Funding & Finance

Lawsuit claims school funding reduction mechanism unconstitutional

Updated 9 a.m. – A group of school districts and parents filed a lawsuit Friday arguing that the device used by the legislature to control annual K-12 spending, the so-called negative factor, is unconstitutional.

The suit, filed against the state in Denver District Court, argues that the negative factor violates Amendment 23, the constitutional provision that requires school funding to increase by inflation and enrollment growth every year.

The suit has been expected for some time and opens a new front in the policy war over the negative factor, a conflict that intensified during the 2014 legislative session. It’s estimated that use of the negative factor has cut about $1 billion a year from what school districts otherwise would have received for basic operating costs. (See text of suit here.)

The plaintiffs ask that the negative factor section be stricken from the state’s school funding law and that the legislature be barred from reinstating the factor in another form. The suit does not ask that lost funding be restored.

Lead lawyers in the case are Timothy Macdonald of Arnold and Porter and Kathleen Gebhardt of Children’s Voices, a Boulder public interest law firm. She was the lead lawyer in the long-running Lobato v. State school funding suit, which was thrown out by the Colorado Supreme Court in 2013. (Get full background on the Lobato case here.)

Kathleen Gebhardt / File photo
PHOTO: Scott Elliott
Kathleen Gebhardt / File photo

Gebhardt told Chalkbeat Colorado that the final decision to file was made on Tuesday, partly because recent state revenue forecasts (see story) indicate continued improvement in state finances.

“It’s a simple claim, just that the negative factor violates Amendment 23,” Gebhardt said, describing it as a very different case from the complex Lobato suit.

The plaintiffs in the new case include the Colorado Springs 11, Boulder Valley, Mancos, Holyoke and Plateau Valley school districts, along with the East Central Board of Cooperative Educational Services. Other plaintiffs are the Colorado Rural Schools Caucus and the Colorado PTA. Four sets of parents with children in the Kit Carson, Lewis-Palmer and Hanover districts also have signed on to the suit.

The lead plaintiffs are Lindi and Paul Dwyer, who have four daughters in the Kit Carson district, and the case takes their name, Dwyer v. State. Gov. John Hickenlooper and Education Commissioner Robert Hammond are the named defendants in the suit.

Lawyers from four Denver law firms have agreed to assist Gebhardt with the case without charge.

What Amendment 23 does

Passed by voters in 2000, A23’s backers intended for it to provide a predictable and growing source of funding for schools. The amendment’s goal was to restore per-pupil funding to 1988 levels over time. For the first 10 years after passage the amendment required that funding increase an additional 1 percent a year on top of the increases for inflation and enrollment.

State funding for schools comes in two chunks. The larger amount, base funding, provides an identical per-student amount to every district. The second chunk, called factor funding, gives districts varying additional per-student amounts based on district characteristics such as numbers of at-risk students, low enrollment and cost of living for staff.  Local property and vehicle tax revenues also contribute to what’s called total program funding for schools.

(A third, smaller pot of state support known as categorical funding provides money to districts for programs such as special education, gifted and talented and transportation. While A23 requires overall categorical funding to increase by inflation every year, the money is not distributed by the same formula that governs total program funding.)

The key fact is that up until the 2010-11 school year, the legislature applied the inflation-and-enrollment increase to both base and factor funding. (Because of the recession, in 2008-09 and 2009-10 the legislature cut school funding by other means.)

Behind the negative factor

School funding chart
Source: Colorado legislative staff. Click for larger view

With the economy still squeezing state revenues, in 2010 the legislature created the negative factor (originally called the stabilization factor) to control school spending as lawmakers continued to struggle with the overall state budget. It applied to the 2010-11 K-12 budget and has been in effect ever since.

The legal reasoning behind the negative factor is that A23 applies only to base funding, not to factor funding. And while the original A23 factors are intended to increase school funding, the negative factor gives lawmakers a tool for reducing it. This is the key issue under attack in the new lawsuit. The negative factor hasn’t been tested in court before. Its rationale is based on a 34-page 2003 memo issued by the Office of Legislative Legal Services at the request of then-Rep. Keith King, R-Colorado Springs. (Read memo here.)

