DENVER – Colorado Gov. John Hickenlooper wants the state Legislature to cut a property tax exemption for senior homeowners and to increase the state special sales tax on marijuana for the upcoming fiscal year in order to bridge a state budget gap that hits K-12 education the hardest.
The request, made by the governor and the Office of State Planning and Budgeting and submitted Tuesday to the Joint Budget Committee, seeks to address a projected $106.2 million shortfall in the budget first submitted last November.
That shortfall was created because of the Gallagher Amendment, which was enacted in the early 1980s in order to keep residential and non-residential property tax revenues in check with one another and leaves more of the burden on non-residential property owners.
But forecasts from the Division of Property Taxation have estimated that the residential assessment rate will fall by 17.6 percent in the next fiscal year, and the OSPB estimates the reduced property taxes will cost the budget about $135.1 million, which is earmarked mostly for K-12 education statewide.
To address the shortfall and to keep the state’s “negative factor” for education finance in check, the governor wants the Legislature to cut the Senior Homestead Exemption, which is a property tax break for Coloradans aged 65+ who have lived in a home for at least 10 years, in half for the next fiscal year, to $68.1 million.
That means people who qualify would be able to claim the exemption on the first $100,000 in value on their homes, rather than the typical first $200,000.
Secondly, the governor and the OSPB wants to increase the special state sales tax on recreational marijuana to 12 percent, which the office says would generate approximately $41.9 million in order to keep the "negative factor" in check when combined with the new funds made by halving the Senior Homestead Exemption.
The current special sales tax sits at 10 percent, but is set to fall to 8 percent on July 1 should the Legislature not pass the requested changes.
The extra funds from the marijuana tax would all be dedicated to K-12 education financing, the OPSB says.
But its director noted that the state constitution creates a quandary that has now left the budget committee with choices to make.
“One part of the Constitution lowers property taxes for schools and shifts the burden to the State, and another part of the Constitution says the K-12 school budget has to grow. This is a prime example of why we call our budget rules a ‘fiscal thicket,’” said OSPB director Henry Sobanet in a news release.
Hickenlooper noted in his State of the State address last week that the Legislature would have to tackle the education funding rules.
For the full list of proposed budget amendments sent to the JBC by the OSPB and governor, click here.