For the second year in a row, Gov. Jared Polis on Thursday called lawmakers into a special legislative session to cut property taxes.
Only this time, lawmakers won’t reconvene just out of concern over rising property taxes; it’s also out of fear that without a special session, voters might enact tax cuts so deep that they decimate state and local budgets.
“It’s really a win-win, if we can save homeowners money and small businesses money on their property taxes and make sure that we’re not going to devastate our schools and other local entities,” Polis said in an interview with The Colorado Sun ahead of the announcement.
The session will start Aug. 26, and would have to last at least three days in order to send a bill to the governor’s desk to be signed into law.
In exchange for a modest package of additional tax cuts and stronger limits on property tax growth, conservative groups said they would pull two measures off the November ballot — Initiatives 108 and 50 — that have created panic among state and local government officials, developers and bond investors over their wide-reaching impacts.
Initiative 50, which would amend the state constitution, might be the more consequential of the two. It would limit property tax revenue growth to 4% statewide, with no flexibility for local governments or their voters to opt out without a statewide referendum.
Initiative 108 would cut property taxes for homeowners and businesses by an estimated $2.4 billion. That’s the equivalent of 15% of the $15.5 billion that schools and local governments collected this year. The state would be on the hook to reimburse schools and local governments for much of the revenue lost to the cuts.
Polis said to preserve the agreement, he won’t sign any bills passed during the special session until Initiatives 50 and 108 are pulled from the November ballot.
Legal interpretations vary on how much the state government would have to pay if the measures passed. But state budget officials say the measures could create a budget crisis on par with an economic recession, mandating deep cuts to essential public services like K-12, higher education and Medicaid.
The proponents of the measures — Colorado Concern, an alliance of state business executives, and Advance Colorado, a conservative political nonprofit — have argued those concerns are overblown. A spokesperson for their campaign declined to comment Thursday.
Business groups insist the property tax relief passed by the Legislature in recent years hasn’t gone far enough to serve as a true replacement for the Gallagher Amendment, the tax-limiting constitutional provision that voters repealed in 2020.
Even after the Legislature passed a round of cuts in last year’s special session, property tax revenue still went up 21% statewide in the 2023 tax year, according to the Colorado Department of Local Affairs.
Under a proposed deal presented to the state’s Property Tax Commission on Monday, the Legislature would cut taxes by an additional $255 million next year, for taxes owed in 2026. That’s on top of $1 billion in tax cuts the Legislature approved at the end of its regular legislative session, which ended in May.
The Legislature would also put a new cap on school districts, limiting their property tax growth to 12% over a two-year period.
In exchange, lawmakers have demanded that the groups provide assurance that they won’t bring back similar ballot measures in the next 10 years.
Lawmakers are racing against the clock to get the deal finalized before a Sept. 6 deadline to remove initiatives from the November ballot. The Colorado Secretary of State’s Office has to certify the ballot by Sept. 9, as ballots must be mailed to military and overseas voters by Sept. 21.
The special session will be the third under Polis since he was sworn into office in 2019.
The deal was negotiated behind closed doors in recent weeks among the governor’s office, Advance Colorado’s Michael Fields, and Republican and Democratic lawmakers. A special session seemed unthinkable until all the sides restarted negotiations that flamed out during the regular legislative session, which ended in May.
The talks started up again after lawmakers and the conservative groups behind the ballot measures presented to the Colorado Forum in recent weeks. The forum is a decades-old public policy panel made up of state business and civic leaders that takes positions on pressing issues. Forum President Gail Klapper urged the power players to try to find a solution.
When the mayors of Colorado’s three largest cities and a long list of top civic and business groups from across the political spectrum separately issued letters saying they supported a special session to find a compromise, it was clear lawmakers would be returning to the Capitol.
“I think it’s a good compromise,” said Sen. Barbara Kirkmeyer, a Brighton Republican who was the first elected official to publicly call for a special session. “It reduces risk in the future, makes sure that Colorado has a viable future and still further reduces property taxes, which is what my aim is, is looking out for the property owners of the state.”
On Thursday, the top four Democrats in the Legislature issued statements in support of the special session, saying it was needed to keep “reckless” measures off the ballot.
“It is a grave risk to our state that wealthy special interests have proceeded with ballot measures that would devastate our economy, cut funding for schools, and risk financing for critical infrastructure projects like affordable housing,” House Majority Leader Monica Duran, a Wheat Ridge Democrat, said in a written statement. “I’m proud to go back to work to help keep people in their homes, provide additional tax relief, and protect funding for our schools that we’ve fought so hard for.”
But not everyone is happy about it. At the tax commission meeting this week, Rep. Cathy Kipp of Fort Collins said House Democrats were divided over whether it was worth taking the deal.
“There are some people who are risk averse and would like to proceed with a special session and there are others who don’t appreciate that this is the way things are moving forward,” she said.
Holding a special session isn’t free. Past sessions have cost taxpayers close to $25,000 a day to pay staff and lawmaker stipends as they trek to Denver from across the state.
Polis said he would have preferred the deal to have been reached during the regular lawmaking term this year, but that the special session “de-risking the November ballot” is still better than nothing.
“It came close,” Polis said. “In fact, I now think we see how close by the fact that a lot of this is just refining the cap mechanism that already went in place and building off the work that was already done.”
The special session could also bring political intrigue beyond the property tax debate.
It’s an election year, and Republicans are trying to dismantle the Democratic supermajority in the House and prevent one from being secured in the Senate. The GOP could be tempted to force the issue with controversial amendments and floor speeches.
The session may also invite disruption from Democratic lawmakers who aren’t returning to the Capitol next year after losing their primary races in June or abandoning their reelection bids midcycle. There are also several term-limited Democratic and Republican representatives and senators who will be returning for the special session.
Finally, unions could push lawmakers to take up some pro-labor bills passed during the session this year that Polis vetoed. That’s part of why a special session wasn’t called to strip out a provision in a bill kneecapping a 2024 ballot measure that would overhaul the state’s election process.
The governor can limit what topics can be discussed in a special session, but lawmakers have some legal leeway to decide what qualifies within that scope. Polis said he’s happy to have discussions about those union measures next year, but that the special session is limited to property tax legislation in order to stop the measures from appearing on the November ballot.
“There’s only a small window of time before the ballot initiatives can be taken down,” Polis said.
Despite the risks, Polis is already pointing to the special session as another example of his ability to broker policy deals. During the regular lawmaking term this year, he helped shepherd agreements on oil and gas, medical malpractice lawsuits and Taxpayer’s Bill of Rights refunds.
The Legislature’s next regular session begins in January, when newly elected representatives and senators will begin their terms.