Higher education finance impacts from the 2020 election

by Henry Sobanet

Henry Sobanet headshot

Having been trained as an economist, I was always envious of the famous economists who had theories or maxims named after them. The best I’ve been able to do is expound on the famous “no free lunch” theorem and say: “The only free things in life are God’s love, gravity, and sunshine… everything else is a tradeoff.”  Rolls off the tongue, right?!

In the recent election, there were several 2020 Colorado ballot issues that demonstrate various tradeoffs very well. Our discussion today relates to those ballot issues and their impact on higher education funding or costs. Keeping in mind that the opinions of our readers are as varied as the entire state, and that people of good will can disagree, I am offering this initial take on four measures through the lens of higher education finance. And so whatever side you were on for these, we are well aware that there are costs and benefits — tradeoffs — to each.

Of the many ballot issues this year, the most impactful measures for higher education were Amendments B and 77, Proposition 116, and Proposition 118. What you see below is my best take on the likely impacts higher education will see from these measures, taking note of the abnormally high uncertainty at this moment.

The passage of Amendment B repeals the “Gallagher Amendment” from the State Constitution. It is likely that the passage of this measure indirectly benefits the CSU System financially. This happens because even as early as next year, there will be more local property taxes available for school finance and therefore reduced pressure on state sources of funds for K-12 education. Over time, as property values rise, this should remain the case, however, there could be downward adjustments to property assessment rates that reduce this indirect benefit.

Amendment 77’s success at the ballot means voters in Black Hawk, Central City, and Cripple Creek will be allowed to raise or eliminate casino betting limits and approve new casino games. Of any new revenue from these yet-to-be-enacted changes, 78% is earmarked for community colleges, the remainder shared by local governments where gaming is allowed.

Proposition 116’s passage reduces the state income tax rate to 4.55% from 4.63%. In FY 2021-22, this reduces revenue available by $154 million. The reduction applies to calendar years 2020 forward, so there will be an impact this year, too.  The Governor’s budget request had a large reserve budgeted, so we don’t think there will be a major impact if the current revenue forecast holds. Over time, however, this is a material amount of money that would otherwise support capital construction and operating help for higher education.

Proposition 118, when implemented, will create a paid family medical leave program. It is funded by an assessment on employers and employees. The assessment is equal to 0.9% of an employee’s wage and the employer must cover at least 50% of this cost, the remainder by the employees. This program begins in January 2023. There is an exemption if an existing benefit covers the same requirements as are in this new law. We have not explored whether CSU qualifies for the exemption yet; if not, this will be a new cost that may not be covered by new state dollars or allowed tuition increases.

I hope this brief summary was clear regarding these measures. I will be writing from time to time in this newsletter, so see you next time! For the record, CSU Board of Governors did not take formal positions on these measures. On my personal Facebook page, I advocated support for Amendment B and opposition to Proposition 116.

Henry Sobanet is Senior Vice Chancellor for Administration and Government Relations/Chief Financial Officer for the CSU System.

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