School Finance

Lawmakers looking for ways to salvage school finance law

Sen. Mike Johnston often compared his school-finance reform law to a high-powered car that just needed “gas” from Amendment 66 to whisk Colorado into a bright future of education reform and improved student achievement.

Colorado CapitolBut voters declined to pay at the pump, and Johnston’s Senate Bill 13-213 is sitting on blocks in the legislative garage. The question now is, will Johnston or others try to salvage it for parts and build a couple of compacts, and will anyone be willing to pay for them?

In the days following A66’s defeat, Johnston and other amendment backers were cautious about predicting what they or others may do.

“I can’t answer that yet,” Johnston told EdNews on Election Night when asked about which pieces of SB 13-213 he might try to resurrect. The Denver Democrat was similarly circumspect in later media interviews, although he certainly didn’t close the door on reviving parts of SB 13-213.

But lawmakers love to propose education bills, and with more than $1 billion in the State Education Fund, a dedicated account used to supplement annual school funding, there’s little doubt there will be some attempts to revive pieces of Johnston’s omnibus bill from last session.

Minority House Republicans were first out of the gate last week, announcing they’ll introduce 2014 bills to change how student enrollment is counted, provide better facilities and transportation funding for charter schools and to improve transparency of school district finances. Most of those issues were addressed in SB 13-213. (Get details in this news release.)

Another part of the GOP package is a bill by Rep. Clarice Navarro, R-Pueblo, to increase funding for English language learners and to extend the number of years students are eligible for such funding. She, along with Rep. John Buckner, D-Aurora, saw the 2013 version of that idea die in committee. SB 13-213 contained significant increases for ELL students as part of the overall K-12 funding formula.

Disassembly may be difficult

Pricey shopping listEstimated costs of some SB 13-213 components
  • Reform laws implementation – $374 million
  • Special education increases – $188 million
  • Innovation grants – $100 million
  • Charter facilities – $21.6 million
  • Gifted and talented – $7 million
  • Teacher career ladders – $6 million
  • New count and financial reporting systems – $5 million
  • Services for students in detention – $2.6 million
  • Cost and return on investment studies – $500,000

It’s hard to break out figures for some of the bill’s more expensive elements, including additional funding for at-risk and ELL students, more preschool spaces for at-risk children and full-day kindergarten for all students. But there is consensus that those elements would cost hundreds of millions of dollars. Leanne Emm, CDE budget chief, says the cost of those as separate programs would require new calculations.

Figures reflect new spending and are from a legislative staff analysis of the bill.

Johnston also frequently liked to describe SB 13-213 as a “grand bargain,” a plan that had something for every education interest, from more money for districts to some additional funding for charters to a modest amount of autonomy for principals in spending money on at-risk students.

“I think the beauty of 213 was that it was a comprehensive package,” notes Kayla McGannon, a lobbyist who had education clients.

Given that its pieces were so interconnected, SB 13-213 may be tough to disassemble. And even if parts of the law surface in 2014 as separate bills, they face the same problem that Johnston’s big bill did – they need gas.

The total SB 13-213 package would have cost an estimated $1.3 billion in 2015-16, its first year of operation. That would have been on top of the $5.7 billion Gov. John Hickenlooper is proposing be spent on district support in 2014-15.

So big-ticket elements of SB 13-213 are expected to be off the table because there’s no money to fund them.

But Capitol observers still expect Johnston and others to consider reusing smaller pieces.

The most likely one is a change in counting student enrollment. District funding currently is based on attendance counts taken during a small window around Oct. 1. Many legislators and educators favor switching to the system called average daily membership (ADM), under which student counts are taken frequently throughout the school year and averaged. The education theory behind ADM is that districts will have a greater incentive to keep students enrolled.

But rolling out ADM isn’t without cost – estimates run between $5 and $10 million – and it would take some time to implement. Even SB 13-213 wouldn’t have changed the count system until the 2017-18 school year.

New bills will get close scrutiny

Even relatively small and largely one-time costs like changing to ADM may face opposition.

That’s because school districts, now without the prospect of an A66 boost, will be pushing hard to get as much support as they can from the current school finance formula.

Hickenlooper is proposing that basic K-12 support, known as Total Program Funding, increase only by inflation and enrollment growth in 2014-15, as required by Amendment 23. That would put total program at about $5.7 billion in state and local revenues. The governor’s plan proposes very little change in what’s called the negative factor, a mathematical formula used by the legislature to reduce school funding from what it would have been under the full terms of A23, the 2000 constitutional amendment that will continue to guide education funding now that A66 is dead. It’s estimated districts have lost more than $1 billion in funding over the last few years because of the negative factor.)

Districts lost a fight with Hickenlooper and the Joint Budget Committee last spring over reduction of the negative factor. Districts are expected to resume the battle in January and to resist spending money on new education initiatives instead of using it to trim the negative factor.

