The question asked in Amendment 23 is a very simple one: should the state raise taxes 11 billion dollars?

The amendment would create a new State Education Fund. The state would be required to allocate 1/3 of 1% of the state income tax into the fund. In the year 2001, with the current income tax rate, the income tax revenue allocated to the fund will equal $313 million. Over the ten year period until the year 2010 the income tax revenue allocated to the fund will total $4.58 billion.

That money must be paid from the surplus tax revenue collected above the TABOR limit. In other words, taxpayers must forego the income tax rebate they would have received without this amendment. For example, in the year 2001, an average taxpayer would forego $113 in tax rebates.

According to the Director of the State Office of Budgeting and Planning, the Amendment would also reduce state funds available for capital construction, and deplete of the Highway Users Tax Fund, which is used for highway repair and maintenance.

Amendment 23 would require the state to increase current funding under the School Finance Act by 5% per year for the next ten years. Compared to current state school funding of $1.98 billion, funding would increase to $3.22 billion in 2010. Over the next ten years the cumulative increase in state school funding would be $6.35 billion.

The amendment would also require the state to increase state funding for Special Purpose Programs at the rate of inflation plus one percent for the next ten years. The current level of state funding for these programs is $140.5 million. If we assume an inflation rate of 3.7% per year, the annual state funding for these programs would increase to $222 million in 2010. Over the ten year period the cumulative increase in state funding for Special Purpose Programs would be $330 million.

The total fiscal impact of the amendment is $11.26 billion.

Eleven billion dollars is a lot of money, so it is not surprising that tax increase advocates do not want citizens to know the total fiscal impact of the amendment. As far as I know this article is the first analysis that has calculated this total fiscal impact.

The amendment is being touted as something that will be paid out of surplus state revenues. What happens if the economy slows down, and the surplus disappears? Then, the extra spending has to paid for out of general funds, meaning that other state programs would have to be cut. If the economy gets really bad, the Amendment allows the spending increase to be temporarily skipped.

The disadvantage of earmarking funds for education is that it removes discretion from the legislature in determining budget priorities between education and other state government programs. In short it gives the education lobby a privileged position in which they don't have to defend their spending programs along with other state agencies and interest groups through the regular budgetary process. Now, the teachers' unions don't want to be perceived as a group of privilege seekers, but that is what they are in proposing this earmarking of state funds.

A number of arguments have been used by the teachers' unions as a rationale for this amendment, but a close examination of these arguments reveals that they are flawed. The argument that Colorado public schools are underfunded does not stand up to careful empirical analysis. The Public school Finance Act of 1994 has significantly increased state funding for public education, and the share of state funds allocated to public education is projected to increase notably in future years.

The teachers' unions argue that we should shift funding for public schools from local governments to the state government. They argue that increasing state funding for schools and decreasing reliance on local property taxes, will increase the efficiency and equity of school finance.

However, there is now ample empirical evidence showing that these trends in school finance will result in less effective schools and less public support for public education.

The teachers' unions assume that throwing more money at the public schools will solve our education problem. The empirical evidence shows that throwing more state money into our public schools has not solved our education problems in the past, and there is no reason to expect that the increased spending proposed in this amendment will bring any better results.

Copyright 2000