“Amendment 23 precludes the General Assembly from purporting to grow the base but then slashing overall education funding by fundamentally revamping or jettisoning the [finance] formula as in effect in 2000,” the suit argues.

The policy debate

Negative factor impact
  • $5.9 billion K-12 funding in 2014-15 with
  • $6.8 billion without

A23 isn’t the only constitutional provision that applies to the state budget. Among other things, the constitution requires a balanced state budget every year, limits the amount of new revenue that can be spent even in years of high growth and restricts property taxes in a way that has reduced growth of local district revenues.

Because of those restrictions, policymakers who support the negative factor argue that it’s necessary to prevent K-12 spending from consuming larger and larger shares of the state’s general fund budget and squeezing out other state programs.

With state revenues improving, reduction of the negative factor was the top priority for education interest groups during the 2014 legislative session. Their proposals ranged as high as $275 million. In the end lawmakers agreed to a $110 million reduction.

The Hickenlooper administration and legislative budget experts resisted a larger buy down, arguing that a bigger amount would put too much pressure on the state budget in future years. That can happen because reducing the negative factor puts more money into K-12 base funding, which is subject to A23’s multiplier in the future.

Lawsuit backers met with key lawmakers near the end of the session, but legislators reportedly refused to be swayed by any possibility of a suit.

What happens next

As usually happens in these kinds of constitutional cases, the attorney general is expected to ask the district court to dismiss the suit. If that happens, the plaintiffs would appeal to the Colorado Court of Appeals.

Assuming the case stays alive in district court one way or another, both sides could file their written arguments by the end of the year – creating a pile of legal documents for the 2015 legislature to ponder as lawmakers consider the 2015-16 budget and how big a negative factor to include.

Interest groups already are gearing up to push for additional factor buy downs in 2015, and a live lawsuit will provide additional fuel and tension for the debate.

 

help wanted

Memphis charter office seeks to double in size to keep up with growing sector

PHOTO: Laura Faith Kebede
From left: Stacey Thompson, charter planning and authorizer for Shelby County Schools, confers with director of charter schools Charisse Sales and Brad Leon, chief of strategy and performance management.

Shelby County Schools is about to double the size of its staff overseeing charter schools.

About a year after a national consultant called the district’s oversight deficient, the school system is seeking to reorganize its team and hire more help.

With 45 charter schools, Shelby County Schools is Tennessee’s largest charter authorizer but has only three people to watch over the sector — “lean for a portfolio of its size,” according to a report by the National Association of Charter School Authorizers, or NACSA.

The charter office reviews applications for new schools, monitors quality of academic programs, ensures compliance with state and federal laws, and can recommend revocation for poor performance.

NACSA Vice President William Haft said the changes point to a school system that is becoming more sophisticated in collaborating with charter schools in order to improve innovation in the classroom.

Shelby County Schools “grew quickly as an authorizer,” he noted, and at a time when the district was also restructuring quickly due to the 2013 merger of city and county schools and subsequent exit of six municipalities.

“When you have just a handful of charter schools, naturally it’s just a small organization and you have an all-hands-on-deck mindset. … Everybody pitches in,” Haft said. “Now there’s an opportunity. And to their credit, the district is recognizing and … taking action to develop those structures that are now absolutely necessary.”

The new positions, which were advertised this month, would add more specificity to job responsibilities.

Brad Leon, the district’s chief of strategy and performance management, said the restructuring is to meet the needs of a growing number of charter school students, including thousands under the state-run Achievement School District who eventually will return to local governance.

“This is part of the strategic staffing plan …,” Leon said. “This team will be directly responsible for ensuring that children in our community have the opportunity to attain an excellent education and for moving forward the district’s priority around expanding high quality school options.”

The hires also are designed to boost the relationship between charters and the district, which have become increasingly strained over funding and processes. Last spring, confusion over the district’s charter policies came to a head with the revocation of four charters.

Shelby County Schools authorized its first three charter schools in 2003, one year after the state legislature passed a law allowing nonprofit operators to open schools in Tennessee. Though the sector has swelled to 45 schools, its oversight office has only grown from two to three staff members.

