The Colorado Department of Education erred when it told school districts in 2007 to start reducing their mill levies — the property taxes paid by residents — and that means tax increases, albeit mostly small ones, for 127 school districts over the next 20 years. 

The Colorado Supreme Court ruled Monday on an interrogatory tied to House Bill 1164 that was submitted by Democrats in the Colorado General Assembly. The bill seeks to correct that 2007 decision, which has forced the state over time to pay a greater share of the cost of K-12 education. 

In 1988, when mill levies were first approved by the legislature as a way to finance public education, the statewide average was 47 mills, according to state Sen. Rachel Zenzinger, D-Arvada, the sponsor of HB 1164. The statewide average is now 27 mills, although many districts, especially wealthy ones, are far below that. 

Due to the CDE error, some property owners pay tax rates that are 16 times higher than those of taxpayers in neighboring school districts on properties of the same value, which forces the state to send disproportionately high state funding to the wealthiest districts, subtracting from what would otherwise be distributed to all districts, according to a statement from Senate Democrats. 

HB 1164 seeks to correct the balance between what the state pays and what school districts pay, by overturning the CDE decision and requiring school districts to come up to that average of 27 mills. That will affect 127 out of the state’s 178 school districts. Fifty-one are already at mills high enough to fully fund their school districts or have not “deBruced,” which is when districts ask voters if they can keep all of the property taxes they collect. There are only three that haven’t deBruced: D-11 in Colorado Springs, the Steamboat Springs school district and Clear Creek school district. 

The bill will direct the Department of Education to come up with a correction plan that requires districts below the 27 mills to increase by one mill per year until they reach 27. For most districts, according to Zenzinger, that correction will be completed in five years or less. But there are a few districts that are far below the 27 mills, and the bill gives up to 20 years for that correction to be made. 

Adjustments of up to one mill per year will restore mill levies to previously voter-approved levels and ensure the impact on taxpayers is reasonable and incremental, according to a fact sheet on HB 1164. 

For example, the Hanover school district in El Paso County, at 8.433 mills, will need most of that 20 years to get to 27 mills. But that doesn’t mean a huge property tax increase for residents; under the 20-year plan the state share would reduce only by $3,000 in the next fiscal year and the local share would increase by $42,536 for the entire district. That also takes into account an inflationary increase from the state.

Zenzinger said local districts could refuse to abide by the correction plan, but that comes with a big risk. The state will then stop covering the tax credit it’s been supplying over the years, and/or the district will have to ask the voters for additional taxes. 

What’s at issue with the questions submitted to the Supreme Court was whether voters would have to approve those mill levy increases. The Court said no. 

“School district voters previously approved waivers of the applicable TABOR limits [through deBrucing]; per the erroneous advice of the Colorado Department of Education, the school districts did not implement those waivers.” 

“In these circumstances, the court perceives nothing in TABOR requiring further voter approval.” 

At the heart of the dispute is a 2009 Court decision, Mesa County Board of County Commissioners v. the State. In the Mesa decision, the Court said CDE had erred in telling districts to reduce their mill levies, which was done to keep the districts under their TABOR limits. However, for the 174 districts that had already deBruced, those TABOR limits didn’t exist, based on their voters’ decisions to allow them to keep any property tax revenues they collected. 

Zenzinger said the savings to the state will start at $91.6 million and go up from there. That money, according to HB 1164, must be put back toward education, to help pay down the $572 million debt the state has owed to K-12 since the 2008-10 recession. Once that debt is paid off, Zenzinger suggested that money could be redirected to roads or healthcare or other state priorities. 

Mark Grueskin argued the case on April 23 on behalf of Senate Democrats; Daniel Burrows, representing the Public Trust Institute, argued the opposite side on behalf of House and Senate Republicans, which focused on the requirement that voters must be asked to approve those mill levy increases.

Once the court’s decision was announced, the Senate quickly passed HB 1164, which had been sitting on the calendar for more than two months, waiting for the court’s answer. The bill passed on a 23-12 vote and now heads to the governor.