Tobacco, nicotine taxes fund Colorado preschool program at high court

Colorado's lawyer in St. Mary Catholic Parish v. Roy said during Tuesday's oral arguments that the state expanded free preschool to every four-year-old, where its predecessor program had focused only on low-income children and children with disabilities.

Lawyers for the Catholic preschools told the justices the condition violates the First Amendment’s protection of religious exercise, and that the money is a benefit to families rather than schools. They said more than 1,000 participating preschools already limit enrollment in other ways. Colorado's lawyer said those limits cannot override the equal-opportunity rule, which applies to secular and religious providers alike.

The money comes from Proposition EE taxes on cigarettes, tobacco and nicotine products. The 2020 ballot booklet told voters the measure would raise up to $175.6 million in its first full year and up to $275.9 million after rates are fully phased in by fiscal year 2027-28.

Legislative Council Staff put Proposition EE revenue at a preliminary $256 million last fiscal year and project $296.2 million in 2027-28, above the original estimate voters were shown. In 2023, voters approved Proposition II, letting the state keep $23.65 million collected above the estimate rather than refund it, according to that year's ballot booklet.

Legislative Council Staff projects cigarette revenue, 51% of the total, will fall 6% in fiscal year 2026-27 while nicotine revenue rises 19.2%. The forecast attributes continued growth in the overall total to tax rate increases scheduled under existing law through 2027.

Joint Budget Committee records show preschool’s cash-fund appropriation was $212.8 million last fiscal year, up from $141.1 million in the program's first year statewide. Under the 2020 law, Proposition EE revenue goes to preschool programs, tobacco education and the general fund.

Colorado ranked 11th among states in total preschool spending in 2024-25 but 37th in spending per child enrolled, counting all reported funds, according to researchers at Rutgers' early education institute, who calculated the total-spending rank at The Center Square's request.

The requirement at issue sits in Colorado Department of Early Childhood rule. Providers taking Universal Preschool money must give eligible children an equal opportunity to enroll regardless of race, ethnicity, religious affiliation, sexual orientation, gender identity, housing status, income or disability, and may not turn a family away on those grounds.

The department declined to comment, citing the pending case, and referred questions about provider participation and enrollment to its open-records team.

Steven Barnett, director of Rutgers' National Institute for Early Education Research, said the institute does not track how many states attach similar conditions to preschool dollars. He told The Center Square that states generally require the same rules of public and private providers taking state pre-K dollars, and that "we have not seen this in any other state."