Are Colorado Charter School Institute schools subject to TABOR's voter-approval requirements for multi-year debt and emergency reserve obligations?

Opinion 12-02: Colorado Charter School Institute schools are TABOR districts and cannot incur multi-year debt without statewide voter approval

Plain-English summary

The Senate President asked whether Colorado Charter School Institute (CSI) Charter Schools, public schools authorized by the state's CSI rather than by a local school district, are "districts" under the Taxpayer's Bill of Rights (Colo. Const. art. X, § 20). TABOR limits any district's fiscal year spending, requires advance voter approval for multi-year debt, and mandates a 3 percent emergency reserve.

The AG said yes, CSI Charter Schools are TABOR districts. Three threads converged. First, the Colorado Supreme Court in In re Submission of Interrogatories on Senate Bill 93-74 had defined a TABOR "district" to include any entity "essentially governmental in nature," and Nicholl v. E-470 Public Highway Authority had reinforced that approach. Campbell v. Orchard Mesa Irrigation District (irrigation district not a TABOR district because it did not levy general taxes, voting was not one-person-one-vote) and Olson v. City of Golden (urban renewal authority not a TABOR district) had set the outer bounds. CSI Charter Schools fell well inside the governmental-in-nature test: they are public, nonsectarian schools created by an independent state agency under the Colorado Department of Education, primarily funded by the Department, with employees in PERA, exempt from tuition charges, and part of the state's constitutionally-required system of free public schools (Colo. Const. art. IX, § 2).

Second, CSI Charter Schools could not be TABOR enterprises. An enterprise must receive less than 10 percent of its annual revenue from governmental sources (Colo. Const. art. X, § 20(2)(b)). CSI Charter Schools were primarily funded by state per-pupil revenue distributed via the Department of Education under § 22-30.5-513, which would put them well above the 10 percent threshold.

Third, the AG flagged the practical implication: because the relevant TABOR "district" was the state itself, multi-year debt required a statewide vote. That was an "impracticable burden" but not the AG's problem to solve. The AG closed with a roadmap of TABOR-compliant alternatives: lease-purchase financing subject to annual non-appropriation termination, or financial obligations that did not extend beyond the current fiscal year.

Currency note

This opinion was issued in 2012. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here. The CSI Charter School financing landscape has continued to evolve, including through specialized state-supported moral-obligation and school-finance reforms.

Background and statutory framework

The Charter School Institute was established as an independent state agency within the Department of Education with authority to approve or deny applications for charter schools (§ 22-30.5-503(1)(a); § 22-30.5-504(1)). It is itself a public entity for purposes of the Colorado Governmental Immunity Act, the Administrative Procedures Act, the Open Records Act, and the open meetings laws (§§ 22-30.5-505(4) and 503(8)). The Institute itself is therefore an arm of the state and a TABOR district.

CSI Charter Schools authorized by the Institute are "public, nonsectarian, nonreligious, non-home-based school[s] that operate[] pursuant to a charter contract authorized by the Institute" (§ 22-30.5-507(1)(a)). They may organize as nonprofit corporations, but that does not change their public-school status under Colorado law (§ 22-30.5-507(4); Dolores Huerta Preparatory High v. Colorado State Board of Education). For tax-exempt financing purposes they are public schools and governmental entities (§ 22-30.5-507(5)). Their employees are governmental public school employees eligible for PERA (§ 22-30.5-512). They are funded primarily through state per-pupil revenue (§ 22-30.5-513), with the Department of Education adding each CSI Charter School's enrollment to its accounting school district's per-pupil revenue calculation, then routing the school's share directly to it. They cannot charge tuition (§ 22-30.5-507(6)) and may apply for grants and emergency loans from a state-administered fund (§ 22-30.5-515.5).

TABOR (Colo. Const. art. X, § 20) requires advance voter approval for any multi-year district debt, mandates an emergency reserve of 3 percent of fiscal year spending, and limits district fiscal year spending. A "district" under § 20(2)(b) is "the state or any local government, excluding enterprises."

What the AG concluded at the time

CSI Charter Schools are essentially governmental in nature

The Colorado Supreme Court's TABOR cases shaped the analysis. In re Submission of Interrogatories on Senate Bill 93-74 had held that Great Outdoors Colorado, though not technically a state agency, was a TABOR district because it was essentially governmental in nature, addressed matters of statewide concern, and was created by statewide vote. Nicholl v. E-470 had said the E-470 Public Highway Authority was a TABOR district because it was a joint venture of government entities with taxing power.

