Dive Brief:
- A bill under consideration in the Colorado General Assembly could increase the amount of money some schools in the state receive for capital funding needs from the sale of legalized marijuana. When the state first began using marijuana excise tax money to fund the Building Excellent Schools Today (BEST) program, the amount was capped at $40 million a year, but that amount was raised last year to 90% of the tax, Chalkbeat reports.
- The new bill, if passed, would require that all marijuana excise tax money — an estimated $58 million in the next fiscal year — be funneled into the BEST program, which is used to provide supplemental funding for approved school construction, upgrades and repairs in districts without enough property taxes to cover capital needs. The bill would also now base the amount of BEST funding set aside for charter schools on student enrollment figures, rather than 12.5% of total funds.
- Kathy Gebhardt, vice chair of the board that administers the BEST program, said the additional money will be a short-term fix, but that the state needs to seek a better long-term funding solution for school facility needs, as marijuana sales will probably dip as more states legalize the drug.
Dive Insight:
In many school districts, facility needs are met primarily from local funding and are often funded by property taxes. However, this funding method can create inequities between rich and poor areas, leaving many lower-income districts with facility needs that are left unmet. Colorado tried to address the issue by funneling portions of certain taxes on marijuana into its BEST program, which serves to help districts who need it most. But now, it's considering increasing that funding as the state struggles to meet more facility needs than it can handle.
Colorado is one of many states that has elected to use “sin taxes” to fund education needs. Sin taxes have a long history in the U.S. and are often seen as a way to make “undesirable behaviors” help pay for public needs. In the past, sin taxes have been imposed on items such as alcohol and tobacco and on behaviors such as gambling. Many states use lottery funding, which is often classified as a sin tax, to fund education. And in recent years, as more states have legalized marijuana, taxes on these sales have been used to fund educational activities ranging from school construction to preschool education.
The use of sin taxes remains controversial. Proponents say they discourage unhealthy behaviors and often gain wider political acceptance than some other funding approaches, while critics say sin taxes often disproportionately affect certain groups. And when these taxes are used for education, they sometimes send mixed messages to students.
Moreover, a report released last year by Pew Charitable Trusts revealed that these “sin taxes” are often unreliable sources of income. Sometimes, people quit smoking, for instances, because the price is too high, or neighboring states may open up gambling opportunities or legalize marijuana — both of which affect sales as well.
As the Pew study concludes, “Policymakers may be tempted to turn to sin tax revenue during downturns or to fund new spending initiatives. As with all revenue, states should be mindful of both short-term volatility and long-term growth trend. It is important for states to support recurring spending with recurring revenue and to ensure that critical functions are funded by sustainable revenue streams. Given the unpredictability of sin tax revenue, states should be cautious about extending what may be effective short-term fallbacks into long-term solutions.”