Colorado Legislative Council Staff

STATE and LOCAL

CONDITIONAL FISCAL NOTE

TABOR Refund Impact

State General Fund Revenue and Expenditure Impact

State Cash Fund Revenue and Expenditure Impact

School District Revenue Impact

TITLE:            CONCERNING THE RETENTION OF STATE REVENUES IN EXCESS OF THE CONSTITUTIONAL LIMITATION ON STATE FISCAL YEAR SPENDING FOR THE PURPOSE OF REDUCING LOCAL SCHOOL DISTRICT PROPERTY TAX LEVIES.

Summary of Legislation

             *Beginning with the 2000 income tax year, state individual income tax General fund revenue would be increased due to projected reductions in residential property taxes for those taxpayers who itemize. Similarly, corporate income tax revenue would increase due to overall decreases in business property tax liability.

            This bill would submit a question to the registered electors of the State of Colorado at the next General Election in November 1998 to annually transfer from the state General Fund to the School District Mill Levy Reduction Fund an amount equal to the lesser of the excess revenues for the preceding fiscal year or $280 million. Excess revenues for FY 1997-98 would be transferred to the School District Mill Levy Reduction Fund on January 31, 1999. Transfers would be made annually after that on November 1 beginning with the FY 1998-99 transfer on November 1, 1999. Transfers would not be deemed to be an appropriation subject to the General Fund appropriaiton limitations of Section 24-75-201.1, C.R.S.

            Beginning with FY 1999-00 and each fiscal year thereafter, the General Assembly would annually appropriate moneys to the Department of Education for the purpose of providing a proportionate mill levy reduction in the following property tax year for all school districts in the state.

            The bill would take effect following proclamation by the Governor of the vote of the registered electors at the 1998 General Election. Since the bill is conditional upon voter approval, the bill is assessed as having conditional state and local fiscal impact.

State Revenues

             Beginning with the 2000 income tax year, state individual income tax General Fund revenue would be increased due to projected reductions in residential property taxes for those taxpayers who itemize. Similarly, corporate income tax revenue would increase due to overall decreases in business property tax liability. The increase beginning with the 2000 income tax is projected to be $9,795,610 annually. The impact for FY 2000-01 would be $4,897,805, representing a six-month impact.

            Property taxes on producing mines and oil and gas properties will be reduced as well. The reduced property taxes paid will increase the amount of severance taxes due on these properties.

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

            The bill would authorize the General Assembly to annually transfer an amount equal to the lesser of the excess revenues for the preceding fiscal year or $280 million from the General Fund to the School District Mill Levy Reduction Fund. Moneys in the fund would be available in the following year (a two year lag from the fiscal year in which the money was excess revenue) for the purpose of reducing school district mill levies. For example, the excess revenue from FY 1997-98 would be transferred to the School District Mill Levy Reduction Fund in FY 1998-99. These moneys would be reflected in a mill levy reduction for property taxes due in calendar year 2000. Projected TABOR excess revenues based on the Colorado Legislative Council staff December 1997 economic forecast for FY 1997-98 through FY 2002-03 is identified in Table 1. below.

Table 1. Projected TABOR Excess Revenue

FY 1997-98 through FY 2002-03 (in millions of dollars)

Election Expenditure Impacts (For Informational Purposes Only)

            A General Fund line-item in the 1998-99 Long Appropriations Bill will fund the costs of publicizing any initiative or referendum proposal in newspapers and for printing and distribution of the Blue Book to all electors. The General Assembly spent $291,267 GF for one state-wide ballot proposal on the November, 1995 ballot and $1,042,014 GF for the 12 proposals that appeared on the November, 1996 ballot.

            The 1996 General Election fixed costs for mailing the Blue Book to 1.35 million registered voters was $174,036 for postage and $3,800 for obtaining mailing addresses. These costs will be the same regardless of the number of issues on the ballot. Variable costs included: Spanish translation of $11,215; newspaper publication of $644,828; printing costs of $206,806; and other costs of $1,328. Total costs were $1,042,014 GF. Fixed costs totaled $177,837 and variable costs were $72,015 per ballot issue.

            Based on the costs incurred for the 1996 Blue Book, one ballot issue cost $249,852 to print and mail to the public. The $72,015 of incremental cost would be added for each issue to the basic mailing costs of $177,837.

School District Impact

            School district property taxes would be annually reduced by the lesser of the state’s excess revenues or $280 million per year beginning in 2000. This property tax reduction would be made up through payments made directly to the treasurer of each school district by the Department of Education. Table 2. identifies the total amount of the property tax reduction and the percentage reduction in school district operating mill levies.

Table 2. Property Tax Reduction and

School District Mill Levy Percentage Reduction

2000 through 2004 (in millions of dollars)

                               *The assessed value shown is for the year prior to the mill levy

                                   reduction.

Spending Authority

            The bill specifies that on January 31, 1999, the State Treasurer shall transfer from the General Fund an amount equal to the excess revenues for the 1997-98 fiscal year or $280 million, whichever is less. The fiscal note would imply that no additional appropriations or spending authority are required in FY 1998-99 to implement the provisions of the bill.

Departments Contacted

            Legislative Council