The AG matched CSI Charter Schools against those features. CSI Charter Schools are created by a state agency (the Institute), perform an essential governmental function (providing free public education), are part of Colorado's constitutionally-required "thorough and uniform" public school system (Colo. Const. art. IX, § 2), and are subject to State Board oversight (§ 22-30.5-503(6); Boulder Valley School District RE-2 v. Colorado State Board of Education). Funding flows from state appropriations through the Department of Education's per-pupil revenue formula. Employees participate in PERA. Tuition is forbidden. The schools are governmental in every meaningful sense.

CSI Charter Schools are not enterprises

TABOR's "enterprise" exception requires under-10-percent revenue from governmental sources (Colo. Const. art. X, § 20(2)(b)). CSI Charter Schools' core revenue stream is the per-pupil state aid distributed via § 22-30.5-513. Although a CSI Charter School could accept private grants and engage in private fundraising, its primary revenue source is state government funding. The 10 percent threshold could not be met.

The relevant TABOR district is the state

When the AG asked which TABOR district CSI Charter Schools are part of, the answer was the state itself. CSI Charter Schools are state public schools; the Institute that authorizes them is a state agency. Multi-year debt by a CSI Charter School would therefore require statewide voter approval, an impracticable burden in practice. But the AG flagged that TABOR-compliant alternatives existed: annually-terminable lease-purchase financing, financial obligations confined to the current fiscal year. Those alternatives would let CSI Charter Schools finance facilities and obtain operating capital without the statewide-vote requirement.

Common questions

Could a CSI Charter School get a different answer by changing its corporate form?

No. § 22-30.5-507(4) explicitly says that organizing as a nonprofit corporation does not change the school's public-school status. Dolores Huerta Preparatory High v. Colorado State Board of Education applied that principle. The TABOR analysis follows the substantive nature of the entity, not the corporate paperwork.

Could a CSI Charter School borrow money for less than 12 months without a statewide vote?

The AG's roadmap suggested yes, by using "financial obligations that do not extend beyond the current fiscal year" or by structuring lease-purchase financing with annual non-appropriation termination. Those structures avoid the multi-year-debt trigger.

Did the AG say a CSI Charter School must run its own emergency reserve?

The AG noted TABOR's 3 percent emergency reserve requirement applies to districts. Whether the CSI Charter School itself or the state-level district must hold the reserve was not separately analyzed. The opinion's framing (the relevant district is the state) implies the reserve obligation runs at the state level.

Are locally-authorized district charter schools (not CSI Charter Schools) subject to TABOR the same way?

The opinion is specifically about CSI Charter Schools. Locally-authorized district charter schools are part of their authorizing district for TABOR purposes, which would mean local-district vote requirements rather than statewide. The analysis would track but not be identical.

Does this opinion still apply if the CSI Charter School raises substantial private money?

The 10-percent enterprise test cuts against that. To qualify as an enterprise, the school would have to receive less than 10 percent of total revenue from government sources. As long as state per-pupil revenue is the dominant funding stream, the school will not qualify as an enterprise.

Citations

• Colo. Const. art. X, § 20 — Taxpayer's Bill of Rights.
• Colo. Const. art. X, § 20(2)(b) — definition of "district" and "enterprise" under TABOR.
• Colo. Const. art. IX, § 2 — General Assembly's duty to maintain a thorough and uniform system of free public schools.
• C.R.S. § 22-30.5-503 to 507 — Charter School Institute and CSI Charter Schools statutory framework.
• C.R.S. § 22-30.5-512 — PERA participation for CSI Charter School employees.
• C.R.S. § 22-30.5-513 — funding of CSI Charter Schools through state per-pupil revenue.
• In re Submission of Interrogatories on Senate Bill 93-74, 852 P.2d 1 (Colo. 1993) — Colorado Supreme Court holding that "essentially governmental" entities are TABOR districts.
• Nicholl v. E-470 Public Highway Authority, 896 P.2d 859 (Colo. 1995) — Colorado Supreme Court holding that an interlocal authority with taxing power was a TABOR district.
• Campbell v. Orchard Mesa Irrigation District, 972 P.2d 1037 (Colo. 1998) — Colorado Supreme Court holding that an irrigation district was not a TABOR local government.
• Olson v. City of Golden, 53 P.3d 747 (Colo. App. 2002) — Colorado Court of Appeals holding that an urban renewal authority was not a TABOR district.
• Dolores Huerta Preparatory High v. Colorado State Board of Education, 215 P.3d 1229 (Colo. App. 2009) — Colorado Court of Appeals holding that nonprofit-corporation form does not change CSI Charter School public-school status.

