Proposition NN: Refunds are gone for two years and the 2% is not guaranteed

By Shaina Cole | Contributing Writer, Rocky Mountain Voice

Colorado voters approved Proposition NN, which eliminates TABOR refunds for the current budget year and the next.

A single filer earning $50,000 gives up $21 in 2027 and $39 in 2028, according to Legislative Council Staff’s Blue Bookanalysis. A joint filer at $100,000 gives up $56 and then $96. At $500,000, a joint filer gives up $130 and then $352.

The measure drew 55.67 percent in the Secretary of State‘s count, last updated at 11:50 a.m. MST Thursday. The Associated Press called it at 11:23 p.m. election night.

What voters approved

Proposition NN raises the ceiling on what the state may keep. The new limit equals the current TABOR limit plus the most the state has ever spent on K-12 education from certain sources.

In the first year, that headroom is $4.6 billion. The state is not expected to collect anywhere near that. Legislative Council Staff estimates it will actually keep about $500 million.

The gap is the point. Revenue is expected to clear the old TABOR limit and stay under the new one for years, and in that range refunds go to zero rather than shrink. The Blue Book calls that the most likely scenario for the next several years, barring a recession.

The new limit continues indefinitely. Revenue is not expected to exceed it for at least five to 10 years. The analysis says the measure could cut refunds by more than $1,000 per taxpayer in some years and have no effect in others.

Where the money goes

In the current budget year, the whole retained amount goes into a new Children’s Account. Starting in 2027-28, the money first reimburses local governments for property tax exemptions for seniors, veterans with a disability and Gold Star surviving spouses, and whatever remains goes into the account.

For the first 10 years, at least half the account must go to K-12. The rest goes to programs supporting children, with preschool and child care prioritized. The legislature decides how the children’s money is spent.

After 10 years, the requirement splits differently. A flat amount stays dedicated to teacher pay, teacher retention, smaller classes and career and technical courses. Everything else may be spent on any purpose the legislature chooses.

The Blue Book puts K-12 at $241.5 million in the current budget year and $234 million the next, with the same amounts going to children’s programs. Property tax reimbursements take $206.1 million in the second year.

One line runs the other way. The measure pulls $153.1 million that would otherwise be available for the general state budget into the Children’s Account in each of those two years.

What the campaign promised and what the law says

The Yes on NN campaign told voters the measure “requires a minimum 2% annual funding increase directly to local school districts.” RMV checked that claim in September against the enrolled bill and Legislative Council Staff’s analysis.

The bill defines the increase as the lesser of a formula amount or whatever the state actually keeps above the cap. If the surplus is smaller, schools get the smaller number. The Blue Book says those amounts “are only paid if enough revenue is retained.”

The Colorado Education Association told voters the money “is limited to K-12 only and cannot be used for anything else.” Homestead reimbursements come off the top starting in the second year, children’s programs take roughly half the account, and after a decade the legislature decides the remainder.

Only the positive factor reaches districts and charter schools by formula, and it may be spent only on teacher pay, teacher retention, smaller classes and career and technical courses. The Blue Book puts that at about $110 million in the first year and $220 million in the second. The Blue Book’s own spending table adds up to about $951 million going into the account over those two years.

The measure that could shrink it

Proposition 137 has not been called. It leads 50.74 percent to 49.26 percent, a margin of 34,599 votes out of more than 2.3 million cast on the question. Only Amendment 87 is closer.

If it passes, it reduces the revenue the state collects that counts against the TABOR limit. That does not change the Proposition NN limit. It changes how much surplus exists for Proposition NN to capture.

If Proposition 137 passes, the amount the state keeps under Proposition NN “may be reduced or eliminated,” the Blue Book says.

Voters approved a mechanism whose yield depends on a measure still being counted.

The legislature that referred it

Proposition NN reached the ballot through Senate Bill 26-135, carried by Sens. Jeff Bridges and Cathy Kipp, and Reps. Jennifer Bacon and Meghan Lukens, all Democrats.

It passed the Senate 23-12, which was the chamber’s exact party split. The House passed it 42-21, where Rep. Lorena Garcia was the one Democrat voting no. No Republican appears among its prime sponsors, sponsors or co-sponsors on the bill record.

Voters approved it by better than 11 points.

The legislature now decides how the children’s programs half is spent, and how school services and disability funding are allocated. On preliminary returns as of Wednesday morning, Democrats won 49 of 65 House seats and 24 of 35 Senate seats, two-thirds of both chambers for the first time.

What the arguments were

The Blue Book’s case for the measure cites a state study finding Colorado schools face a $3.5 billion shortfall, about $4,000 per pupil, and says the measure redirects money the state already collects.

The case against calls it “essentially a tax increase, permanently eliminating or reducing TABOR refunds,” and notes that school funding rose 25 percent over five years while enrollment declined. It also says the measure “eventually hands the state over $5 billion per year at the expense of Colorado families.”

RMV reported in September that K-12 enrollment has fallen six years running, with kindergarten down 10.3 percent since 2020.

Where the count stands

Proposition NN leads 1,307,715 to 1,041,516, a margin of 266,199 votes.

AP has called six of the 14 statewide measures. Four constitutional amendments were rejected. Propositions NN and 133 were approved.

None of these results are official.