The Colorado Legislature cut $621 million from K-12 education last month after COVID-19 rattled the country’s economy and stunted state tax revenue. Schools in Southwest Colorado are now scrambling to incorporate those cuts into their budgets for the next unpredictable school year, as rising COVID-19 cases threaten the reopening of schools and force both teachers and students to adapt to online learning.
The pandemic was unforeseen and likely a one-time jolt to education funding. But another force has been at play for many years, slowly ratcheting down property tax collections and creating an unsustainable formula for maintaining or growing school programs.
The Gallagher Amendment, adopted in 1982, has kept Colorado property taxes low but impeded funding for essential local services like K-12 and fire districts. The people working to repeal the amendment believe that if voters understand the issues the Gallagher Amendment causes, they would forgo their tax protections.
How Gallagher worksThe amendment limits taxes collected on residential properties to be no more than 45% of statewide property tax collections. The other 55% comes from nonresidential property, such as commercial buildings and oil and gas.
The amendment also includes a flexible residential assessment rate – the percentage of a home’s total value that is subject to property taxes. When the Gallagher Amendment was passed, the assessment rate was 21%, meaning a home worth $100,000 would pay property taxes on only $21,000. Meanwhile, nonresidential properties – the 55% part of the split – were taxed at a fixed assessment rate of 29%.
Soaring home values over the past 40 years have triggered residential tax savings to maintain the 45-55 split. As residential property values have rapidly increased in Colorado, the assessment rate has fallen from 21% to 7.15%.
This year, though home values are rising, it’s a steep drop in business values, as well as oil and gas, from the current economic downturn that’s expected to cause residential tax savings. Until now, industries like oil and gas had been preventing deeper tax cuts.
Overall, the amendment has saved Colorado homeowners $35 billion in property taxes since its passage, while leaving businesses taxed at four times the rate of homeowners.
The Gallagher Amendment affects different communities in different ways, distributing benefits and downsides unequally across the state. That’s because the amendment triggers residential property tax savings based on a statewide calculation, without consideration to what’s actually happening to homeowners or funding for services like education.
If local business is down, then there are fewer employment opportunities, and people move out of the area to where they can find work. The Durango School District is already aware of 80 students who are not returning in the fall, but the district anticipates a 200-student decline in enrollment as more parents move out of the region to find work after the economic toll of COVID-19.
When residents move out of the area, there are fewer people buying and renting, so the total value of property in the state goes down.
This year, because of the limitations on property taxes in the Gallagher Amendment, homeowners could see an 18% property tax cut. The resulting decrease in tax revenue could mean an additional $491 million in cuts to schools beyond the $621 million already cut by the state.
When the Gallagher Amendment was first adopted, local property taxes funded 60% of education, and the state general fund provided the remaining 40% of the funding for K-12 schools.
However, with decreasing property tax revenue, roles have reversed, and the state has been required to fill a growing gap in funding for schools. The state now provides 60% of funding for schools, with local property taxes providing 40% of the funding for K-12 schools.
With state spending cuts to education after COVID-19, increased property taxes could be help keep schools funded.
But in rural areas like Southwest Colorado, homeowners have benefited tremendously from the tax relief, despite increasing development in places like Durango. Those homeowners now pay among the lowest effective property tax rates in the country, but it has steadily increased the tax burden on businesses that were hit hard by the lack of tourists visiting Colorado’s national parks and ski resorts this spring.
Desperate to prevent further damage to education funding, lawmakers in Colorado, including state Rep. Barbara McLachlan, D-Durango, and Sen. Jack Tate, R-Centennial, are pushing for repeal of the amendment.
“Our property taxes will go so low, there will be no state funding to fall back on,” McLachlan said.
So McLachlan and other lawmakers voted to include a ballot measure in the November election that will ask voters if they want to repeal the Gallagher Amendment.
Colorado is generally a tax-averse state, but voters will now decide whether to repeal the amendment and, by extension, whether to allow the deep cuts to education given the significant loss in state funds. But in the middle of the economic crisis initiated by COVID-19, many taxpayers in rural Colorado might not be able to afford the tax increase that would come with repealing the amendment.
“None of us like to pay more taxes, so businesses are excited, but most people aren’t excited,” said John Wells, broker and owner of Wells Group Real Estate in Durango.
Furthermore, rent prices in Durango are increasing. If property taxes drive them up more, much of the local workforce could be lost. But services like schools, hospitals and firefighting are being cut because of the limit on local funds.