Source

• Landing page: https://coag.gov/attorney-general-opinions/
• Original PDF: https://coag.gov/app/uploads/2019/08/No.-12-2-Are-Colorado-Charter-School-Institute-Schools-Subject-to-TABOR.pdf

Original opinion text

STATE OF COLORADO

John W. Suthers
Attorney General

DEPARTMENT OF LAW

Cynthia H. Coffman
Chief Deputy Attorney General

Office of the Attorney General
State Services Building
1525 Sherman Street - 7th Floor
Denver, Colorado 80203
Phone (303) 866-4500

Daniel D. Domenico
Solicitor General

FORMAL OPINION OF JOHN W. SUTHERS Attorney General

No. 12-02
February 16, 2012

This opinion, requested by Brandon Shaffer, President of the Colorado State Senate, concerns the application of Colo. Const. art. X, § 20 (commonly known as the TABOR Amendment) to institute charter schools established under § 22-30.5-501, C.R.S.

QUESTIONS PRESENTED AND CONCLUSIONS

Question: Whether institute charter schools are subject to the limitations and requirements of Colo. Const. art. X, § 20, due to institute charter schools being either a "district", as defined by Colo. Const. art. X, § 20(2)(b), or being part of such a district?

Answer: Yes. Institute charter schools are districts under TABOR because they are state public schools and are essentially governmental in nature. They are created and authorized by the Colorado Charter School Institute, an administrative subdivision of the Colorado Department of Education, and are subject to the direction of the Institute Board and general oversight of the State Board of Education. CSI Charter Schools are primarily funded by the Department with state funds and are part of the statewide thorough and uniform system of public schools under the Colorado Constitution.

DISCUSSION

Taxpayer's Bill of Rights

The TABOR Amendment requires advance voter approval for the creation of any multiple-fiscal year direct or indirect district debt or other financial obligation, mandates an emergency reserve equivalent to three percent of fiscal year spending, and limits fiscal year spending by any "district". A "district", in turn, is defined as the state or any local government, excluding enterprises. Colo. Const. art. X, § 20(2)(b).

The question presented, therefore, turns on whether Institute charter schools constitute "districts" as that term is defined by TABOR. The Colorado courts have defined a "district" under TABOR to include entities that are "essentially governmental in nature". According to the Colorado Supreme Court, the best reading of TABOR is to exclude from state fiscal year spending limits only those entities that are non-governmental in nature. Thus, in In re Submission of Interrogatories on Senate Bill 93-74, 852 P.2d 1, 10 (Colo. 1993), the Colorado Supreme Court held that, although it was not a state agency, Great Outdoors Colorado is a "district" under TABOR because it is essentially governmental in nature, its authority was not confined to a specific geographic area, it addresses matters of statewide concern, and it was created by a statewide vote of the electorate.

Similarly, the Colorado Supreme Court has ruled that the E-470 Public Highway Authority is a district subject to the voter approval requirements of TABOR. Nicholl v. E-470 Public Highway Authority, 896 P.2d 859, 869 (Colo. 1995). The Authority was a joint venture of government entities organized for the purpose of operating and maintaining a fee-for-service public roadway and had the power to levy taxes without relation to the services provided, and thus was a governmental entity itself that qualified as a district under TABOR.

TABOR also does not define the term "local government" for purposes of defining a district subject to the requirements of TABOR. Local governments do not include entities with a limited purpose and geographic jurisdiction which are not funded with public funds. An irrigation district is not a local government entity under TABOR because it did not levy taxes on the public at large for general government purposes, and voting rights in the irrigation district elections were not based on the traditional one person one vote concept. Campbell v. Orchard Mesa Irrigation District, 972 P.2d 1037 (Colo. 1998). An urban renewal authority is not a local government and therefore not a district under TABOR. Olson v. City of Golden, 53 P.3d 747 (Colo. App. 2002).

Thus, entities that are essentially governmental in nature, address matters of statewide concern and are created and funded by state government are "districts" subject to the strictures of TABOR.