With charter schools now firmly entrenched in Memphis’ education landscape, the district has sought to step up its oversight of them. Last year, Shelby County Schools issued its first-ever report on the state of charter schools in Memphis. A charter advisory committee also was created to find ways to improve oversight and collaboration in academics, financing and facilities.

Coming out of that committee is a voluntary authorizer fee. Many Memphis operators have said they are willing to pay the fee in exchange for better oversight and collaboration, including adding more staff to the charter office.

“(Charter leaders) look forward to continuing to work with them and others that the district looks to add to the office in order to continue the steps to becoming a high quality authorizer for SCS charter schools,” said Luther Mercer, Memphis advocacy director for Tennessee Charter School Center and co-chairman of the charter advisory committee.

Numbers game

Aurora school board balks at budget-cutting plan that would likely increase class sizes

A college algebra course at Hinkley High School in Aurora. (Photo by Jamie Cotten, Special to The Denver Post).

The Aurora school board on Tuesday rejected increasing student-to-staff ratios as a way to cut the budget, a move that would likely lead to more crowded classrooms and fewer teachers.

Aurora Public Schools Superintendent Rico Munn was seeking the board’s guidance on the idea, one of several under consideration to trim the 2017-18 budget by about $31 million.

More than 100 teachers, parents and community members packed the board meeting to speak out about the impact of increased class sizes — and the board told Munn to look elsewhere.

Munn presented the request saying the district would try to change staff ratios as little as possible. While more modest budget cuts this year have not been felt in classrooms, Munn said it may be inevitable. The district is facing a budget crisis due to record enrollment declines, among other issues.

Staff salaries make up by far the largest share of school districts’ budgets.

“If we take 70 percent of our budget out of the conversation, then that leaves very little room to address what are significant unknowns that are in front of us,” Munn said.

In Aurora, staffing ratios are used to calculate the largest portion of school budgets.

Opponents’ criticism of the plan at Tuesday’s board meeting contrasted to what district officials gathered during a community input process. Of four budget-cutting scenarios, one that included the staff-ratio increases received the most first-choice votes from participants.

District officials in laying out the scenarios claimed that increasing the staffing ratio would not directly increase class sizes.

“Personnel dollars are allocated to schools and then principals make staffing decisions,” it stated.

On a practical basis, however, it’s hard to reach any other conclusion, according to educators and community members who spoke during Tuesday’s public comment.

“I currently have 31 students in my home room,” one teacher told the board. “The more students I have, the harder my job becomes.”

Board president Amber Drevon said that because the increased student-to-staff ratios had more than a 90 percent chance of increasing class sizes, she would rather not change the ratios.

“I think our class sizes are too big as it is,” Drevon said.

Four of the six board members at Tuesday’s meeting said the same, asking Munn and district administrators to take a closer look at all other options, including some scenarios submitted by the public.

District officials have sought to clarify that the district is not bound to pick any of the drafted scenarios — including the ones they drafted — or to follow them as presented.

“The scenarios were meant to drive a community conversation,” the district’s budget website now states. “They were NOT designed to represent specific courses of action.”

The district is still able to present other cuts later this spring, said Patti Moon, a district spokeswoman.

In part, the district says the cuts are needed because of a declining trend in student enrollment, and in part because of a potential drop in property taxes that would mean less local money for schools. The district is also looking to start building up its reserves — basically, rainy day money — instead of continuing to dip into the fund.

In the current school year, the district has already made more than $3 million in administrative cuts and authorized use of reserves to prevent other mid-year cuts.

Board member Dan Jorgensen asked the district to consider using dollars from reserves once again for next school year. At the end of the 2015-16 school year, the reserves stood at more than $15 million.

The board also had a brief discussion Tuesday insisting that they had the right to analyze the budget line by line, against the advice of the district’s attorney citing the district’s governance policy. Board members said they did not want to analyze the budget that way, but said they would if they needed to.

“Everything is on the table,” Drevon said. “We’re a long way away from making any final budget decisions.”