Colorado Supreme Court Holds Local School District Funding Does Not Violate the Taxpayer Bill of Rights

By Benjamin Figa

In Mesa County Board of County Commissioners v. State, the Colorado Supreme Court recently addressed the applicability of the Taxpayer Bill of Rights (TABOR) with regard to school funding.  TABOR is a state constitutional amendment (Article X) that limits the amount of tax revenue the state can collect in a given year.  If revenues exceed the limits, the taxing entity must refund the excess money to taxpayers or seek voter permission to retain the surplus.

In 2007, the Colorado legislature amended the Public School Finance Act to allow local school districts to waive TABOR’s revenue limits.  SB 07-199.  This legislation shifted approximately $117.8 million in funding from the state to local districts.  By 2007, 174 of the state’s 178 districts approved ballot issues waiving TABOR’s revenue limits, but no statewide election had taken place.

The state trial court declared SB 07-199 unconstitutional under the standard that TABOR’s preferred interpretation “shall reasonably restrain most the growth of government.”  Thus, the electorate of the entire State of Colorado needed to approve this legislation.

According to the Colorado Supreme Court, the trial court did not have the benefit of the 2008 decision Barber v. Ritter, which held that a statute must be proven to be unconstitutional beyond a reasonable doubt to be invalid under TABOR.  196 P.3d 238 (Colo. 2008).

In evaluating the legislation under Barber standard, the plaintiffs made three arguments that SB 07-119 was unconstitutional: (1) the legislation was “a tax policy change directly causing a net tax revenue gain to any district;” (2) the local school district waiver elections were invalid because of generic ballot language; and (3) the legislation was an “other limit on district revenue, spending and debt [that] may be weakened only by voter approval” under subsection 1 of TABOR.

The Colorado Supreme Court found each of these arguments unpersuasive.  In a 6-1 decision, the Mesa Court upheld the constitutionality of SB 07-199.

In response to the first argument, the Court interpreted “tax policy change” to not include “policy modifications that have a de minimis impact on a district’s revenues.”  Characterizing the waiver elections as a revenue change—rather than a tax increase—no second election approving the funds was needed under TABOR.

Secondly, the Court reasoned the language on the ballot was not invalid simply because it was broad.  No specific ballot language was required.  Furthermore, extrinsic evidence that voters did not understand ballot language was irrelevant, as “outside evidence cannot contradict and override the text of the ballot question.”

Responding to Plaintiff’s third argument, the Court reasoned that the School Finance Act did not reference the “other limit” in subsection 1 of TABOR.  Rather, it referred to subsection 7(c) of TABOR and to hold otherwise would create unnecessary redundancy.

Justice Eid dissented because she thought SB 07-199 required voter approval.  She wrote, “SB 07-199 is a ‘tax policy change directly causing a net tax revenue gain to any district,’ under article X, section 20(4)(a) – plain and simple.”  She read the language of section 4(a) of TABOR more broadly than the majority: “the language requires the ‘distric[t] [here, the state] must have voter approval in advance for . . . a tax policy change [here, the $117 million] to any district [here, the local school districts].”  Thus, in Justice Eid’s opinion, the bill was unconstitutional.

The Mesa decision is highly controversial from a political standpoint.  Many conservatives believe that the decision reaffirms Democratic attempts in recent years to dismantle TABOR one piece at time.  Democrats, on the other hand, praised the decision for stabilizing the state’s education fund.