The Impact of Tax Increment Financing on School Finance

Public K-12 eduction in Colorado is financed in part by local governments and in part by state government.  The school finance formula establishes a statewide total funding level.  The difference between this amount and the local share determines the state’s obligation to school finance.  The local share is paid primarily from local property taxes.  When property taxes are not collected from a specific property, the funding formula requires the state to augment its share of K-12 education funding by the amount of foregone local tax revenue.  This issue brief discusses the impact of tax increment financing on the state and local shares of K-12 education funding.