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Proposition 137 asks voters to divert all state sales tax revenue generated from the purchase of sporting goods starting next year to things like land conservation and access, as well as wildfire mitigation. That’s estimated to be about $175 million at the start.
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However, whether the measure will ever truly do that — even if it passes — is far from guaranteed.
That’s because Proposition 137 would turn off in years when it could affect a pair of state tax credits for lower-income families. Additionally, Democrats in the legislature have signaled they will ignore the measure’s directives in tough fiscal years — and supporters of the initiative have all but said they are fine with that.
“Proponents were trying to design a measure that could send funding to Colorado communities to protect them from wildfire and widespread drought, but recognize that the state is operating in a dynamic fiscal environment and there are a lot of pressures on the state budget,” said Tarn Udall, an attorney with Western Resource Advocates, one of the main backers of Proposition 137.
But Udall said that, ultimately, any money that goes toward land management is a good thing.
“The way I like to think about it is Proposition 137 is asking voters to pitch the tent,” she said.
The fiscal fine print adds a layer of uncertainty to what the people and groups pushing for Proposition 137 hope will be one of the state’s largest-ever investments in land management amid growing pressures from reduced federal funding and the increasing impacts of climate change, including drought and wildfire.
How 137 interacts with the Family Affordability Tax Credit and the Earned Income Tax Credit
A provision in Proposition 137 reduces or fully turns off the land management revenue diversion in years when the measure would affect two tax credits adopted by Democrats in the state legislature: the Family Affordability Tax Credit and the Earned Income Tax Credit, known as FATC and EITC.
FATC is the bigger of the two, providing families earning as much as $96,000 up to $3,200 per child under age 6 and up to $2,400 per child 6 to 16 years old. The state EITC credit piggybacks off a federal credit of the same name that provides an income tax break to working families with lower incomes. The breaks totaled nearly $1 billion combined in 2024, with FATC accounting for $866 million of that.
The availability of FATC and EITC each year depends on how much money the state is projected to take in that is subject to the annual Taxpayer’s Bill of Rights cap on government growth and spending, which is calculated through a formula dependent on changes in inflation and population. The cap in the current fiscal year is more than $20 billion.
Since Proposition 137 would exempt sales tax revenue generated from sporting goods sales from the TABOR cap, it could — without the trigger provision — cause FATC and EITC to turn off or be reduced.
Udall said supporters of the ballot initiative added the trigger because they were keenly aware it could affect the tax credits and wanted to “avoid any negative interactions.”
Whether Proposition 137 would affect the tax credits is determined by the economic forecast provided by nonpartisan staff and the governor’s office to the legislature each December before the start of the next fiscal year.
So if the measure passes in November, the December forecast this year will determine whether the sales tax revenue diversions in 137 will happen in fiscal year 2027-28, which starts July 1, 2027.
In September, nonpartisan Legislative Council Staff predicted that both FATC and the EITC would be turned off in 2027 — as they are this year — because revenue subject to the TABOR cap isn’t growing fast enough.
Democrats tied the credits’ availability to revenue growth in an attempt to have them turn off when the state doesn’t have enough TABOR surplus to pay for them without cutting into the budget. In other words, the credits’ availability isn’t determined by the surplus itself but rather how fast revenue subject to the TABOR cap is going up.
In 2028, the credits are expected by nonpartisan staff to be partially available, meaning it’s unclear whether the Proposition 137 trigger would be activated in December 2027 for the 2028-29 fiscal year, turning off or limiting the funding spigot for land management and wildfire mitigation.
(The Governor’s Office of State Planning and Budgeting projects that FATC and EITC won’t be available for 2026, 2027 and 2028, though they believe it will be available in 2029.)
The forecasts were created without factoring in Proposition 137 because nonpartisan economists and the governor’s office only offer projections based on current law.
But if the credits are already turned off, that likely means Proposition 137 funds are safe from the trigger.
Udall said she doesn’t think Proposition 137 would affect the tax credits, setting off the trigger, in the coming years. If ever does happen, she thinks it would be rare.
She added that the backers of Proposition 137 made it a statutory measure instead of trying to pass a change to the state constitution to give the legislature flexibility to change or pause the initiative to respond to fiscal needs. That is a reference to the other reason why the spending under Proposition 137 may not happen.
The TABOR cap and Proposition 137
EITC and FATC are likely not the only factors that will determine whether all of the funding envisioned under Proposition 137 will be realized.
In years when there isn’t sufficient TABOR surplus to cover the diversions called for under Proposition 137, the legislature may forgo the spending to avoid cuts to existing government programs and services.
That’s because when there isn’t a TABOR surplus, or there isn’t enough to cover the full revenue diversion called for under the initiative, the only way for the legislature to adhere to Proposition 137 is by cutting its general fund spending elsewhere, and that likely means healthcare and education.
When Udall talks about the fiscal flexibility of Proposition 137 being a statutory change and not a constitutional one, that’s what she’s referring to.
During the legislature’s discussion over what should be in the state ballot guide, known as the blue book, this year, House Speaker Julie McCluskie, D-Dillon, sought to add language informing voters that Proposition 137 funding may be limited or cut altogether by state lawmakers when there isn’t enough TABOR surplus.
“They would have the discretion — the choice — to be able to use revenues for other purposes in a challenging budgeting environment,” she said.
Legislative Council Staff said they didn’t include that explanation in their nonpartisan explanation of Proposition 137 in the state ballot guide because supporters of the initiative didn’t expressly lay out that budgeting flexibility in their measure.
The blue book change was rejected by Republicans on the bipartisan Legislative Council Committee, arguing that if voters pass Proposition 137 the legislature should follow their will and spend the money in the way prescribed in the measure.
The good news for supporters of Proposition 137 is that the state is forecast to have TABOR surpluses in fiscal years for the foreseeable future — $827 million in the current fiscal year, $579 million in the next fiscal year and $652 million in the following fiscal year, according to Legislative Council Staff.
(In years when FATC and EITC aren’t available, like this one, the TABOR surplus is much higher because those dollars would have otherwise gone toward the cost of the credits.)
The surplus projections from the governor’s office are less rosy.
The Governor’s Office of State Planning and Budgeting forecasts the state will have $607 million in TABOR surplus this fiscal year and $287 million next fiscal year, and $334 million in the year after that.
The reality, however, is that the state’s financial situation can improve or decline suddenly if there’s an economic boom or downturn — or, say, a global pandemic.
Additionally, if another ballot measure, Proposition NN, passes in November, every dollar removed from the surplus would represent a dollar less that the state could be spending on education and early childhood programs.
That could also force lawmakers to reevaluate Proposition 137.
Proposition NN would indefinitely tap the state’s TABOR surplus and let the state keep and use that money for K-12 education and early childhood programs. Right now, any surplus must be refunded to taxpayers.
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