When Gov. John Hickenloopers budget office learned that the states general fund will come in roughly $300 million under budget for this fiscal year, there was much reason to celebrate. After all, it was the first bit of good financial news lawmakers had heard in several years. But instead of turning first to the difficult question of what funding gaps can now be partially filled, legislators are making a tax exemption for seniors their priority. That is the wrong move.
The homestead exemption allows qualifying seniors to reduce their property tax bill by 50 percent for the first $200,000 of their homes value a break that costs the state $100 million to backfill the lost revenues that counties and school districts would face without the funding. For the past three years, the exemption has been suspended as state revenues have been crunched during the recession. Republican lawmakers have been pushing hard since 2011 to restore the exemption, and while that is a worthy long-term goal, it should not be the top budgetary priority. However, that is exactly where the Colorado Legislature appears to have ranked the exemption.
The $300 million in unallocated revenue is hardly a windfall. For perspective, the states general fund is $7.3 billion, and everything it funds has taken significant cuts in the years since the recession began. The first thing lawmakers should be doing is finding ways to restore those cuts, not ensure that they continue. Instead, lawmakers this week announced that the property tax exemption is the first order of business for the unexpected revenue, with the distribution of the remaining $200 million to be determined as the Joint Budget Committee finishes its work on the budget for consideration by the full legislature. That order of operations is exactly backwards.
Democrats, most notably Gov. Hickenlooper, appear to be suffering from an abundance of timidity or a dearth of leadership on how to allocate the unanticipated revenue. The cuts to K-12 and higher education have firmly cemented Colorados place at or near the bottom of the nations funding ranking for these essential services, and lawmakers have said that healing those financial wounds is a priority. To look first to tax exemptions and for seniors, the most reliable of voting blocs suggests that lawmakers are first committed to securing the favor of an important component of their constituency, rather than addressing a very real funding problem.
Last week, when the overage was anticipated to be just $200 million, Gov. Hickenlooper made vague comments about the property tax exemption being something to consider but not first, and not for all seniors. Those caveats seem to have disappeared with the revised estimates.
It is easy to imagine the political calculus that pushed the property tax exemptions to the top of the list of what to do with the extra revenue. After all, the climate at the state and national levels is still one skeptical of government spending of any kind to say nothing of the taxes that pay for that spending. What is less easy to picture is the conviction it would have required to shepherd through a measured and responsive use of the full $300 million to restore needed funding to cash-starved state programs. It is disappointing that the tax exemption leapt to the front of the line; it is, however, not surprising.