“Most districts want more money spent out of the State Education Fund” on total program, said one lobbyist. “I think it’s going to be a rough year.”

Kerrie Dallman, president of the Colorado Education Association, said recently, “Our legislators need to understand the burden and stress unfunded mandates have placed on educators across the state. We would caution the upcoming Colorado General Assembly against adding any new education reforms to this over-burdened education system.”

Other education advocates also think the state perhaps should focus on successfully implementing education reforms already in the pipeline.

This school year districts are rolling out new academic content standards, a new early literacy program and evaluating principals and teachers under the terms of Senate Bill 10-191, the landmark evaluation law. That system will be fully implemented in the 2014-15 school year, along with new online tests.

“We need to regroup and focus on things that already are in law,” said Chris Watney, president of the Colorado Children’s Campaign, which was a major backer of SB 13-213 and of A66.

Speaking of those initiatives, Sen. Rollie Heath said, “If we get all of that right I would be very happy,” adding, “I don’t see a lot of meaningful [new] things happening” during the 2014 session. The Boulder Democrat was Johnston’s cosponsor on SB 13-213 and will be Senate majority leader next session.

There’s even some stray Capitol chatter that the defeat of A66 could put existing reforms – or at least their timetables – at risk.

Tony Salazar, CEA executive director, acknowledged that risk recently, but he added, “It’s too early to say if delays are needed.”

Even Hickenlooper, speaking with reporters last week, said, “If 66 had passed we would have been able to implement Senate 191 at a high level,” along with other programs. “The money’s not there now.”

behind the budget

With House plan that adds money for vulnerable kids, all Indianapolis districts would gain

PHOTO: Scott Elliott
Perry Township, along with the other Marion County districts, would see more per-student funding if a House budget proposal moves forward.

Every district in Indianapolis is tentatively slated to get more state dollars per student under House Republicans’ 2019 budget plan released this week — exceeding some school leaders’ expectations.

For the most part, new money added to the budget to fund each student along with higher enrollment estimates are driving the increases. But even though some districts are projected to lose students, they would still get more money because of changes to Indiana’s funding formula that add money for vulnerable students and because lawmakers put more money in the budget overall.

“I just didn’t think they’d be able to reach that level when they started the session,” said Patrick Mapes, superintendent in Perry Township. “It’s very much appreciated.”

In Indianapolis Public Schools, the city’s largest school district, per-student funding is expected to go up more than 3 percent to $8,029 from $7,764. Overall, the district would see about 4 percent more in total state dollars. Compared to other districts, IPS receives more per student in part because of the number of students there from low-income families. Having more English-learners and students with disabilities can also bring in additional funding per-student.

“There are still too many moving pieces in other parts of the comprehensive budget proposal to get a clear picture of what this will ultimately mean for our students and employees,” an IPS spokeswoman said in an emailed statement.

The estimates are far from final, as the Senate will still offer its own budget draft and lawmakers will eventually have to come to a compromise. But the House draft, which easily passed out of the Ways and Means Committee on Monday, will likely see support from the full House in the coming week.

This year, district funding estimates could be even more volatile because of problems with a calculation that drives extra aid to districts with larger shares of students from low-income families. It’s unclear how this might affect schools because the calculations were not changed from last year.

“We used the numbers that we felt gave schools the most realistic proposal,” said House Ways & Means Chairman Todd Huston. He said that he was not sure when more accurate projections would be available, but House Republican staff was working with other state agencies to dig into the problem.

The budget draft proposes increasing Indiana’s contributions to schools by $461 million — or 4.3 percent — through 2021, a little more than increases in years past. The basic per-student funding that all districts get would jump from $5,352 per student this year to $5,442 per student in 2020, and $5,549 per student in 2021.

House lawmakers also made some big overall changes to how schools are funded that do more to support some of the state’s most vulnerable students.

Funding for preschool for students with disabilities increased for the first time in more than 25 years, going from $2,750 per student currently, to $2,875 per student in 2020, and $3,000 per student by 2021. In 2018, about 13,000 students qualified for the program, costing the state about $36 million. The increased grant would up those totals to about $37.3 million in 2020 and $39 million in 2021.

The budget draft would also send more money to educate students learning English as a new language for the fourth year in a row. Last year, lawmakers set aside about $32 million. Over the next two years, there’d be more than $40 million available for grants, at $325 per student, up from $300 previously.

Higher per-student grants for English learners would help the district shift more money to teachers and other employees, said Mapes, the Perry Township superintendent. Raising teacher salaries has been a hot topic during this year’s legislative session, and while money is not specifically earmarked for raises in the House budget plan, Mapes said it doesn’t need to be.

“That’s local control,” Mapes said. “We have an elected school board whose job is to make that decision for each school corporation in the state. It’s not the job of the legislature to direct down a salary schedule.”

In Beech Grove, the funding forecast is slightly less optimistic — the district is the only in the county projected to lose funding overall through 2021, by a small margin of less than 1 percent. That’s driven by a projected loss of about 116 students out of a total of 3,033.

