School Finance

Compact model of school finance plan still in the shop

A stripped-down version of last year’s school finance overhaul may soon join the growing line of bills that hope to tap a one-time surplus of K-12 funding.

But that proposal may face resistance from groups that want to increase basic school funding, not pay for new programs, and it may conflict with plans to save some surplus funds for the future.

Sen. Mike Johnston’s Senate Bill 13-213 didn’t go into effect because voters subsequently defeated Amendment 66, the ballot measure that would have paid for it. So the Denver Democrat now is scavenging parts of that plan to build a smaller model he hopes to sell to the 2014 legislature.

Johnston said last week that the bill could be introduced within a few weeks, but the timetable likely depends on how much support Johnston can gather. The bill’s contents are a moving target, and some influential interest groups that have kicked the tires aren’t impressed. Negotiations are continuing.

On the other hand, taking the bill public soon may be necessary to give Johnston’s ideas visibility in the discussion over how to use what could be as much as $1 billion available in the State Education Fund (SEF), an account that’s dedicated to K-12 spending.

“We need to make our case in the midst of all the other education debate,” said Johnston, who is working on the bill with Rep. Millie Hamner, D-Dillon, and Rep. Carole Murray, R-Castle Rock.

Six bills with a combined draw on the SEF of $40 million already have been introduced. Another 10 bills without specific price tags also are in the mix, including potentially expensive plans to expand full-day kindergarten and broaden services for English language learners.

The 2013 coalition is fraying

Johnston’s SB 13-213 and A66 were a big political compromise intended to unite various education interests, from reform groups to school districts, because the $1 billion in new income tax revenue would have paid for some initiatives reformers wanted and for partial restoration of recent years’ budget cuts, something districts wanted. (Refresh your memory on the details in this story from the Chalkbeat Colorado archives.)

Since there’s now no new money for anybody, jockeying for what funding is available has intensified competition among interest groups, and all eyes are focused on the SEF.

The fund is more flush than it’s been in years, primarily because a 2012 law put $1.1 billion in state surpluses into the SEF. Legislative economists project the SEF will contain about $2 billion when the 2014-15 budget year starts next July 1. Some $850 million already is scheduled to be spent, leaving a balance of just under $1.2 billion when the 2014-15 year ends.

Executive branch economists in the Office of State Planning and Budgeting take a more conservative view, estimating there will be $1.6 billion in the SEF at start of 2014-15, $887 million in planned spending and a $712 million ending balance.

Whatever the number, it’s a tempting target for lawmakers, even it’s one-time money, unlike the $1 billion-plus that A66 would have generated for schools every year.

Johnston-Hamner bill would combine key initiatives

While other legislators are proposing individual dips into that pot, Johnston is working to assemble a plan that would combine several spending programs in a single bill.

Those ideas are downsized versions of some programs and spending proposed in SB 13-213, leading some statehouse observers to dub the new measure “Son of 213.” Its reported formal working title is the Student Success Act.

“We have some concepts out there,” Johnston said, without going into details. He noted he’s looking for Republican support for the bill. (Republican lawmakers, Johnston allies on previous education bills, abandoned him last year over SB 13-213 because they opposed the tax increase.)

According to several people familiar with the discussions, the following elements are being considered for inclusion in the bill. The cost is estimated at $230 to $250 million, about half in one-time spending and half in recurring annual costs. As with the elements, the cost is a moving target.

  • Increased kindergarten funding – The bill may include $100 million to increase state reimbursement for kindergarten students as an incentive to expand full-day programs. (Kindergarten reportedly has replaced increased preschool funding as a priority in an effort to gain GOP support.)
  • Reform implementation – Also under consideration is $100 million for districts to help them pay for implementation of new standards, tests and educator evaluations.
  • Early literacy – Districts also could receive $20 million to help fund implementation of the 2012 READ, which requires students to be reading at grade level by the time they enter fourth grade.
  • English language learners – The measure may include $15 million for expansion of services to these students.
  • Enrollment counting – Conversion to the average daily membership method of counting enrollment could get $10 million for technology costs.
  • Financial transparency – Districts also could receive $5 million for the costs of improved spending reporting to the public.
  • Charter school construction – Also under consideration is providing an additional $20-$25 million to charter schools for facilities needs.

Republican lawmakers already have introduced individual bills related to kindergarten funding, English language learners, enrollment counting, financial transparency and charter construction needs. While those bills are unlikely to pass on their own in the Democratic-majority General Assembly, including those issues in his bill could give Johnston a lever to gain some GOP support.

Districts push back on earmarked funding

Plans to dip into the SEF face two big hurdles.

The first is the push by the Colorado Association of School Boards, the Colorado Association of School Executives and the Colorado Education Association to reduce the “negative factor,” the formula used by the legislature to reduce annual school funding from how the state funding formula otherwise would have calculated it. It’s a device used to balance the overall state budget.

