The biggest partisan fight of the Colorado legislative session may have been avoided with the revelation that there appears to be enough state revenue to fund a senior property-tax break and partially restore cuts to education. The news that the Senior Homestead Exemption could be funded in the 2012-13 budget year, which starts in July, was good news to both parties and decreased tensions at the Capitol.
Staff told the Joint Budget Committee (JBC) that they are now projected an additional $199.8 million in the 2012-13 budget year in addition to the $98.6 million needed to fully restore the senior tax break. Based on those latest numbers, the JBC voted to restore $57 million in cuts to K-12 education in 2012-13 to bring the level of per-pupil funding even with the current year. The restoration, though, does not increase funding for inflation or restore deep cuts from previous years. The panel also proposed, but did not approve, restoring $29 million in cuts to higher education, which would keep funding levels even with the current year without accounting for inflation or restoring prior-year cuts.
The Senior Homestead Exemption exempts fifty percent of the first $200,000 of a home’s assessed value. To get the benefit, a senior must be 65 years or older and have lived in his or her home for the past 10 years. Colorado must reimburse counties for the property-tax loss they see as a result of the tax break, a sum that costs the State about $100 million annually. Critics of the tax break note that there is no means test for it, meaning rich and poor seniors alike get it, but those who have sold their homes within the past 10 years to downsize don’t get it, regardless of how long they have lived in Colorado.
Though voters approved the tax break in 2000, the amendment also allows the legislature to zero out the tax break if they like, which lawmakers have done in all but four years since it was passed. Gov. Hickenlooper had first proposed that the tax break be suspended once again in the 2012-13 fiscal year. However, after last week’s revenue forecast showed state revenues up, Hickenlooper proposed a means-tested approach that would target the poorest seniors first. Henry Sobanet, the Governor’s budget director, said, “Our position that low-income seniors should be prioritized first as money returns has not changed.”