CO Voters Reject Education Tax Increase

CO Voters Reject Education Tax Increase
November 21, 2011

Jim Waters

Jim Waters is president of the Bluegrass Institute for Public Policy Solutions in Bowling Green,... (read full bio)

Lopsided defeats of proposed education tax hikes across the nation, including a 64-36 drubbing in Colorado, indicate a decidedly anti-tax attitude among voters as states struggle to pay for rising education costs and teacher pensions.

Colorado’s Proposition 103 would have raised the state income tax on individuals and corporations by 8 percent—from 4.63 to 5 percent of adjusted gross income—and the state sales tax from 2.9 percent to 3 percent, a 3.4 percent increase. Proponents said both increases would be used to fund public schools.

“It remains the sentiment of the country that we have to get our fiscal house in order,” said Colorado state Sen. Kent Lambert (R-Colorado Springs), one of the leading voices against Proposition 103. “People are getting a lot more savvy about these issues. Even a lot of Democrats were saying, ‘We can’t afford another tax increase.’”

Although there could be some exceptions in the coming elections, the Colorado result suggests tax increases are currently not likely to pass in most states, said Michael Barone, an American Enterprise Institute political analyst.

Voters in Douglas County also rejected tax increases aimed at instituting a teacher pay-for-performance program and a $200 million bond proposal. They reelected, by wide margins, school board candidates who had approved the nation’s first county-initiated voucher program. Two of three reform-minded Denver School Board candidates won seats, but the two union-backed school board candidates in Jefferson County also won seats. 

Tax Increase Split Democrats
The Colorado initiative was the only statewide tax on the ballot in the nation this year. Last year, voters rejected by 66 to 29 percent Initiative 1098 in Washington, which would have established that state’s first income tax.

Lambert notes “only about four Democrats out of 100 legislators showed up” when Sen. Rollie Heath, D-Boulder, “held the initial press conference to announce this money-grabbing bill. If this would have brought support within the Democratic Party, they would have been there. It didn’t, and it never did.”

Gov. John Hickenlooper (D) refused to endorse the measure, choosing instead to propose—on the same day as the Prop. 103 vote in November—a budget cutting K-12 education spending by $97 million next year.

The governor could have been avoiding the fight in order to maintain party unity, Barone said.

“Maybe he thought the tax increases were bad public policy but didn’t want to anger advocates and split his party by opposing them outright,” Barone said.

‘Flat-Out Lie’
In trying to build momentum for the tax increase, supporters claimed Colorado is one of the nation’s poorest funders of K-12 education, saying it ranks No. 49 among all states in per-pupil spending.

An analysis of Prop. 103 from the Colorado-based Independence Institute supports Lambert’s claim the ranking is “a flat-out lie.”

Colorado, which spent $11,133 per student during the 2007-08 school year, is actually “in the middle of the pack or a little ahead when making regional comparisons of per-pupil spending,” said Penn Pfiffner, a senior fellow in fiscal policy for the institute.  

Pfiffner compared that figure to surrounding states’ per-pupil spending, and found it was higher than neighboring Kansas, New Mexico, Arizona, and Utah.

“Locally, only Nebraska came in higher, at $1,164 more,” Pfiffner reported.

The National Education Association ranked Colorado No. 30 in per-pupil spending in December 2010.

Non-Segregated Money
Prop. 103 opponents also succeeded in raising doubts about the measure by questioning whether the money would actually be spent on education. Though the measure stated, “Additional revenues resulting from these increased tax rates be spent only to fund public education,” Pfiffner noted the measure “does not create a segregated, separate fund. There is no basket into which the new money figuratively will be dropped.” This meant the state legislature might spend education-designated funds on other projects.

There is historical precedent for this concern, Lambert said.

“A couple of years ago, they had Referendum C and Referendum D that they were saying was for the kids, but it wasn’t used for that,” he said. “As soon as [Prop. 103] would have passed, the legislature could have legally diverted that money to use it wherever they want.”

Program Sustainability Questioned
Critics also questioned the sustainability of new education programs the funding created, since the measure stipulated the tax increase would expire in five years.

The measure would have broken “a basic rule in public finance, [which] is that onetime money should not be used to finance ongoing programs,” noted Barry Paulson, a senior fellow with the Independence Institute.

Because the money would likely have been used to fund ongoing education programs, there would have been “tremendous pressure on the state to extend the tax increase and make it permanent,” Paulson said.

Voter Interest in Reforms
Prop. 103’s crushing defeat reflects voters’ steadfast refusal to provide new tax money to schools “without any reforms attached,” such as charter school expansion, introducing vouchers, and teacher pay-for-performance, said Victor Mitchell, a former state lawmaker and leader of Save Colorado Jobs, which opposed the measure.

“There’s been a lot of venom against charter schools from the education establishment, but charters are a key reason why our state public schools are staying up [since charters are public schools],” Lambert said in agreement. “Unfortunately, the other side is not interested in real reform and changing their practices.” 

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Jim Waters

Jim Waters is president of the Bluegrass Institute for Public Policy Solutions in Bowling Green,... (read full bio)