Transcript What is the Gallagher Amendment? The Gallagher Amendment

This information is being provided to staff through one on one
meetings with each school and to the parent groups for each
of those schools. The attempt is explain some Colorado State
Constitutional Amendments and the impact they are having
on State Revenue collections and in turn on the funding
allocations to school districts, Englewood Schools in
particular.
As always, if you ever have any questions, please contact
Jon Kvale at the Englewood Schools Finance Office at 303806-2014 or [email protected]
School Finance and Education Reform Timeline
1982 – Voters approve Gallagher Amendment
1992 – Voters approve TABOR
1994 – School Finance Act Introduced
2000 – Voters approve Amendment 23
2005 – Voters approve Referendum C
2007 – Mill Levy Stabilization
2009-10 – Budget Stabilization / Negative Factor Implemented
What is the Gallagher Amendment?
The Gallagher Amendment, passed in 1992, was designed to maintain a
constant ratio between the property tax revenue that comes from
residential property and from business property (45% to 55%). To simplify
a set of complex formulas, the effect of Gallagher was to reduce the
assessment rate (the percent of property value that is subject to taxation)
whenever statewide total residential property values increased faster
than business property values. As a result of the Gallagher Amendment,
the assessment rate for residential property has declined by more than
two-thirds over the years because of Colorado’s population growth and
because the increases in residential real estate values. The net effect
has been marked decline in revenues collected from property tax, which
prior to Gallagher, provided the majority of school funding.
RECAP OF RESIDENTIAL ASSESSMENT RATES
Years Rate enacted into law Rate calculated by RAR Study
1983-1986
1987
1988
1989-90
1991-92
1993-94
1995-96
1997-98
1999-2000
2001-02
2003-04
2005-06
2007-08
2009-10
2011-12
2013-14
21.00%
18.00%
16.00%
15.00%
14.34%
12.86%
10.36%
9.74%
9.74%
9.15%
7.96%
7.96%
7.96%
7.96%
7.96%
7.96%
9.83%
8.17%
8.19%
8.85%
8.77%
9.13%
What is TABOR?
TABOR is the Taxpayer Bill of Rights, passed in 1992. TABOR prohibits
any tax increase without a vote of the people. In addition, TABOR places
strict limits on how much revenue the state can keep. Any revenue
collected in excess of TABOR’s revenue limits must be refunded to the
taxpayers. During the 1990’s, the strict limits prevented the State from
increasing per pupil funding even to the level of increased inflation. As a
response, Amendment 23 was passed in 2000.
The post-9/11 recession of 2001-2003 intensified the need to address the
restrictions of TABOR. TABOR’s so-called “ratchet effect”, which lock in
TABOR’s revenue limits at their lowest point, prevented the state from
restoring cut services when the economy improved. To address this
restriction, a bipartisan group put forth Referendum C which the voters
approved in 2005.
What is Amendment 23?
Amendment 23 was a constitutional change approved by the voters in
2000. Amendment 23 requires K-12 spending to increase by inflation
plus 1% through 2011 and by inflation only after that. This was in
response to funding in the 1990’s that did not keep pace with inflation. It
also requires funding for specific “categorical programs” such as special
education and transportation to increase by inflation.
Amendment 23 mandates that “base” per pupil funding increase each
year by the rate of inflation. Base funding is then adjusted by factors,
such as district size, local cost-of-living and number of at-risk students, to
get to the per pupil revenue funding by district.
What is Referendum C?
Referendum C, approved by voters in 2005, allows the state to retain and
spend money from existing revenue sources above the TABOR limit each
year beginning in 2005-06 for five years, ending in 2009-10. After this
“five-year timeout period”, Referendum C allows the state to retain and
spend all excess revenue up to a “cap”, which is equal to the highest
total state revenue for a fiscal year during the timeout period adjusted by
inflation plus population growth for each subsequent year. Revenue
collected above this “cap” will be refunded to taxpayers.
What is the Mill Levy Stabilization?
In 2007, the legislature enacted a stabilization plan to correct a flaw in
the 1994 School Finance Act. If a school district’s revenue exceeded its
TABOR limit the district had to reduce its mill rate unless the district “debruced” – a vote of the district’s public to allow it to retain revenues in
excess of its TABOR limit (175 of Colorado’s 178 districts did just that).
Unfortunately, the 1994 School Finance Act had a provision that ignored
all those 175 local decisions. In effect, the Act required those districts to
continue to cut their Mill Levies in direct conflict of the voters in those
districts. The result was an ever-increasing portion of the state budget
was being spent on school finance, leaving fewer dollars available for
other critical state programs.
The Mill Levy Stabilization froze the local mill levies at their current level
as of 2007. In many districts, this frozen level was as much as 50% lower
than where they were when voters voted to “de-bruce”.
