The preschool to high school (PK-12) education system in Colorado would benefit from a major restructuring of its governance and finance. I've provide my proposal first, and then review the status quo for those not already familiar with it.
My Proposal
1. Finance PK-12 education entirely from state revenue with the increased state revenue demand financed with an income tax increase. This would require an increase from a 4.5% state income tax to a 6.53% state income tax.
2. Eliminate all property tax and car tax funding of schools. This would reduce real property taxes, business personal property taxes, and motor vehicle property taxes by an average of approximately 60% across the board statewide, although the reduction would vary by school district and by locality within school districts. Districts will low property tax rates due to large property tax bases per student would receive the least benefit.
3. The State of Colorado would guaranty all school district municipal bonds to which property tax revenues had previously been pledged.
4. Replace the elected state school board with a school board appointed by the Governor with approval from the state senate, with staggered terms. (While we are at it we should do the same thing in the case of the CU-Regents, which are also elected statewide on a partisan basis.) This would reduce the number of statewide elected officers per voter by four.
5. Replace existing school board elections for the general public, with internal elections conducted on a one enrolled student, one vote basis, in which parents or guardians vote as proxies on behalf of their children of less than high school age (the vote for a student with two parents would be split in half, one for each parent), and high school students would vote for themselves. A single transferrable vote system would be used (and would be more feasible given the smaller number of voters involved). In Denver this would reduce the number of school board posts per voter to vote upon per election cycle by three. A set of rules and processes related to school district campaigns would be developed to fit this new kind of election.
6. Future bond issues would have to have the support of the same people who vote for school board (so that major capital projects get parent-student approval), but could only be made if the Colorado Department of Revenue certifies that the school district will have enough revenue to service the bonds for their term and agrees to guaranty those bonds.
7. End all state and local elections in odd numbered years, outside home rule cities or cities and counties that can make their own rules.
Why?
* It resolves inter-district school funding level and tax burden disparities in a fair way.
* It provides a stable funding base for education that is appropriate to what it funds.
* It makes Colorado's state and local tax system less regressive.
* This is a boon to lower income property owners and vehicle owners, and tends to make housing more affordable.
* It eliminates conflicts between state government and local government in school finance.
* It is basically neutral in terms of tax administration costs since the process of collecting property taxes and the process of collecting income taxes would remain largely unchanged with only the amounts due changing.
* School boards make decisions on how to spend school funds (they don't have the power to raise funds with taxes without state legislature or voter approval), which are only salient to students and people not related to students shouldn't have a say in that matter. But, it gives a say to non-citizen parents and parents of students from outside the district who make school choice decisions to attend there.
* Frequently, the combination of the different voter base for school boards, and the use of a single transferrable vote system, would provide a voter base that would appropriately reflect the greater diversity of children enrolled in schools in an area than the local community as a whole.
* Giving high school students a vote in real school board elections is an excellent way to build habits of good civic participation, and high school students are old and wise enough to participate in making these decisions.
* It substantially reduces the burden imposed on voters by eliminating elections for the general public in odd numbered years.
* It substantially reduces the burden imposed on voters by ending general public elections for local school boards, the state school board, and local bond and mill levy issues that impose a significant burden on voters to investigate and vote upon. It would reduce the number of candidate races per four year election cycle per voter by seven and would also reduce the number of ballot issues each voter would have to evaluate.
* Elections for Governor, the State House, the State Senate, and state TABOR voters would provide an adequate protection to taxpayers in the general public and adequate general public supervision of the educational process, in a manner with a similar political lean.
* While this is a substantial overhaul, it wouldn't require federal legislation or changes in federal appropriations. This is a major improvement in public policy that could be achieved despite gridlock on most policy issues at the federal level.
* It isn't likely to result in meaningful positive or negative externalities outside of Colorado, something that is a major consideration for high education financing reforms where interstate travel by students is common.
Background: The Complex Status Quo In Colorado
PK-12 Governance
Currently, the state is divided into school districts that provide PK-12 education that are governed by school boards elected in odd numbered years by all registered voters in the district. These voters also vote on requests from school boards for property tax funding and in order to authorize significant debt financing of capital expenditures with municipal bonds to which property tax revenues and other revenues of the district are financed.
Neighboring school districts may established Boards of Cooperative Education, which are joint ventures of two or more neighboring school districts to cooperate to provide services such as vocational schools or special education services that smaller school districts could provide more efficiently with the economies of scale provided by a joint venture. These BOCES, as they are called, are governed by officials selected by representatives of the member school districts and are financed with funds from the member school districts' funds.
Some PK-12 education policy issues, other than school finance, are handled by an elected state school board. For example, the state school board sets statewide curricular standards, approves certain charter or voucher school applications, and can intervene to place school districts that are in crisis in a receivership type status.
School Choice
The default rule is that students in a public school district are assigned to attend the school appropriate to their grade in the system in their neighborhood with each elementary school, middle school, and high school having its own territory within the district. Many schools have multiple programs that have distinct student bodies for most classes and different curricula and teachers, while sharing things like sports teams, school dances, and cafeterias, and students in those schools, on a space available or applicable basis, can be placed in one of these programs at a neighborhood school.
But, students can attend a school outside their assigned territory within the school district is there is more than one school at their grade level using a school choice system, and a system of statewide school choice exists to allow students who reside in one school district to attend a school in another school district. To utilize the school choice system, one applies to attend a neighborhood school outside your own neighborhood to the extent that there is space available there. Sometimes one can apply more specifically a special program in a school of choice.
