Colorado schools are getting more money. Bigger changes could be on the way.

Colorado state Capitol building in Denver, Colorado, with the U.S. and state flags in front of a cloudy sky
Colorado lawmakers made progress on challenging school funding issues this session. (Hyoung Chang / The Denver Post)

When Colorado schools reopen in the fall, most of them will have a lot more money to work with — between 10% and 12% more per student for the typical district — and schools that serve large numbers of students who live in poverty and English learners will be the biggest beneficiaries.

The pandemic forced lawmakers to reexamine which students need the most help. With the economy doing better than expected and lawmakers using a new legal interpretation to raise local taxes, Colorado is investing nearly $500 million more in K-12 education, with $91 million alone from mill changes in 2021-22. 

“In a nutshell, it’s a huge step forward for kids,” said Leslie Colwell of the Colorado Children’s Campaign, which has called for sweeping changes to school funding. “We saw the biggest movement for school finance on both the revenue and the formula side in 25 years.”

This year’s legislative session saw a series of key changes to how Colorado funds its schools, just one year after lawmakers made deep cuts to all areas of state government. As painful as it was, the pandemic paved the way for major changes, some of which advocates have sought for years. 

These changes are significant because Colorado has constitutional restrictions on raising and spending money. With limited money in the system, past efforts to change how Colorado funds schools have foundered on rocky political shores

This year, lawmakers found a way past one constitutional barrier — the requirement that voters approve any new tax increase — to bring in more money. Then they agreed to share that money differently with school districts to help students with greater needs.

“We always get stuck in ‘we can’t change the formula unless we have new revenue’ and ‘we don’t want to put more money into the same broken formula,’” Colwell said. While a significantly improved budget outlook helped move the conversation forward, “the pandemic forced a look at the inequities in our system, and legislators seemed motivated to think differently.”

There’s still a lot to do, though. Colorado’s school funding distribution formula changes were limited to areas of broad agreement, and several thornier topics were kicked to a special committee that will meet over the next two years to recommend more changes. 

Increasing funding for students in poverty and those learning English “were the low-hanging fruit of all the changes we were planning to make,” said state Rep. Julie McCluskie, a Dillon Democrat who serves on the Joint Budget Committee and headed up a previous effort to rework the school finance formula. What’s left will be more challenging, she said. 

There are also the critical questions of whether Colorado can sustain its new investment in students and whether the new money will lead to better student outcomes. 

“Money that is not focused on student achievement is not money well-spent,” said state Sen. Paul Lundeen, a Monument Republican active in school funding debates.

Here’s a closer look at what changed this year and the work that remains.

Mill levy change will bring in more than $91 million

In Colorado, school funding is shared by the state and local districts. Once total school funding is established by a formula, the state pays for whatever local taxes don’t cover. Over the last few decades, due to the complex interaction of constitutional provisions, more of that burden shifted to the state, crowding out other needs in the state budget. Meanwhile, taxpayers in different districts paid wildly different tax rates, from 4 mills in wealthy Aspen to 27 mills in Cañon City and Alamosa. One mill is equivalent to $1 for every $1,000 of taxable value. 

This year's change in state law gradually increases local property taxes in districts with rates below the cap of 27 mills. The Colorado Supreme Court signed off on the change, agreeing with an argument that voters didn’t need to approve the increase because tax rates had been lowered in the past despite voters at the time agreeing to hold rates constant.

This change is expected to bring in $91 million in new school revenue for 2021-22 and more than $288 million a year when it’s fully implemented. It’s the first time in years that Colorado schools have had a new revenue source, and it means that taxpayers in different districts eventually will pay similar rates. 

Matt Richmond, an independent consultant who previously advised Colorado lawmakers on school funding issues as the chief program officer at Ed Build, said the money produced by this change is significant and “worth the work that was put in,” but it’s even more valuable that it creates a fairer funding system. Previously, some wealthy districts paid lower taxes while collecting more state money than poorer districts.

“Anytime you have a statewide system, especially something as important as education, you want people to feel that it’s fair and that they’re bought in,” he said. 

Most districts are getting more state money

If the mill levy change were the only change this year, it would have meant more spending overall on K-12 education, but many districts, including some serving working-class communities such as Denver and Commerce City-based Adams 14, would have seen less state money as they covered more of their own costs with local taxes. 

Instead, the majority of school districts are seeing increases in state money and paying a smaller share of their total costs, according to a Chalkbeat analysis. Why? The deep cuts lawmakers made in 2020 turned out to be unnecessary because the economy performed better than expected, and the forecast for 2021 also was strong. That meant the legislature had plenty of money to work with and could restore past cuts, invest new money in schools, and save money in the state education fund as a reserve against a future downturn. 

According to estimates from state analysts, Denver taxpayers will pay 5% more toward schools in 2021-22, while the state will pay almost 33% more. In the Adams 14 district, which serves one of the highest percentages of English language learners in state, local taxpayers will pay less than 0.2% more while the state will pay almost 20% more.

There are a few exceptions. The Aspen school district, a poster child for the unfairness of the previous tax system, will see a 75% decrease in state aid and cover more than 96% of its own costs next year through a local tax increase of about three-quarters of a mill.

