Democrats applaud ruling on tax freeze

The Colorado Supreme Court on Monday upheld a controversial property tax freeze enacted in 2007 to raise $1 billion for Colorado schools.

The measure, which bitterly divided Democrats and Republicans, has been tied up in court since it was signed into law by Democratic Gov. Bill Ritter in 2007.

Without the freeze, mill levy rates in many districts would have declined over the years.

The bill increases state revenue by approximately $1 billion over a six-year period by locking in those rates.

A Denver District Court judge ruled last year that the tax freeze was unconstitutional because it violated the Taxpayer's Bill of Rights, or TABOR, an amendment to the state constitution that requires any tax increase to be approved by popular vote.

But the high court overturned the ruling on a 6-1 vote. The justices said that because state taxes don't technically increase under the mill levy freeze, a vote of the people isn't required.

Reactions to the ruling were split, predictably, along party lines.

"The real winners today are Colorado's children, families and schools," Ritter said. "We took up this fight two years ago because it was the right thing to do for the right reasons: We were leading Colorado forward by removing an obstacle that hurt students, families and this state's future."

Colorado Attorney General John Suthers, a Republican, slammed Ritter and the Democrats and said the issue should have gone to the voters under TABOR, because its purpose is to increase tax revenue.

"Given the court's history with the Taxpayer's Bill of Rights, I am not surprised by the decision, but I am nonetheless disappointed," Suthers said. "I remain convinced that the Colorado Constitution dictates that the voters decide when their taxes should be increased."

Senate Minority Leader Josh Penry, R-Grand Junction, blasted the court as Democratic "loyalists," and said the decision was an obviously partisan one.

"(TABOR) is on life support and the principle of fiscal restraint is in full retreat," Penry said. "Unfortunately for citizens, this property tax hike comes at the worst possible time - the moment when many Coloradans are struggling just to keep their homes."

Because mill levy rates decline as property values increase, the rates had slowly been ratcheting down over the years as the real estate market boomed. The 2007 School Finance Act, which included the mill levy freeze, changed that and directed more income from the mill levies into school district coffers.

For districts with mill levies under 27 mills, the law froze them where they were when it was enacted. For districts with high mill levy rates but low property values, the new law lowered rates to 27 mills and froze them there.

The state has had to funnel cash to local districts based on their property tax income or lack thereof, so they can meet a certain funding threshold. The mill levy freeze allows the state to hang onto that money, because school districts will now collect their own, and means the Legislature can use the savings for other programs.

"Before this, the state had to put more money into schools," said Rep. Jack Pommer, D-Boulder, who co-sponsored the mill levy freeze in 2007 and sits on the Joint Budget Committee. "Now that we don't have to do that every year, that money can be used on anything. We could increase Medicaid or lower higher education tuition."

TABOR author Douglas Bruce, of Colorado Springs, called the freeze "massive theft."

Democrats argued that in passing the bill, they were following the will of the voters because 174 of Colorado's 178 school districts had voted to "de-bruce," meaning they could keep excess revenue over the limit imposed by the 1994 School Finance Act and TABOR. Bruce called the assertion "absurd" and said there's no precedent for a state enacting a law approved at the local level.

Ritter said that without the freeze, the Legislature would have been forced to make even deeper cuts in education this year than the tens of millions slashed in the 2008-09 budget.

In El Paso County, the mill levy freeze has resulted in higher property taxes in four of its 14 school districts: Calhan, Lewis-Palmer, Peyton and Ellicott. Mill levy rates in the other 10 districts went down because they had been above 27 mills.