Also, the school system has authorized "charter schools" and "voucher schools" which are public schools with almost no district level supervision that don't have an assigned neighbor and admit students who choose them based upon applications and the choice system rules.
PK-12 Finance
School boards are financed through a combination of local property tax collections and from state funds appropriate from the state general fund budget that is raised predominantly from state income and state sales taxes.
State PK-12 funds are distributed to school districts based upon a formula established by the state legislature which begins with a per enrolled student dollar amounts, with adjustments for certain higher need enrolled students, and is further adjusted at the aggregate level based upon the property tax revenues that the district raises. The mix of PK-12 funding in the Denver Public Schools (from here) is fairly typical:
In fiscal year 2017-2018, in the Denver Public Schools, total expenditures per K-12 student were $11,476.
Property taxes to finance the operations (mill levies) and municipal bond payments (redemption mills) for the local school district typically make up a majority of the property tax burden. There is a certain baseline mill levy rate that a school district can impose without voter approval. There is also a maximum amount of property taxes that the state allows a school district to impose. Voter approved property taxes above the minimum amount are called mill levy overrides and the extent to which local taxpayers approve them varies considerably.
Because some school districts have a larger property tax based per student than others, the amount of money raised by a given mill levy varies. Some school districts can generate more tax revenue than they need from a low mill levy, while others generate very little tax revenue even from a maximum level mill levy. Schools with less property tax revenue generating capacity (generally rural farming based areas, areas heavily impacted by tax exempt government property, and low income urban areas) receive more state funding than schools with more capacity to fund themselves with property taxes (such as ski resort towns). For this reason the state funding component of PK-12 funding to school districts in Colorado is called a "state equalization payment."
Specifically, as a March 3, 2020 article from the Colorado Sun explains:
Currently, Colorado sends about $453 million in state funds to districts where school property tax rates are below the level needed to fully fund themselves, or below 27 mills. . . .
Colorado’s history of inequitable school funding was set in motion in 1988, when property tax rates were all over the place, similar to how they are today. . . .
The legislature aimed to establish a consistent level of investment in schools through a uniform tax rate, mandating all districts levy the number of mills at which they would be fully funded, or at most 40 mills. That would have resulted in local communities covering half of the funding needed for K-12 education with the other half contributed by the state. . . .
By 1991, all districts had reached 40 mills or the number that would enable them to be fully funded with local property tax revenues. But in 1992, Colorado voters passed the Taxpayer’s Bill of Rights, which capped the amount of revenue the state government and local governments could generate and spend. In K-12 education, that cap was dictated by growth in inflation and student enrollment. . . .
That posed a problem for school districts in communities where the assessed value of properties was rising rapidly, causing them to generate revenue amounts above their constitutional limit.
The solution: decrease property tax rates.
In some communities, particularly those experiencing an oil and gas boom, property values soared, causing property tax rates to plummet, [for example in] Primero RE-2 School District in rural Las Animas County. That district’s property tax rate dropped from 40 mills in 1993 to 1.68 mills in 2006.
Some districts in Weld County also cut their property taxes and mill levies and are fully funded because of oil and gas values. Those districts include Pawnee School District Re-12, Prairie School District and Platte Valley School District RE7.
In 2007, after property tax rates had continued to fall, the legislature stepped in and froze the rates to keep them from ratcheting down. At that point, some districts were approaching 0 mills. . . .
That legislative decision, she said, also froze inequities in place with no way for districts to resolve them and no incentive to change because they can count on the state to backfill budget gaps.
The resulting system has been an unbalanced one in which wealthier school districts are in many cases receiving state funding at the expense of districts in lower-income communities, and the state’s role in funding public education has become increasingly outsized.
The scales have tipped so far that the state is now providing 61% of education funding while local communities cover the remaining 39%, according to figures provided by the Colorado Children’s Campaign.
State funding per student varies greatly in across Colorado's 178 school districts:
Rural districts receive large upward adjustments in per pupil funding, despite their low cost of living due to the diseconomies of scale associated with having small schools with low enrollments, and because their property tax base is anemic.
School districts typically own the buildings and facilities used to provide education in their district which are funded with municipal bonds that are repaid with voter approved bond redemption millage. Sometimes, school districts made their buildings available to charter schools or voucher schools in their district which rent the spaces from their budgets.A lot has changed since October 24, 2005 (including the state income tax rate) when I summarized state and local finance in Colorado, but some of the broad outlines remain the same: A single comprehensive solution can solve the problems above to a great extent.
Colorado currently collects the following amounts of taxes:
State Income Tax-------$3,972M at a 4.63% flat rate.
State Sales Tax--------$1,849M at a 2.9% rate.
Local Sales Taxes------$1,862M at an average 2.95% rate.
School Property Taxes--$2,048M
Other Property Taxes---$1,366M
About 25% of Colorado's aggregate property valuation is business property now assigned to bear 55% of the total property tax burden. About 75% of Colorado's aggregate property valuation is reisdential property assigned to bear 45% of the total property tax burden.
The gas tax currently brings in about $900 million a year, with no funds currently being contributed for transporation spending from general revenues, but the Department of Transportation needs $1.4 billion a year to maintain state roads in a way that will match growing expenses and traffic.
As of 2019-2020, state K-12 education spending was $4,405.2 million of general fund money and $1,780.7 million of other state funds. The total state general fund revenues are $12,641.4 million, of which $8,387.6 million comes from state income taxes (net of diversions to the state education fund which funds K-12 education outside the general fund).