Formula changes will help at-risk students

Colorado’s school funding formula starts with a base amount per student and then adds weights based on student factors such as poverty and district factors, including size and cost of living. These weights end up steering more money to expensive districts than to ones serving large numbers of students in poverty. Rather than run all the new money through the old school funding formula, which could have exacerbated those inequities, lawmakers made two important changes. 

They decided to count more students living in low-income households, adding those who qualify for reduced-price lunch to those who qualify for free lunch to the at-risk calculation. And for the first time, districts will get 8% more for each student learning English. Colorado previously set aside some extra money for English learners, but that amount hasn’t grown with the population.

“If the new money had not come in, I’m not sure we would have had the support for these formula changes,” McCluskie said. “If we had made these changes without the new money, then wealthier districts with fewer students in poverty would have seen a decrease in funding.

“Our school districts are very willing to engage in formula changes as long as the pie is expanding. I hate to use the phrase winners and losers, but if we shift resources to districts with more need [without new money], some districts that were winners would lose money, and that has been a challenge.”

Colorado’s constitution complicates school funding changes

Colorado’s Taxpayer’s Bill of Rights, known as TABOR, requires voters to approve any tax increases and limits how much the government can grow year over year. If the economy does well, and revenues grow faster than inflation, the state has to give money back to taxpayers, something state economic forecasts predict will be required for each of the next three years.

Tracie Rainey, director of the Colorado School Finance Project, worries that TABOR refunds will eat into the general fund money available to support education.

This year’s changes have “the potential to help if the state can sustain it for the next five years, but if we get in a situation where we seesaw back and forth, have money one year, next year it goes away or is reduced, then you cannot put it into people and programs,” she said. “You’ll have this constant upheaval.”

Richmond said Colorado’s constitution makes it a uniquely challenging state.

“The state can have as many great ideas as they please, and with the number of restrictions that come from the constitution related to funding, it’s very difficult to implement them,” he said.

Next steps include bipartisan discussion

Colorado lawmakers plan to convene a special bipartisan committee to look at further school finance reform. This is the second such effort in five years. The topics include how the state counts students in poverty, how it pays for special education, how it funds rural districts, how to account for cost differences around the state, and how to make up for some districts’ ability to pass special tax increases called mill levy overrides that let them provide additional services that less well-off — or more tax-averse — districts cannot.

Richmond said changing how the state thinks about poverty is critical, a sentiment echoed by local education advocates. With the federal government extending universal free lunch during the pandemic, families increasingly aren’t filling out applications for subsidized lunch and not showing up in at-risk student counts, even though many families are struggling more than ever. Other ways of measuring poverty include looking at community income levels or how many children take advantage of certain services. 

After a disrupted school year, lawmakers hope additional funding will make a difference for students. (Nathan W. Armes for Chalkbeat)

Changing the cost-of-living factor, which often sends more money to communities with high property wealth and fewer students in poverty, will likely be contentious. With this year’s changes, that factor now directs a smaller share of state money, but districts that have benefited aren’t seeing cuts. 

But if Colorado wants to spend more on special education or other student needs, the money will have to come from somewhere. That will mean hard decisions.

“I keep feeling like people are looking for this magic moment where it won’t take any political courage to make these changes,” said Luke Ragland, who heads up the conservative education advocacy group Ready Colorado. “It’s never going to be easy. It’s never going to be palatable or convenient to all these traditional interest groups to take money from a system that benefits institutions and invest it in ways that benefit kids.”

But Ragland and Lundeen, the senator, both said they are encouraged to see broad agreement that Colorado’s school finance formula should be built around the needs of kids.

“A formula that honors student achievement is still alive in the building,” Lundeen said. “If we don’t focus on that, if we don’t honor that, then we have failed the students of Colorado.”

Many Republicans don’t think Colorado schools need more money so much as that money needs to be spent differently and with more leadership and commitment.

“I always ask: What is the number? It’s always ‘more,’” Ragland said. “That’s not a real discussion. That’s a talking point.”

A growing body of research finds that spending more money on education improves outcomes for low-income students, though not necessarily for their better-off peers.

Colwell, of the Colorado Children’s Campaign, said the public should expect even this year’s investments to make a difference, if not immediately in test scores than in other ways.

“The public should expect investments made in things that will directly address the lost learning opportunities from the pandemic, and we should see some acceleration of student learning in the next year because students have more access to the supports and interventions that they need,” she said.

Ragland said the public should also watch to see if teacher salaries go up or if new money goes toward administrative costs.

Rainey said the first question for the special committee needs to be what kind of education system Colorado wants, the second how much that would cost, and only the third how to distribute the money.

For example, the additional 8% for English learners doesn’t reflect the full extra cost of teaching students a new language — it’s just what lawmakers felt they could afford. 

Colorado spends a smaller share of its total economic capacity on education than most other states, according to an analysis by Bruce Baker, a school finance expert from the Rutgers Graduate School of Education. Neighbors like Kansas spend more because its state constitution requires the legislature to provide funds to meet goals set by the state’s board of education.

“Colorado is one of the least well-funded school systems in the country, especially for as wealthy as it is,” Baker said. “Colorado has been willing to try anything but money. Let’s dramatically expand charter schools, let’s do teacher evaluations, let’s do portfolio model, let’s do anything but fund schools.” 

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Correction: The map showing district contributions to state funding has been updated to correct the information for the Littleton school district. Local contributions expected to decline by -1.0411%.

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