Application of TABOR to Institute Charter Schools

The Colorado Charter School Institute ("Institute") was established by the General Assembly as an independent state agency within the Colorado Department of Education authorized to approve or deny applications for institute charter schools. §§ 22-30.5-503(1)(a) and 22-30.5-504(1), C.R.S. (2011). It is a public entity for purposes of the Colorado Governmental Immunity Act, has authority to promulgate rules pursuant to the Administrative Procedures Act and is subject to the Colorado Open Records Act and open meetings laws. §§ 22-30.5-505(4) and 22-30.5-503(8), C.R.S. (2011). Thus, the Institute itself is an agency of the State and a district subject to the requirements of TABOR.

According to statute, a CSI Charter School is a public school with the governmental purpose of operating a public school within the statewide system of public education. It is a "public, nonsectarian, nonreligious, non-home-based school that operates pursuant to a charter contract authorized by the Institute". § 22-30.5-507(1)(a), C.R.S. (2011). Although a CSI Charter School may organize as a nonprofit corporation pursuant to the Colorado Revised Nonprofit Corporation Act, this legal organization does not affect its status as a public school for any purposes under Colorado law. § 22-30.5-507(4), C.R.S. (2011); Dolores Huerta Preparatory High v. Colorado State Board of Education, 215 P.3d 1229, 1233 (Colo. App. 2009). For purposes of tax-exempt financing, a CSI Charter School is a public school and a governmental entity. § 22-30.5-507(5), C.R.S. (2011). CSI Charter School employees are governmental public school employees eligible for retirement benefits under the Colorado Public Employees Retirement Association. § 22-30.5-512, C.R.S. (2011).

CSI Charter Schools are primarily funded by the State Department of Education with state funds. The Department adds each CSI Charter School's enrollment to their accounting school district's per pupil revenue funding formula and then withholds the CSI Charter School's per pupil revenue from the accounting school district's monthly state equalization payments and pays the withheld funds to the CSI Charter School. § 22-30.5-513, C.R.S. (2011). CSI Charter Schools are prohibited from charging tuition except under narrow statutory circumstances. § 22-30.5-507(6), C.R.S. (2011). Moreover, CSI Charter Schools may apply for grants and emergency loans from the institute charter school assistance fund administered by the State Treasurer. § 22-30.5-515.5, C.R.S. (2011). Although CSI Charter Schools may accept grants and donations and engage in private fund raising, they are primarily funded by the Department with state funds and therefore cannot be an enterprise exempt from TABOR's restraints upon state fiscal year spending under the provisions of TABOR (an "enterprise" must receive less than ten percent of its annual revenue from governmental sources, Colo. Const. art. X, § 20(2)(b)).

CSI Charter Schools are created and authorized by a state government entity to serve an essential government function of providing a statewide system of public education. The Institute and CSI Charter Schools are part of the thorough and uniform system of free public schools to be established and maintained by the General Assembly as required by Colo. Const. art. IX, § 2 and are subject to the general supervision of the State Board of Education. § 22-30.5-503(6), C.R.S. (2011); Boulder Valley School District RE-2 v. Colorado State Board of Education, 217 P.3d 918, 928 (Colo. App. 2009).

CONCLUSION

For the foregoing reasons, I conclude that CSI Charter Schools are districts subject to the requirements of TABOR. CSI Charter Schools are public schools performing an essential governmental function of providing a statewide system of public education. They are created and authorized by a state entity and are subject to the direction of the Institute and general oversight of the State Board of Education. CSI Charter Schools are primarily funded by the Department with state funds and are a public school and government entity under several state and federal laws.

As a district subject to the requirements of TABOR, CSI Charter Schools may not borrow funds or incur debt that extends beyond the current fiscal year without taxpayer approval and are required to maintain a TABOR emergency reserve. In the case of CSI Charter Schools, the "district" would be the State of Colorado, meaning that a statewide vote would be required to obtain taxpayer approval of any multi-year debt; clearly an impracticable burden.

Fortunately, other TABOR-compliant financing methods exist short of engaging in a statewide vote. These financing methods would include lease purchase financing that is subject to annual termination due to non-appropriation, or financial obligations that do not extend beyond the current fiscal year, and can be entered into without the required taxpayer approval under TABOR. These types of TABOR-compliance financing methods would, of course, remain available to CSI Charter Schools.

Issued this 16th day of February, 2012.

JOHN W. SUTHERS
Colorado Attorney General