Fairer to whom? Colorado considers redividing the pie with a new school finance formula

In a change that one lawmaker is calling a “paradigm shift,” Colorado’s school funding formula eventually could take into account how many students in each district are learning English or have disabilities that require additional services — needs with which state funding has not kept pace.

That’s a key component of draft legislation that will be presented Monday to a special committee tasked with rewriting Colorado’s 25-year-old formula determining how the state distributes money to school districts. There is widespread agreement that the current model is outdated and too often sends more money to well-off districts and less to poorer districts, with little regard for student needs. But changing it has proved politically challenging.

“We have spoken consistently and with unity about making the funding formula first, foremost, and completely about the students,” rather than about institutions like districts, said state Sen. Paul Lundeen, a Monument Republican and vice chair of the Interim Legislative Committee on School Finance, which has been meeting for three years. “That is a really significant change in language.”

But the draft legislation does not yet address the price tag of this change — it’s full of blank spots for different variables at play — or whether there will be additional revenue for public schools in a state where per-student funding lags behind the national average by about $2,700, according to analyses that take into account regional cost differences.

Previous efforts to rewrite the school finance formula have foundered in part because voters have turned down statewide tax increases for schools, and changing the formula without adding more money inevitably creates winners and losers.

State Rep. Julie McCluskie, a Democrat from Summit County who served as chair of the school finance committee, believes that ultimately the formula will require more money.

“In trying to make our school finance formula more fair, I truly believe our formula should be student-centered and equitable, but right now we are underfunding public education,” she said.

She stressed that the legislation to be presented Monday is just a draft that will undergo numerous changes based on feedback from other committee members and representatives of interest groups, including school districts.

Consultants from EdBuild, a nonprofit that works on school funding issues nationally, have developed a complex computer model that shows how various changes to the funding formula would affect different districts and the overall cost of funding education in Colorado.

On Monday, McCluskie and Lundeen will present different proposals for each of the variables that feed into the formula, such as how much extra funding for students living in poverty or how much consideration should be made for very small rural districts or for mountain resort communities with high costs of living. Those numbers will be run through the model to give more concreteness to the proposal. The committee plans to meet one more time before the session starts Jan. 8, ideally to vote on a proposal with real numbers behind it.

The hope is that the 10 members — comprising five Republicans and five Democrats, with equal representation from the state House and the state Senate — will be able to agree and send a committee-endorsed bill to the full legislature.

Colorado’s current school finance formula starts with a base amount for each student and then applies factors related to district characteristics, like size and cost of living that could increase or decrease how much the district gets per student. Because wealthy communities often also have a high cost of living, this has had the effect of sending more money to more affluent communities, which in some cases pay a smaller share of their school costs than do poorer districts.

Districts also get additional money for “at-risk” students, defined as those learning English or those who are eligible for free school lunch, but the current formula puts more money into district characteristics like cost of living, which accounts for more than $1 billion alone, than it does toward students in poverty.

And because the district characteristics are applied to the base funding first, different districts get radically different amounts of extra money for their students from low-income families.

Districts also get to count each student only once, such that they get the same amount of money for an English language learner whose parents are engineers with college degrees and a stable home as for one whose parents struggle to pay their bills.

Districts get additional money from a separate pot — known as categorical funding — for students with disabilities, those who are gifted, and those who are learning English — but that funding has not always kept pace with the growth in those student populations or with community and legal expectations for how they should be educated.

In one analysis, EdBuild noted that the legislature frequently doesn’t allocate enough money to educate students with disabilities. It falls short of its own guidelines, which call for students with a higher level of need to get $6,000 a year. Instead, districts get “leftover” money, an approach that consultants said no other state uses.

These are some of the challenges the committee set out to tackle. It is not, however, taking up another great inequity in Colorado school funding. Due to the complicated interaction of state laws around taxation, some districts have to pay most of their own school costs from local property taxes, while others get a large share of their funding from the state. Again, these differences have little to do with how much property wealth a given district has. On top of that, some districts have passed special property taxes to supplement what the state formula allocates.

The Joint Budget Committee is considering a separate bill that would push districts to adopt uniform property tax rates, increasing the amount of local money going to education. If this change were adopted, it could eventually free up hundreds of millions of dollars in state money for K-12. However, a similar proposal last year was never even introduced because its chief legislative champion feared it would hurt the districts he represents.

Just like rewriting the school finance formula, property tax reform is a heavy political lift.

Lundeen said it’s important for the conversation about how money is distributed to move forward independent of the conversation about revenue.

“What we’re asking people to do is have an honest conversation about the best policy,” he said. “Once we have the best policy, we can ask, should we put more money into it? But these are separate questions.”

In contrast, McCluskie believes the system needs more money to meet student needs.

She plans to propose an increase in base funding alongside increases for students living in poverty, those who are learning English, and those with disabilities.

Here’s how the draft legislation proposes distributing money among districts:

  • Districts would get additional money for each student who qualifies for free- or reduced-price lunch, not just those who qualify for free lunch. Larger districts with higher concentrations of students in poverty would get more additional funding.
  • Districts would get additional money for each student who is learning English, including those who have graduated from specific English language instruction but whose progress is still being monitored.
  • Districts would get additional money for each student with a disability, with more money allocated for more significant needs.
  • Districts with a high cost of living and ones that are small or very remote may still get additional money, but it’s likely that these factors would only be applied to districts that are particularly small or particularly expensive, rather than making adjustments for every district according to minor differences.
  • All of these variables would be applied to base funding in a cumulative way, rather than making district adjustments first. This addresses the problem of different districts getting different amounts of money for students with comparable needs.
  • There would be a two-year transition period, starting in 2021, in which districts that would lose money under the new formula would get extra money.

How much consideration, if any, to make for district characteristics like size, remoteness, and in particular cost of living is likely to be a major point of discussion. The less money is set aside for cost of living, the more money is available from existing revenue to apply to other factors, like poverty and disability status.

Grant Schmidt, superintendent of the Hanover district in El Paso County and co-chair of the Colorado Association of School Executives’ legislative committee, said he and other district leaders are glad to see lawmakers proposing a new formula, but waiting for numbers to understand how it will impact districts.

“Our concern is to make sure we don’t have any losers, so to speak,” he said. “We don’t necessarily agree that some factors are district-oriented and some are student-oriented, because all districts use the funds to educate students.”

And speaking as a superintendent, he said, “we are unified in the approach that if there is going to be a change, we need more money.”

Julie Benmellah, president of the Colorado Association for Bilingual Education, said more money for students learning English — students she calls emerging bilinguals, in recognition of the importance of their native language — would make a noticeable difference in those students’ school experience and academic performance. Districts need money for additional curriculum, more staff, and training for all teachers.

“Language learning doesn’t just happen during one period of the day in a particular class,” she said. “It happens throughout the day, and every teacher who works with an emerging bilingual needs the materials, the knowledge, and the skills to support that student.”

However, Benmellah said she and her colleagues share the belief that education in general is underfunded and that more money for English language learners should not come at the expense of other students.

And once districts have that extra money, she said, they need to make sure it goes to serve the students for whom it was intended.

“We would see improvement if we targeted resources to areas of need,” she said. “We need to hold all districts’ feet to the fire to make sure those funds go to the students they are underserving.”

Read the full text of the draft bill below.