HB 19-1257, PROPOSITION CC

Voter Approval to Retain Revenue for Education & Transportation

Pending Voter approval Nov. 5, 2019

HB 19-1257, Proposition CC, allows the state to retain all revenue collected in excess of the state TABOR limit and to spend this revenue for public schools, higher education, and transportation projects. HB 19-1257 eliminates future TABOR refund obligations. The elimination of partial refundability of the tax credit is estimated to increase state income tax revenue in future years by $3.0 million per tax year. Per approved HB 19-1258 (signed into law on June 3, 2019 by the Governor), the retained funds will be designated as part of the general fund exempt account. The General Assembly must appropriate 1/3 of the funds to public schools and 1/3 of the funds to higher education. The state treasurer must transfer 1/3 of the funds for transportation. HB 19-1258 further defines how funds may be used by the public schools and the Highway User Tax Fund (HUFT).

Effective Date:

If HB 19-1257 is approved, the state will begin to retain revenues in FY 2019-20.

Defined Use:

Use of funds retained are dictated by approved law HB 19-1258. The General Assembly must appropriate 1/3 of the funds to public schools and 1/3 to higher education.

Public Schools:

Must be distributed on a per pupil basis,

May only be used for non-recurring expense for the purpose of improving the classroom,

May not be used as part of a district reserve

Specific spending decisions will be made by schoolboards

The state treasurer is required to transfer the remaining 1/3 of the money to the highway users tax fund (HUTF).

60% to the state highway fund,

22% to counties,

18% to cities and incorporated towns.

No more than 85% of the money allocated to the state highway fund may be expended for highway purposes or highway-related capital improvements, At least 15% must be expended for transit purposes or for transit-related capital improvements.

Fiscal Impact: HB 19-1257 will impact the following:

State Revenue,

State Expenditure,

State Transfer,

TABOR Refund*

Reporting: Reporting requirements are dictated by approved law HB 19-1258. The Office of the State Controller in the Department of Personnel and Administration is required to report annually on the amount of retained revenue, and the Office of the State Auditor in the Legislative Branch is required to audit these reports. This reporting can be accomplished within existing reporting requirements.

Assumptions: According to the Legislative Council Staff (LCS) economic forecast, March 2019, the state is not expected to collect a TABOR surplus in either FY 2019-20 or FY 2020-21. A forecast of state revenue subject to TABOR is not available for years beyond FY 2020-21. Therefore, HB 19-2157 is not expected to increase state expenditures in FYs 2020-22

* TABOR: Article X, Section 20, of the Colorado Constitution (TABOR) limits annual growth in state fiscal year spending, the amount of collected revenue that the state may retain and spend or save each year. Revenue is subject to this TABOR limit unless it satisfies a constitutional exception. The largest exceptions are:

Federal funds,

Revenue collected by enterprises,

Revenue changes approved by voters.

The TABOR limit is set each year according to inflation, population growth, and voter-approved revenue changes. Under Referendum C, a voter-approved revenue change, the TABOR limit equals the amount of revenue collected in FY 2007-08, grown each year by inflation plus population growth. Revenue collected in excess of the TABOR limit (Referendum C cap) is refunded to taxpayers in the following fiscal year. If approved, HB 19-1257 will be another voter approved revenue change (Proposition CC). Additional background information on the TABOR revenue limit is available at http://leg.colorado.gov/sites/default/files/the_tabor_revenue_limit.pdf