxpayers’ federal income tax liability would increase by an estimated $173.3 million for tax year 2004.

TABOR Refund Impact

            Section 20 of Article X of the Colorado Constitution, limits the maximum annual percentage increase in state fiscal year spending. Once total state revenue from all sources that are not specifically excluded from fiscal year spending exceeds these limits for the fiscal year, the state constitution requires that the excess shall be refunded in the next fiscal year unless voters approve a revenue change as an offset. Based on the current Legislative Council economic forecast, it is projected that the state will be in a TABOR refund position during each of the next five fiscal years. Any increase or decrease in state revenue from changes in fees, fines, licenses, or other revenue sources will affect the amount of the state revenue to be refunded.

State Expenditures

            School Finance Act. The bill is anticipated to reduce the property tax collections of all local governments, including school districts. However, because state aid for school districts is computed as the difference between total program cost and the amount collected from property taxes, additional state aid may be required through the School Finance Act to provide sufficient revenue to offset the reduction of property tax revenues available to school districts.

            Property taxes for schools are estimated to decrease by $457.7 million in FY 2003-04. The School Finance Act requires the state to make up for any reduced operating budget property tax revenue. Therefore, per the provisions of this bill starting in FY 2003-04, the state may be required to reimburse (General Fund) lost property tax revenues to school districts.

Local Government Impact

            All local governments that levy an operating budget property tax will be affected by the reduction in business personal property assessed values. School districts will be reimbursed for lost property tax revenues for operating purposes through the School Finance Act.

            Additionally, the residential assessment rate will be affected because the assessed value of business personal property will be reduced, thus further impacting all local governments. Under current law, the residential assessment rate is projected to be 9.29 percent in 2003. Under the bill with the exemption of business personal property, the residential assessment rate would decline to 6.51 percent in 2003.

            Nonresidential assessed values would decline by an estimated $7.701 billion in 2003, while residential assessed values would decline by an estimated $6.984 billion. Due to the reduction in assessed values, property taxes of all local governments would decline by an estimated $870.2 million in FY 2003-04. School finance property taxes would decrease by an estimated $457.7 million, while nonschool property taxes would be $412.5 million lower.

Spending Authority

            This fiscal note would imply that no new state appropriations or spending authority would be required for FY 1998-99.

Departments Contacted

            Local Affairs              Legislative Council Staff