Englewood Schools Program Mills
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
58.160
33.759
37.704
41.548
41.397
43.754
43.754
44.761
44.761
41.156
35.713
35.556
32.883
32.305
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
24.800
24.800
24.776
24.467
22.412
21.895
21.895
21.895
21.895
21.895
21.895
21.895
21.895
21.895
Property Tax Collections
Description
Market Value of a $100,000 Residence
in Arapahoe County
Calendar Year 1994 Calendar Year 2014
$
Times the Residential Assessment Rate
Equals the Assessed Value
12.86%
$
Times the School District Program Mill Levy
Equals Property Taxes applicable to the
School Finance Act funding formula
100,000.00 $
12,860.00 $
44.761
$
575.63 $
100,000.00
7.96%
7,960.00
21.895
174.28
What is the Negative Factor?
In 2009 the legislature reinterpreted Amendment 23 to mean that only the
“base” amount was covered by the mandatory increases, not the factors.
Thus they added a new factor called the “negative” factor.
In order to make across-the-board cuts from all districts, the legislature added
a “negative factor” to the School Finance Act formula. In effect, the legislature
now decides how much it wants to spend on school finance and then adjusts
the negative factor to meet the funding target. The legislature did not make
cuts by simply scaling back the current factors, instead the cuts are made by
calculating what is required under Amendment 23 and then cutting each
district’s per pupil amount by the percent necessary to get to the desired
funding target.
Englewood Schools Negative Factor
Questions???
Is the Negative Factor unconstitutional, is it contrary to what voters
approved in Amendment 23? Dwyer v State will determine this issue.
Is TABOR unconstitutional?
Why is TABOR enforced but Amendment 23 is not, nor is Gallagher?
Is a statewide tax increase the only solution to solve the problem?
What can the District Do…
The District has about $1.8M to its cap for an override Mill.
Englewood Schools Audited Numbers
2009-2010
Inflation
BASE Per Pupil Funding
+ Personnel Cost Factor
+ Cost of Living Factor
+ Non-Personnel Cost Factor
+ Size Factor
Adjusted Per Pupil Funding
* Funded Pupil Count
Formula Funding
+ At-Risk Funding
TOTAL FORMULA FUNDING
Total Formula Per Pupil Funding
2012-2013
3.90%
$
$
$
$
$
$
5,507.68
0.8676
1.241
0.1324
1.0409
6,931.65
3,203.60
22,206,249
1,363,145
23,569,394
7,357.15
2013-2014
3.70%
$
$
$
$
$
$
5,843.26
0.8658
1.242
0.1342
1.0458
7,391.26
2,839.90
20,990,426
1,494,761
22,485,187
7,917.60
1.90%
$
$
$
$
$
$
5,954.28
0.8653
1.242
0.1347
1.0471
7,540.29
2,747.50
20,716,959
1,505,794
22,222,753
8,088.35
- Negative Factor
TOTAL PROGRAM FUNDING
Per Pupil Funding After Negative
Factor
$ (543,906)
$ 23,025,488
$ (3,624,462) $ (3,434,418)
$ 18,860,725 $ 18,788,336
$
$
Local Share
State Share
$ 9,952,760
$ 13,072,728
7,187.37
6,641.34
$ 9,517,698
$ 9,343,027
$
6,838.33
$ 9,542,089
$ 9,246,247
Englewood Schools Audited Numbers
Beginning Fund Balance
Total Revenues
Total Expenditures
2011-2012
2012-2013
2013-2014
$ 12,187,714
$ 13,042,380
$ 12,705,709
$ 25,601,073 $ 26,177,152 $ 26,278,433
$ (24,746,407) $ (26,513,823) $ (28,554,035)
Ending Fund Balance
$ 13,042,380
$ 12,705,709
$ 10,430,106
TABOR Reserve (3%)
Board Reserve (12%)
Remainder is amount
available to cover
expenses in future years
$
$
$
$
$
$
768,032
3,072,129
$ 9,202,219
$ 13,042,380
785,315
3,141,258
$ 8,779,136
$ 12,705,709
788,353
3,153,412
$ 6,488,341
$ 10,430,106
Assumptions
2014-2015
- Enrollment adjusted for October 2014 Count and then kept flat
October 2014 Count added 48 students
(5 from 5-yr averaging and 43 from additional CPP & ECARE slots)
- Negative Factor adjusted from 13.15% to 12.7%
2015-2016
- Following Assumptions in Governor's November Proposed Budget
Increase Base Funding by Inflation 2.8%
Fund for growth in students and at-risk students
Buy down of Negative Factor by $200M
(Negative Factor goes from 12.7% to 9.7%)
- PERA will increase to 19.15% in January 2016 from 18.35%
2016-2017 / 2017-2018
- Formula Funding increases by inflation - 2%
