In 2019, voters legalized sports betting in Colorado and authorized the state to collect up to $29 million per year in tax revenue, money that primarily goes to water projects. Any money collected above that limit must be refunded.
Proposition JJ, which was referred to the November statewide ballot by the Legislature, would remove that cap and let Colorado keep all the sports betting tax revenue it collects.
Here’s what you need to know about the measure.
When voters passed Proposition DD in 2019, legalizing sports betting in Colorado starting in May 2020, the measure imposed a 10% tax on operators’ proceeds.
Nonpartisan fiscal analysts estimated that would generate up to $29 million a year in tax revenue. But after the Legislature passed a bill in 2022 limiting the number of free bets that sports betting operators could offer starting in 2023, the state’s tax revenue rose sharply.
In the fiscal year that ended June 30, the $29 million limit was exceeded, according to preliminary data, and it’s expected to be exceeded again in the current and next fiscal years, too.
The Taxpayer’s Bill of Rights, a constitutional amendment approved by voters in 1992, requires that money collected in excess of a tax’s projected revenue be refunded unless voters let the government keep the money. That’s where Proposition JJ comes in.
First, the revenue pays for all related administrative expenses incurred by the Colorado Division of Gaming. Then, up to $1.74 million goes to a “hold harmless” fund that reimburses organizations that receive tax revenue from traditional gaming – casino towns and counties, community colleges and the State Historical Fund – that have lost income because sports gambling siphoned away bets.
The rest then goes to the Water Plan Implementation Cash Fund to pay for projects under the Colorado Water Plan. The Colorado Legislature typically appropriates these funds through the annual budget process in the Colorado Water Conservation Board projects bill.
If voters approve Proposition JJ, the state would be allowed to keep all of the sports betting tax revenue, and it would be distributed in the same way it always has been – there would just be more money for water projects.
For example in the 2023-24 fiscal year that ended June 30, Colorado collected about $29.9 million, based on preliminary data. If voters pass Proposition JJ, the state can keep and spend the extra $900,000.
If Proposition JJ fails in November, the 2019 ballot measure, Proposition DD, will remain in effect with the $29 million cap, and the state will refund the excess $900,000 to licensed casinos and sports betting operators.
Because of the way the bill referring Proposition JJ to the ballot was written, if the measure fails any tax revenue collected above the $29 million cap would be refunded to sports betting operators. The provision is aimed at persuading voters to cast a “yes” vote on the question.
Proposition JJ was placed on the ballot through the passage of House Bill 1436, which had bipartisan support.
The refunds from excess revenues that would go to operators are projected to be about $900,000 collected during budget year 2023-24, about $1.2 million in 2024-25 and about $2.5 million in 2025-26.
Opponents of Proposition JJ say that the measure is effectively a tax increase because it eliminates refunds to operators. When the state collects more revenue than voters approved, it should provide refunds rather than expand a government program, opponents say.
In the 2023 Colorado Water Plan, the state outlined billions of dollars in need for water projects over coming decades.
The Colorado Water Conservation Board, the state’s top water policy agency, gives loans and grants to communities around Colorado to support water projects, like improving canals and headgates that bring water to farms and ranches throughout the state, helping endangered fish habitat, supporting water-based recreation needs, and funding conservation projects and drought plans.
Looking ahead, the Colorado Water Conservation Board estimated that it will be asked to fund about $3.85 billion in loans and grants over the next 30 years. With current funding – including tax revenue from sports betting – the state said that its grants and loans program is short about $1.5 billion, or about $50 million per year through 2050.
That does not count water-related projects in other state agencies, which total at least $20 billion, according to the 2023 water plan.
Supporters of Proposition JJ say the measure will help meet the state’s water needs as Colorado’s water supplies are stressed by prolonged drought, a changing climate and increased demand from a growing population. Nonetheless, Proposition JJ would only provide a fraction of the amount needed.
They also say that it is not a tax increase, since the revenue is already being collected under the current tax rate.
America’s water infrastructure is often 50 to 100 years old, or older, and in need of upgrades, repairs and improvements to meet changing environmental and public health regulations. Already, local water providers in Colorado are raising water utility rates, in part, to address aging infrastructure needs.
Colorado’s Western Slope is also part of the Colorado River Basin, which provides water to 40 million people across seven Western states, the lands of 30 tribal nations and two states in Mexico.
The Colorado River is overstressed by the demands on its water and by changes in the environment, like prolonged drought and rising temperatures. These issues affect Coloradans across the state who depend on Colorado River water or other rivers with constrained supplies.
In response, communities and water providers are creating water conservation programs, drought plans and more to protect water used in Colorado’s farms, ranches, cities and industries.
Yes on JJ is the issue committee supporting Proposition JJ. It had raised $490,000 as of Sept. 25.
The Environmental Defense Action Fund, which has given $280,000, has been the committee’s largest donor. The second-largest donation to the committee so far, $120,000, came from Conscience Bay Research, the research and advocacy arm of a Boulder-based real estate firm that has invested in owning water rights on Colorado’s Western Slope. The Colorado Cattlemen’s Association, a statewide agricultural lobbying group, donated $50,000 and the American Rivers Action Fund, another environmental advocacy group, gave $40,000.
Yes on JJ spent $6,661.62 as of Sept. 25, mostly on consulting services with RKG Development and OnSight Public Affairs.
There is no organized opposition to the measure.
