Friends and neighbors,
When I logged on this morning to start writing this email, I was disturbed to find out I had failed to hit “send” on the previous email I had written on November 12th announcing the special session and the cancellation of the November 18th town hall. So I apologize that this is the first email I’m sending you about the special session that concluded on Monday.
Here’s the short version.
The Governor called us into a special session to do everything we could to put dollars in pockets this coming spring when people would start facing higher property tax bills due to home value growth. We succeeded, passing a very meaningful package of legislation.
Here’s the long version.
In the election that concluded on November 7th, voters soundly rejected Proposition HH which would have cut next year’s property tax increases in half for the average homeowner while ensuring school districts, fire departments, and child welfare offices received “backfill” funding from the state to help make up for their lost property tax revenues. The state would have been able to afford this by changing the way we calculate the annual TABOR cap, allowing the state to retain an additional 1% of tax revenue every year that otherwise would have been refunded to taxpayers.
While I supported HH, I also understand why voters did not. It was incredibly complicated and controversial, pairing multiple ideas that had varying support across the political spectrum. Some voted no because they were worried that property tax reductions would inevitably harm our schools, Some voted no because they didn’t want to see a reduction in future TABOR refunds. Some voted no because local governments were not getting enough backfill funding.
Among the many lessons I learned is this one: keep it simple.
Another is that we need to grapple with the tough question of who needs a property tax cut, and who does not. For my part, I believe there are many in our state who are not struggling to pay their taxes, but I also believe there are many low and middle income Coloradans and small businesses who do need help keeping up with these costs.
Yet another is that it doesn’t make sense for the state to be making these decisions on behalf of the local governments who already have the authority to lower their property taxes, either temporarily or permanently, if their judgment is that they can afford to take in less revenue.
These were the thoughts going through my head when I joined a small group of legislative leaders in meeting with Governor Polis on the morning of November 8th to discuss the possibility of a special session.
As you know, the legislature’s annual regular session runs from January to May. But the Governor also has the authority to call us into a special session to tackle urgent issues that arise from time to time.
The urgent issue this time was that any changes to the income tax system would need to be made by December 1st, and any changes to the property tax system would need to give our county assessors and treasurers enough time to complete their work before sending out property tax bills in early January.
To hit those targets, the legislature would need to complete its work before Thanksgiving. After discussing the possibility with members of the Democratic caucuses and Republican leaders, we set a start date of November 17th. That gave us all of eight days to get ready.
The Governor gets to outline the scope of what kind of legislation is be permitted in a special session, and I’m grateful that he gave us broad flexibility to address numerous aspects of economic security from high property taxes to high rents to food insecurity. He also asked us to build a structure for a longer-term conversation about longer-term solutions.
After numerous meetings with local governments, education groups, fiscal policy organizations, and caucus members, as well as attempted negotiations with Republican leadership, we came up with a package of legislation. And it was quite a balancing act.
On the main property tax reduction bill, the Republicans wanted huge cuts to be paid for by cutting into the state’s reserve. Democratic leaders thought that was irresponsible, because it’s taken some time to build up that reserve and we’re going to need it next time there’s a recession. But their biggest request was that we not use any of the TABOR surplus to pay for property tax cuts.
We decided to move to the middle, and agreed to this request. As such, we were left with only $200M with which to backfill revenue losses for our public schools, fire departments, and other local governments. That meant that the property tax cuts had to be smaller than those in Prop HH.
The good news is that all of our local governments have the ability to pick up where we left off. In some cases, they may keep their mill levies high because they’ve been saving up for a new firetruck or pay raises for their employees. But in other cases, I have heard from many local governments who say they intend to reduce their mill levies, which will deliver additional property tax cuts to both homeowners and businesses.
In order to make sure the state was doing its part, we complemented the property tax reduction legislation with several policies to focus supports on low-to-middle-income Colorado families, including:
- Doubling the state earned income tax credit (EITC), which targets dollars to working families. The table below shows the federal tax credits, and the state credits will now be 50% of these amounts next year (compared to 25% last year):
- Flattening the distribution of TABOR refunds. Under current law, the highest-income taxpayers would get refunds three times as large as the lowest-income taxpayers. Because of our legislation, everyone gets $800. Simple.
- Investing $30M in rental assistance programs.
- Investing $3M of state dollars to draw $3M of federal dollars to pay for summer meals for low-income kids.
- Funding a new staff member in the Treasurer’s office to process applications for the property tax deferral program. This is a critical backstop that helps those most in need defer a chunk of unpaid property tax bills to become a lien on their property that will be paid off at the time of sale.
- And for the longer-term, we established a commission with numerous local government voices to meet in January and build toward a consensus for a more sustainable solution.
You may not be able to tell from just reading this outline, but this is a big, huge deal. This means hundreds of dollars (and in many cases, thousands) in the pockets of the folks who are struggling most right now to keep up with the high cost of living.
And I couldn’t be more proud of the work we all did together to make it happen.
There is more work ahead. Local governments need to take the lead on property taxes moving forward, and the state must continue to work on the fairness of our income and sales tax systems. Did you know that, despite the “flat” income tax, lower-income Coloradans pay a higher share of their income in taxes than higher-income Coloradans? That’s not fair, and it contributes to our broken system in which the rich get richer while the poor get poorer, no matter how hard they work.
And at the very same time, we’re still underfunding our K-12 and higher education systems, our behavioral health system, and many other state services that Colorado families depend on.
But we’re making progress. While I have less than a year remaining as your State Representative, I intend to spend every minute of it working as hard as I can to make life better for the people of House District 30 and for all of Colorado.
Chris deGruy Kennedy