- Negative Factor returns to approximately 12.5% (could potentially go higher)
- No change in Salary or Benefits
- No increase in staffing
- PERA increase to 19.65% in January of 2017 from 19.15%
- PERA increase to 20.15% in January of 2018 from 19.65%
2014-15
Estimate
2015-16
Green Budget
Beginning Fund Balance
10,430,108
7,524,047
Property Tax
Specific Ownership Tax
State Equalization
Total Program Funding
8,896,523
633,737
10,333,701
19,863,960
8,896,523
613,641
10,874,261
20,384,425
Other Local
Other State
Total Revenue
5,275,555
2,401,106
27,540,621
5,295,651
2,733,911
28,413,987
Salaries
Benefits
Operating
Transfers Out
Budget Cuts
Total Expenses
-18,333,814
-5,241,958
-5,297,948
-1,572,962
0
-30,446,682
-18,350,285
-5,488,940
-4,859,505
-1,346,763
1,631,506
-28,413,987
-2,906,061
0
Change in Fund Balance
Ending Fund Balance
7,524,047
TABOR 3%
Board 12%
Unrestricted
779,030
3,116,119
3,628,898
29%
7,524,047
28%
14%
812,017
3,248,067
3,463,963
13%
Englewood Schools
2014-15
Estimate
2015-16
2016-17
Green Budget
2017-18
Beginning Fund Balance
10,430,108
7,524,047
7,524,047
7,524,047
Total Revenue
27,540,621
28,413,987
27,994,313
28,325,757
Total Expenses
-30,446,682
-28,413,987
-27,994,313
-28,325,757
Change in Fund Balance
-2,906,061
0
0
0
Ending Fund Balance
7,524,047
29%
779,030
3,116,119
3,628,898
14%
7,524,047
28%
812,017
3,248,067
3,463,963
13%
7,524,047
28%
798,995
3,195,981
3,529,071
13%
7,524,047
28%
808,499
3,233,995
3,481,553
13%
TABOR 3%
Board 12%
Unrestricted
2014-15
Estimate
2015-16
Yellow Budget
Beginning Fund Balance
10,430,108
7,524,047
Property Tax
Specific Ownership Tax
State Equalization
Total Program Funding
8,896,523
633,737
10,333,701
19,863,960
8,896,523
613,641
10,874,261
20,384,425
Other Local
Other State
Total Revenue
5,275,555
2,401,106
27,540,621
5,295,651
2,733,911
28,413,987
Salaries
Benefits
Operating
Transfers Out
Budget Cuts
Total Expenses
-18,333,814
-5,241,958
-5,297,948
-1,572,962
0
-30,446,682
-18,350,285
-5,488,940
-4,859,505
-1,346,763
0
-30,045,493
-2,906,061
-1,631,506
Change in Fund Balance
Ending Fund Balance
7,524,047
TABOR 3%
Board 12%
Unrestricted
779,030
3,116,119
3,628,898
29%
5,892,541
22%
14%
812,017
3,248,067
1,832,457
7%
Englewood Schools
2014-15
Estimate
2015-16
2016-17
Yellow Budget
2017-18
Beginning Fund Balance
10,430,108
7,524,047
5,892,541
3,682,648
Total Revenue
27,540,621
28,413,987
27,994,313
28,325,757
Total Expenses
-30,446,682
-30,045,493
-30,204,206
-30,340,327
Change in Fund Balance
-2,906,061
-1,631,506
-2,209,893
-2,014,570
Ending Fund Balance
7,524,047
29%
779,030
3,116,119
3,628,898
14%
5,892,541
22%
812,017
3,248,067
1,832,457
7%
3,682,648
14%
798,995
3,195,981
-312,328
-1%
1,668,078
6%
808,499
3,233,995
-2,374,416
-9%
TABOR 3%
Board 12%
Unrestricted
2014-15
Estimate
2015-16
Red Budget
Beginning Fund Balance
10,430,108
7,524,047
Property Tax
Specific Ownership Tax
State Equalization
Total Program Funding
8,896,523
633,737
10,333,701
19,863,960
8,896,523
613,641
10,874,261
20,384,425
Other Local
Other State
Total Revenue
5,275,555
2,401,106
27,540,621
5,295,651
2,733,911
28,413,987
Salaries
Benefits
Operating
Transfers Out
Budget Cuts
Total Expenses
-18,333,814
-5,241,958
-5,297,948
-1,572,962
0
-30,446,682
-18,864,093
-5,642,630
-4,995,571
-1,384,472
0
-30,886,767
-2,906,061
-2,472,780
Change in Fund Balance
Ending Fund Balance
7,524,047
TABOR 3%
Board 12%
Unrestricted
779,030
3,116,119
3,628,898
2.8%
29%
5,051,267
19%
14%
810,885
3,243,542
996,840
4%
Englewood Schools
2014-15
Estimate
2015-16
7,524,047
2016-17 2017-18
Red Budget
Beginning Fund Balance
10,430,108
5,051,267
2,237,290
Total Revenue
27,540,621
28,413,987 27,994,313 28,325,757
Total Expenses
-30,446,682
-30,886,767 -30,808,290 -30,947,134 2.8% 2.0% 2.0%
Change in Fund Balance
-2,906,061
-2,472,780
-2,813,977
-2,621,377
Ending Fund Balance
7,524,047
29%
779,030
3,116,119
3,628,898
14%
5,051,267
19%
810,885
3,243,542
996,840
4%
2,237,290
8%
797,465
3,189,858
-1,750,033
-7%
-384,086
-1%
806,561
3,226,242
-4,416,889
-16%
TABOR 3%
Board 12%
Unrestricted
Questions?