Guest opinion: Gallagher puts undue burden on local governments
Since being elected to the Colorado House of Representatives in 2014, I have become acutely aware of the adverse impacts that our state’s constitutional budget mandates create for our local governments.
Taken as individual concepts, there is much to like about what voters have prioritized as the framework for our state’s fiscal affairs — our voters have the direct ability to let their voices be heard on important taxing decisions. However, when these measures are taken as a whole, our constitution is a labyrinth of conflicting directives which are driving poor fiscal decisions at the state level due to unintended consequences.
The 1982 Gallagher Amendment is one such mandate that I believe it is time to re-examine. The Gallagher Amendment was a property tax formula set into the Colorado Constitution using the ratio representing the 1982 split in statewide property values between commercial and residential properties, which accounted for 55 percent and 45 percent, respectively.
The amendment also fixed the property assessment rate for commercial property at 29 percent. This means that as values on residential property have increased over the last 35 years, especially across the Front Range, the statewide residential property assessment rate has been forced to drop from 21 percent to 7.2 percent, in order to maintain the statewide property value ratio.
In practical terms, this means that local governments that rely on property tax as a primary source of funding have experienced lower revenues despite the fact that property values on all classes have increased over 35 years, and residential property values now account for approximately 75 percent of the state’s total property value.
In 1982, local school districts received 60 percent of funding from property tax and 40 percent from the state. Due to the ratcheting-down effect of Gallagher, these numbers have flipped, and the state now provides 60 percent of K-12 funding. Other local governments including counties and fire districts that rely on property taxes have also seen large drops in revenue each time the residential property tax rate is adjusted downward.
The Colorado Mountain College taxing district is a prime example of the problems that Gallagher’s downward drive on assessment rates creates. This year’s residential assessment rate decrease dropped the college’s budget by $2.7 million. In response, the CMC Board of Trustees is asking its taxing district voters for the authority to maintain current funding levels by collecting the same amount of revenue prior to any future Gallagher-driven downward adjustments on residential property rates. In effect, this would offer the board the chance to freeze its residential property tax revenue at current levels, avoiding a significant loss of future revenue. (More information on Measure 4B can found at http://www.yeson4b.org.)
This measure is needed and is a genuine attempt by the CMC board to address a budget problem created by our state constitutional directives, while following the requirements of TABOR and Gallagher. I hope that CMC Ballot Measure 4B is successful and spurs the needed statewide conversation that drives a broader solution to keep our local governments funded and a fair tax assessment for commercial and property owners.
Dan Thurlow is a former business owner and a Republican representing House District 55, which includes Mesa County.