Look, readers probably shouldn’t smoke, but those who do are helping the State of Colorado pay for preschool programs, and today’s preschoolers are kids who also shouldn’t grow up to smoke.

Colorado Proposition II (as in eye-eye), at its simplest, would allow the state to retain tobacco tax revenues collected in excess of the maximum revenue cap established in 2020 under Proposition EE, and to spend this money on preschool programs and state General Fund needs. The $23.65 million at stake in Prop II would allocate $18 million to preschool programs and $6.65 million to the state’s General Fund if the ballot measure passes.

Under Colorado’s Taxpayer Bill of Rights (TABOR), proponents of ballot measures that would increase taxes must include a maximum aggregate revenue collection figure with the ballot language. If the state collects more than this maximum figure, it must disburse the “excess” revenue back to taxpayers through means like refunds or tax adjustments, but the state or ballot proponents can also ask voters to approve keeping excess revenue for programs or services. Prop II is doing just that – asking voters to approve keeping revenue in excess of the cap set under Prop EE.

If voters strike down Prop II, the General Assembly would have to determine how to return the “excess” money to taxpayers – in this case, wholesalers and distributors of tobacco products who remit the tax revenue – while the Colorado Department of Revenue would also need to reduce the Prop EE tobacco product tax rates by 11.53 percent to avoid exceeding the Prop EE revenue limit into the future.

The Colorado General Assembly put Prop II on the ballot as a referred measure by passing House Bill 23-1290 in 2023. The bill passed both the House and Senate on almost completely partisan lines, with Democrats mostly in support and Republicans opposed. Prop II is a statutory ballot measure, not Constitutional, so it would pass with a simple majority of voters.

Fun With Funds

This might be more insider baseball than most voters need to know, but many of the mechanisms for what would happen with the money at stake in Prop II are already established.

HB 23-1290 created the “Proposition EE Refund Cash Fund,” and $23.65 million was to have been transferred into this fund from the “Preschool Programs Cash Fund,” which as the name suggests consists of revenue collected under Prop EE for preschool programs. As of late August, it was not yet certain that there would have been $23.65 million available in the Preschool Fund, and if there wasn’t the state would need to use General Fund money to make up the difference.

If Prop II passes in November, the Refund Cash Fund money would go back to the Preschool Fund and the General Fund if necessary. If Prop II fails, the Refund Cash Fund money would be used for refunds to taxpayers.

Preschool Program Roll-out Challenges

Readers who follow education might already know that there have been some challenges with the roll-out of the preschool program made public in recent months. The education specialty publication Chalkbeat Colorado has published fairly recent stories about the state not being able to provide the hours of preschool some parents desire, and about concerns over the quality of the state’s preschool rules.

On a more positive note, Chalkbeat also reported that more than 27,400 Colorado families have accepted preschool matches through the state’s preschool program.

These last two paragraphs are simply to provide some perspective about what’s going on with the existing preschool program. Prop II does not attempt to influence preschool policy or directly dictate the numbers of children able to attend preschool. It would simply allow the state to retain “excess” tobacco tax revenue to use primarily on preschool programs, with the rest going into the state’s General Fund.

Proponents

  • Preschool for All Coloradans

Opponents

  • As of mid-September, there were no registered opponent committees yet

Prop II Pro:

  • Passing Prop II would literally put money into Colorado preschool programs
  • Prop II does not increase existing tax rates.
  • The state has had some challenges with the preschool program roll-out, and additional revenue from Prop II would help meet some of the shortfalls.

Prop II Con:

  • TABOR calls for refunds or tax adjustments if “excess” revenue is collected, and businesses or tobacco purchasers could use their share of these refunds in the manners of their choice.
  • Prop EE already called for a large amount of money for preschool programs, and the state could cut or reprioritize spending in other areas if it needs more revenue for preschool.

Richard’s Take: VOTE YES

There are a lot of reasons for which I might rail against TABOR, but this really isn’t one of them even though it is leading to an additional measure on this year’s ballot and it’s making me write a bit more. The law very clearly says the state has to ask voters for approval to retain revenue like what’s at stake with Prop II, and that’s what the ballot measure very clearly does. It might be a bit unfair to call Prop II a mere formality, but to me it shouldn’t be a horribly deep policy debate either. Admittedly, I’m a non-tobacco user and not a tobacco merchant, so I don’t have a dog in the fight and tobacco tax refunds or adjustments wouldn’t affect me, but in my opinion Prop II is an easy measure to support.

Ballot measure proponents have to put a maximum revenue figure on taxation ballot measures like Prop EE, but it’s not necessarily exact science because people will buy what they want in whatever quantities they can afford, and product pricing decisions might also influence tax revenue collections since products are taxed by percentages. Again, I’ve done my share of TABOR-bashing, but letting people know that there is an upper limit on revenue collection might be a positive point to some voters who could support a program but don’t want limitless open-ended taxation.

To me, the best use of the money at stake with Prop II would be to provide preschool programs, which was very clearly the primary intent of the original tobacco taxation from Prop EE back in 2020. This revenue should help alleviate some of the current preschool program funding shortfalls, and should provide additional opportunities for students and families to reap the benefits of early childhood education. The recent Chalkbeat stories about the state’s preschool rollout are indeed of concern to me, but I don’t see how defeating Prop II and returning the excess revenue to tobacco vendors would be beneficial for preschool programs into the future.