The Economic and Fiscal Impacts of Proposition NN

Key Findings

• Excluding reclassified property-tax reimbursements, Proposition NN would raise state spending by $329.9 million in FY27 and $314.9 million in FY28. $241.5 million and $234 million of these amounts, respectively, would fund K–12 education.
• To achieve these spending increases, Proposition NN would eliminate TABOR refunds for the foreseeable future. Taxpayers and local governments would lose a total of $850.9 million in refunds through FY28.
  • Individual filers who earn $50,000 per year would lose $60, those earning $100,000 would lose $96, and those earning $500,000 would lose $341.
• By allowing the government to retain $850.9 million more over the next two budgets rather than refunding it, Proposition NN would cause the following total economic impacts:
  • A total-employment loss between 46 and 2,227 jobs
  •  A private-employment loss between 460 and 2,056 jobs
  • Between $12 million and $120 million of lost GDP
  • A loss of economic output between $34 million and $244 million
  • An impact on personal income of between -$376 million and $473 million
•  Available data do not support the claim that boosting education funding would improve student achievement. Since 2013, real school-district spending per pupil has risen by 21% while test scores have fallen at benchmark elementary-school, middle-school, and high-school grade levels.

Introduction

The record of Colorado’s legislature and the rhetoric of its members confirm the current government’s haste to unseat many of the rules upheld by the Taxpayer’s Bill of Rights (TABOR). Though a reliable undercurrent of Colorado politics for decades, the protracted struggle over TABOR may be approaching its climax: constrained by TABOR’s strict limits, rising state spending—some fortified at first by lapsed relief funding from the federal government—has generated widely publicized revenue shortfalls over the last two fiscal years. Now, with inflated spending obligations still chafing against their statutory fetters, lawmakers turn to this November’s statewide ballot in hope that voters, persuaded by ostensibly tax-free education funding, will forfeit their TABOR refunds for the foreseeable future and spare the state another cycle of spending cuts.

Proposition NN, the name given the 2026 ballot measure referred by SB26-135, would permanently raise the state’s spending limit by billions of dollars in return for a permanent end to TABOR refunds at current tax rates. Over its first 10 years, when there would be excess revenue under current law, the new law would apportion some of the difference to K–12 education and the rest to other programs for children; afterwards, the state government could budget that remainder freely. This study evaluates the economic impacts of Proposition NN and discusses the effects of increasing state education funding.

Fiscal and Economic Impacts

If passed, Proposition NN would establish a new state-spending limit above the current TABOR cap.[i] Any revenue below this cap that previously would have been refunded to taxpayers would instead be retained by the state. This amount would be used first to compensate local governments for property-tax revenue lost to statewide exemptions then spent on K–12 education, programs for children (e.g., childcare and full-day preschool and partially funded by HB26-1419) for the first 10 years, general state obligations after 10 years, and administration. In years when revenue falls short of the current limit, the state reimburses local governments for lost property taxes from other funding sources; this would not change under Proposition NN.[ii]

The proposed new cap exceeds state revenue in every year since the current limit came into effect. It would have been hundreds of millions of dollars more than actual collections even in fiscal years 2022 and 2023, the years of TABOR’s all-time highest refunds.