School districts mill levy freeze

During the 2007 legislative session, Gov. Bill Ritter proposed legislation to stabilize school district mill levies in order to address education funding and tax fairness issues. The governor’s plan would use some of the state money freed up by the mill levy stabilization to boost preschool and kindergarten programs.

The governor’s proposal addressed a growing revenue imbalance created by TABOR and the School Finance Act of 1994. The revenue limits in TABOR, repeated in the School Finance Act, force mill levies downward in school districts where property values are rising, in order to maintain a steady level of tax revenues.

Property tax is calculated by a three-piece multiplication formula:
Property value X assessment rate X mill levy = tax owed.

The legislature responded to the governor's request by including the mill levy stabilization proposal in the 2007 School Finance Bill, SB 199. After a great deal of debate, legislators passed the act with the stabilization amendment intact, and Gov. Ritter signed the bill on May 9, 2007.

The stabilization plan eliminates a provision in the School Finance Act of 1994* that codifies the property tax revenue limits and ratchet effect of TABOR. The 1994 provision drove down mill levies in school districts where property values were increasing. The 1994 provision also counteracted the 1988 legislative effort to equalize funding in school districts across the state, which set a uniform school district levy of 40 mills. Today, mill levies range from about 2 to 38 mills, with the average at 21.

(* Each year's School Finance Bill is written as an amendment to the overarching School Finance Act of 1994, which established Colorado's current method of financing K-12 public schools.)

Eliminating this provision from the 1994 act means the 175 Colorado school districts (of 178 total) where voters have already approved lifting TABOR’s revenue and spending limits will be able to maintain their present mill levies. As assessed values rise, more property tax revenues will be collected and used by these districts. This will lower their need for state education funding.