“We all need to take three steps back and not panic because … there’s a factor here that’s real critical — the standpoint that our enrollment has gone up for nine straight years until this year,” said Paul Kaiser, superintendent in the district. Lawmakers “are estimating our enrollment is going to continue to drop.”

Kaiser noted that the district does have a high rate of students transferring in from outside the district — Beech Grove had the second highest rate of students transferring into the district last year, with almost 1,200 students coming in. Like the rest of the county, Beech Grove is expected to get more dollars per student, so if transfers work out like Kaiser expects, the additional money would turn things around. He said he isn’t sure why enrollment was down last year.

“We’re hoping last year’s drop in enrollment was a blip on the horizon,” Kaiser said. “And if it’s not, then we’ll have to decide what we want to do.”

Part of Kaiser’s strategy is going to district voters in the fall to ask them to approve a tax increase — a move many school districts across the state, including IPS, are increasingly making to bring in more revenue.

One group that would see reductions under the House plan were virtual schools and virtual programs operated by school districts — they were cut from 100 percent of what students in traditional schools get to 90 percent, equivalent with students at virtual charter schools.

Lawmakers made the change in response to a rapidly growing virtual school in the Union school district, near Modoc, helped throw off school funding estimates in 2017. Even with the funding cut, budget projections show Union still would receive more state money, driven largely by growing enrollment.

House Republican staff did not confirm whether the change in all district-based virtual school funding resulted in cost-savings for the state.

Take back

Higher property values mean Colorado is getting back millions from schools

PHOTO: J. Zubrzycki
Colorado State Capitol

With student enrollment lower than anticipated and property tax revenues up in many districts, the state could get back as much as $77 million originally allocated for schools this year.

That’s a small portion of Colorado’s $7 billion K-12 education budget, and that money could be used to help fund Gov. Jared Polis’ universal full-day kindergarten plan. But some lawmakers want school districts, not the state, to control at least a portion of that money.

Citing the recent Denver teacher strike and concerns over school funding, the Colorado House voted Friday to let schools keep $12.9 million of that money. As early as Wednesday, the state Senate must either approve the amended Senate Bill 128 or send it back to a conference committee made up of the budget committee members.

It’s the first salvo in what could become a contentious debate over how the state funds schools.

Under Colorado law, the legislature determines how much money school districts should get for each student, with the state and school districts picking up a portion of the costs. If local districts raise more money, the state pays a correspondingly smaller amount. This year, school districts raised a collective $56.1 million more than predicted from local sources, mostly property tax revenue.

At the same time, schools are educating fewer students than predicted. Per pupil funding is based on estimates made months in advance. Enrollment for the current school year is 1,056 fewer than forecast, with at-risk student enrollment 9,893 fewer than the estimate.

The $77 million — or $64.1 million if the House amendment stands — could help fund full-day kindergarten, which is estimated to cost $227 million next year.

Or it could go into next year’s school finance act, which lays out how much money schools will get for 2019-20. Or it could go into the general fund, where it could be used for other needs.

But asking school districts to return money midway through the year can be difficult “because districts hire teachers for the start of the school year and then it’s really hard halfway through to say, ‘Oh, we can’t pay for you anymore,’” said Matt Cook, director of advocacy and public policy for the Colorado Association of School Boards.

Last year, the state took back $104 million. With an increase in local revenues of $97 million, the total cut was only about $7 million, compared to a $21 million impact this year if the state keeps the full amount. Some of last year’s money was later put toward school safety measures.

The House amendment keeps average per-pupil funding at $8,137, instead of reducing it by about $15 on average as the Joint Budget Committee proposed.

The impact of these proposed changes varies among school districts, said Tracie Rainey, executive director of the Colorado School Finance Project. Some districts have seen larger changes in enrollment than others, and some districts raise a large portion of their revenue from local sources, while others are more dependent on state funding.

“[Y]ou’re all of a sudden again going to have a whole different group of kind of winners and losers in this process,” she said.

There’s also a political consideration for Democrats and Republicans alike.

“Everybody who ran for election this last year ran on funding education better, and that they were looking to try to solve the problem,” Rainey said.

In fact, attack ads in the 2018 election often cited votes on school finance amendments or promises to increase school funding.

The House amendment passed on a voice voice with apparent broad support. It replaced an earlier amendment that would have left all $77 million with the school districts.

“I think our next step for us would be what’s the financial, fiscal implication of the amendment and then wait to see what we hear from our staff,” said state Sen. Rachel Zenzinger, an Arvada Democrat and budget committee member.

How this relatively tiny slice of the pie is carved up could be instructive, going forward, education observers say.

“That’s always the big question every year, right?” Cook said. “How do we pay for everything? This year you’ve got the pressure for full-day kindergarten, so I think it’s going to be a very tough budget negotiation.”