Senate GOP leaders: Securitize Lottery, invest more in schools

Senate Republicans offered an end-run today on the governor's embattled plan to hike property taxes for schools, proposing instead to securitize the Colorado Lottery and use some of the proceeds to shore up school funding for the future.

The approach urged by the Senate GOP leadership -- a variation on another proposal announced this week to securitize the Lottery -- would maintain funding for popular amenities such as state parks, trails and open space, while also creating a secure, stable and sizable new funding stream for public education.

"This could be a real win-win solution as we search for a way to bolster school funding statewide," said Assistant Senate GOP leader Nancy Spence, the ranking Republican on the Senate Education Committee. "This would offer a major infusion of cash for education without leaning even harder on taxpayers."

Senate GOP chief Andy McElhany, of Colorado Springs, called securitization a "fair and equitable way to take care of our public schools."

"We have been concerned that the property-tax hike under consideration by the governor and some Democrats in the legislature is at best a Band-Aid," McElhany said. "It reaches deeper into the pockets of retirees on fixed incomes and mom 'n' pop businesses in some of the poorest school districts without fixing the underlying flaws in our system of school funding."

Spence's and McElhany's proposal is similar to a Lottery securitization plan advanced by Republican Sen. Josh Penry, of Fruita, and Democrat Sen. Chris Romer, of Denver, in that it would let private investors acquire an interest in the Lottery in exchange for cash. Legislative policy staffers have estimated that $2.2 billion to $2.6 billion could be raised through securitization, with some $1.5 billion of those proceeds invested in a trust fund whose interest earnings would generously fund the current programs benefited by the Lottery. Some of the balance of the proceeds under that version of the plan would be used for college scholarship funds.

The latest GOP proposal would offer a twist on Penry's and Romer's plan by placing at least $330 million from the securitization proceeds into the state's permanent school lands trust fund. By law, that fund could not be diverted by future legislatures to non-education expenditures. Meanwhile, interest income from the added infusion into the permanent trust fund could shore up the State Education Fund and help cover the annual increases in public education funding required by the state constitution.

"The money would go into a lockbox, assuring taxpayers that lawmakers won't siphon it off for other programs in the future," McElhany said.

Spence pointed out the figures are estimates, based on projections as to what securitization might earn the state, and she said the specific amount alloted to K-12 education could even be increased by the legislature.

"This idea represents a starting point," she said, "and it nudges the debate in the right direction."

McElhany said any such plan would require a constitutional change and would have to go to the voters. He noted it also would require a two-thirds vote in each chamber to get on the ballot.
"We don't need the governor's signature on it, but we sure would like his support to help establish bipartisan backing in the General Assembly," McElhany said. "I'm ready to draft the legislation if he is willing to give the idea serious thought."

On Monday, Senate and House GOP leaders presented the governor a letter signed by all Senate Republicans and all but one House Republican ruling out any support for a property tax hike and calling instead for reform of the state's outdated school-funding system. Toward that end, Republicans have discussed other options, too, like better management of the state's school trust lands to maximize income the state makes off of those lands.

"We hope the governor sees there are various options on the table, and they merit full debate," McElhany said. "We have to move beyond tax hikes to creative, lasting solutions to funding schools."