Opposing Prop HH, Colorado Republicans say budget ‘prioritization’ can pay for property tax cut

Colorado Republican lawmakers on Wednesday renewed their calls for a special session at the Capitol to focus on property tax reduction as they work in opposition to a Democratic-backed measure on November’s ballot.

Colorado voters will decide on Election Day whether to pass Proposition HH, which would reduce the state’s property tax rate over ten years to try and curb rapidly rising taxes tied to increasing home values in the state. To pay for the reduction, the proposition would let the state retain more revenue than currently allowed under the cap set by the Taxpayer’s Bill of Rights. Instead of going back to taxpayers, some of the surplus money would be redirected to school districts and local governments.

Instead, Republicans want to reduce taxes through legislation without affecting that revenue cap and the TABOR refund checks tied to it.

The Republicans’ proposed tax rate reduction bill would potentially lower residential property tax rates to 6.7% after a $50,000 home value deduction. That is the same rate cut proposed by Proposition HH, but Republicans said that number would be a “starting point” for a discussion with local governments for the lowest assessment rate they could handle.

“Our goal is to work with our partners in government to talk about how far they can go down and what they can tolerate and still provide the services that they need to provide within their local government taxing entity. And how far can we as a state go down and still be able to fund education?” Sen. Barbara Kirkmeyer, a Weld County Republican, said in a press conference at the Capitol on Wednesday.

GOP lawmakers argue that local governments were left out of the Proposition HH conversation. The Colorado Municipal League, Colorado Counties Inc. and the Special District Association of Colorado are opposed to the measure.

Republicans said their plan would use General Fund money to backfill local governments — most partially, but some completely — for the reduction in property tax revenue.

“I’m confident we would have the funds to do that,” Kirkmeyer said. “Our reserves actually came in higher (than 15%) at the end of the year. We don’t have a revenue issue, we have a prioritization issue.”

The Legislature is required to keep a 15% reserve in the state budget to mitigate any impact from a revenue decline. For the most recent fiscal year, the Office of the State Controller estimated that there was a 17.6% reserve.

The state used general fund money for part of the backfill for a 2022 property tax reduction, including $200 million for public schools and any additional backfill needed after the state uses $240 million in TABOR surplus money.

Proposition HH allows for general funds to be used to backfill local governments for the first two years.

Republicans also proposed two other bills for a special session. One would make the senior homestead exemption portable, which is a provision also in Proposition HH. The exemption currently allows seniors to exempt 50% of their home’s value from property taxes, up to $100,000. The Republican plan would double the exemption to a potential $200,000. That would continue to be paid for using TABOR surplus as a refund mechanism.

Additionally, Republicans want to permanently reduce the state’s income tax rate from 4.4% to 4%, paying for it using the TABOR surplus.

Republicans said they plan to introduce the legislation next year if no special session is called. To pass any of it, they will need major support from Democrats.

A special session can be called by Gov. Jared Polis, a Democrat, or by two-thirds of the Legislature, where Democrats currently enjoy large majorities in both the House and Senate. The last special session was in 2020, when Polis asked lawmakers to respond to the economic impacts of the COVID-19 pandemic.

“This was a very political event. This was not about their alternative legislation,” state Rep. Chris deGruy Kennedy, a Lakewood Democrat who sponsored the bill to put Proposition HH on the ballot, said of the Republicans’ press conference. “The timing of this is obvious — they are trying to create a narrative so people can vote no on Prop HH thinking there is something better out there. I’m not sure there is. (Prop HH) is probably the biggest property tax cut that we can muster in a reasonable way where we can pay the backfill.”

He said it is “worth questioning” whether there is enough money in the general fund to backfill a property tax rate reduction.

“There are going to be rises and falls we need to grapple with. I don’t know for sure that three years from now that we have a surplus. The economy changes day by day,” he said.

Voters have until Nov. 7 to return their ballots to county election officials.