“There is no perfect answer or perfect solution,” Wells said.
A teacher turnover problemThe short-term benefits to property owners through the Gallagher Amendment, especially during the COVID-19 downturn in the economy, can harm communities in Southwest Colorado in the long run.
Michael Hansen, a senior fellow at the Brown Center on Education Policy, said there are “pretty consistent findings that budget cuts (to education) tend to disadvantage communities.”
“And places that have lower property values have a higher reliance on state support,” he said.
Teaching staff in under-resourced areas like Southwest Colorado tend to be younger and have a high turnover rate because of the low pay. In Montezuma County, teachers are quitting or moving to Durango School District 9-R at a rapid rate for higher salaries once they gain experience.
That high turnover rate is expensive for schools and bad for students, Hansen said.
The schools with the biggest need for teachers, such as those in remote Southwest Colorado, lost 10% of their workforce during the Great Recession, and it is “certainly going to happen again with COVID,” Hansen said.
According to the Colorado Department of Education, almost 9,000 teaching and school psychologist specialist positions needed to be filled during the 2018-19 school year, representing 14% of all teaching and 19% of all school psychologist positions in the state.
Of the 7,773 teaching positions, 264 remained unfilled for the school year and 933 were filled through a shortage mechanism, such as hiring long-term substitutes and retired teachers.
Of the 1,177 school psychologist positions, 103 remained unfilled for the school year and 91 were filled through a similar shortage mechanism.
This was the first survey of its kind in Colorado. But an initial survey from the Department of Education in 2017 found that 81% of urban/suburban school districts and 85% of rural districts that chose to respond received fewer applications from qualified candidates than normal.
The state estimates the shortage is felt more strongly in rural areas. Despite the need, the number of students graduating from education programs at Colorado’s colleges and universities dropped in 2016 more than 24%, down to 2,472 from 3,274 in 2011.
But many student teachers in the state aren’t paid for the hours they invest in the classroom, including lesson planning, teaching and grading, according to the Colorado Department of Education. Working a full-time job for free makes it difficult for student teachers to make ends meet, especially if they are paying college tuition. It imposes a financial barrier for students who want to become teachers in low-income rural areas.
And once they become teachers, the pay remains low. Many teachers in the Four Corners remain under constant financial stress. In the Montezuma-Cortez School District, the average teacher salary is $39,752. The Mancos School District is slightly higher at $43,473, but both salaries are falling behind the cost of living in Southwest Colorado.
As higher Durango living prices creep into smaller, more rural towns like Mancos and Cortez, pay for jobs like teaching does not increase to match it, reliant as it is on the local and state governments.
Some rural schools are pulling in substitute or volunteer teachers who aren’t trained in how to handle or work with children in a classroom.
Celeste Dunlop, a special education teacher at Florida Mesa Elementary School, said having small class sizes makes it easier to check in with individual students during remote learning. If teachers are laid off, those class sizes will grow, Hansen said.
Even Durango School District 9-R has laid off employees and frozen hiring because of the state spending cuts.
Long-term effects of spending cuts“As we spend less on education, we tend to have fewer high school graduates,” Hansen said.
Not graduating high school can affect children by making it more likely they end up in the criminal justice system, which is also disproportionately true for students of color.
Whether students graduate also can be a determining factor in whether they contribute to or are a burden on the state tax base because of unemployment, welfare and jail costs.
“There are a number of bad or negative things that happen when you divest from education,” Hansen said.
If the Gallagher Amendment is repealed, Dunlop said it would do more than allow teachers to have a livable wage.
“We could talk about mental health access. ... We could talk about providing us with more opportunities for professional development so that we can support our students here,” Dunlop said, instead of having students travel the seven hours to Denver or Colorado Springs.
“I just think about how amazing and fantastic our staff is already with this limited budget,” Dunlop said, “and if we were able to increase those opportunities, it just blows my mind in what we would be able to provide.”
For Tigo Cruz, a paraprofessional preschool teacher in Mancos helping to fill the shortage, it would also mean educators get paid a livable wage.
“I want all of us to be paid to where we can have off on the weekends, we don’t have to hold two to three jobs,” he said.
After living in a car and a camper for the past two years, Cruz said he looks forward to buying a house one day.
He wants to have a family.
And he wants to be paid enough.
So it’s “not always stressful about how I’m going to make ends meet, and that I can relax and learn to live a thriving life.”