Wish list for SEFVarious bills propose to tap the fund to pay for such things as:
  • Data upgrades
  • ECE quality improvement
  • Charter facilities
  • Teacher bonuses
  • Gifted & talented
  • Financial transparency
  • Full-day kindergarten
  • School meals
  • Enrollment count system
  • ELL program expansion

Gov. John Hickenlooper’s revised 2014-15 budget proposal calls for $5.7 billion in K-12 spending, including $3.78 billion in state funds. That would be a $241.1 million increase over this school year. On top of that districts would receive $276.7 million in what’s called categorical funding, money that’s earmarked for ELL students, special education, transportation and certain other costs.

The current negative factor is estimated at $1.004 billion. The governor’s budget would take it to about $1.002 billion next year.

In the wake of A66’s defeat, district interests are pushing hard to use any extra money to “buy down” the negative factor and not to fund new programs like Johnston is proposing.

The school boards group is pushing for a buy down of at least $100 million, and the Denver Area Superintendents Council is suggesting a $275 million increase in school spending, most of it to reduce the negative factor and some of it to increase support for at-risk students. A newly formed group of high-poverty districts also may push for additional at-risk funding.

Without some movement on the negative factor, key education interest groups are highly skeptical about Johnston’s bill-in-progress. District lobbyists say they aren’t getting much sympathy about the negative factor from Democratic leaders, at least in the House.

Spend now or spend later?

The second hurdle to big raids on the SEF is the desire by the Hickenlooper administration and legislative budget writers to maintain a healthy balance in the fund as a cushion against education spending needs in future years, especially if the economy takes a downturn.

K-12 schools are funded by a combination of money from the SEF and the state’s main General Fund. If the schools spending base is increased, even if that initially comes from the education fund, the General Fund bears most of the burden in future budget years. That’s because the state constitution requires base funding to increase by enrollment and inflation every year.

SEF primer

The administration would like to leave a balance of about $700 million in the SEF at the end of 2014-15, letting it decline to $400 million at the end of 2017-18. (In addition to the one-time infusion of cash, the SEF receives an annual share of income tax revenues totaling more than $500 million a year.) Keeping a healthy balance in the education fund allows budget writers to reduce the pressure of K-12 spending on the General Fund.

So lawmakers face a three competing interests when they consider school funding this session – new programs, reducing the negative factor and saving for future education costs.

The riddle likely won’t be answered until April, after new state revenue forecasts are issued in late March, after the main state budget bill firms up and after legislative leaders choose the winners from among all the new spending bills proposed by lawmakers, both for education and other state programs.

money matters

Why Gov. Hickenlooper wants to give some Colorado charter schools $5.5 million

Students at The New America School in Thornton during an English class. (Photo by Nic Garcia)

If Mike Epke, principal of the New America School in Thornton, had a larger budget, he would like to spend it on technical training and intervention programs for his students.

He would buy more grade-level and age appropriate books for the empty shelves in his school’s library, and provide his teachers with a modest raise. If he could really make the dollars stretch, he’d hire additional teacher aides to help students learning with disabilities.

“These are students who have not had all the opportunities other students have had,” the charter school principal said, describing his 400 high school students who are mostly Hispanic and come from low-income homes.

A $5.5 million budget request from Gov. John Hickenlooper, a Democrat, could help Epke make some of those dreams a reality.

The seven-figure ask is part of Hickenlooper’s proposed budget that he sent to lawmakers earlier this month. The money would go to state-approved charter schools in an effort to close a funding gap lawmakers tried to eliminate in a landmark funding bill passed in the waning days of the 2017 state legislative session.

Funding charter schools, which receive tax dollars but operate independently of the traditional school district system, is a contentious issue in many states. Charter schools in Colorado have enjoyed bipartisan support, but the 2017 debate over how to fund them hit on thorny issues, especially the state’s constitutional guarantee of local control of schools.

The legislation that ultimately passed, which had broad bipartisan support but faced fierce opposition from some Democrats, requires school districts by 2020 to equitably share voter-approved local tax increases — known as mill levy overrides — with the charter schools they approved.

The bill also created a system for lawmakers to send more money to charter schools, like New America in Thornton, that are governed by the state, rather than a local school district.

Unlike district-approved charter schools, which were always eligible to receive a portion of local tax increases, state-approved charter schools haven’t had access to that revenue.

Terry Croy Lewis, executive director of the Charter School Institute, or CSI, the state organization that approves charter schools, said it is critical lawmakers complete the work they started in 2017 by boosting funding to her schools.

“It’s a significant amount of money,” she said. “To not have that equity for our schools, it’s extremely concerning.”

CSI authorizes 41 different charters schools that enrolled nearly 17,000 students last school year. That’s comparable to both the Brighton and Thompson school districts, according to state data.

Hickenlooper’s request would be a small step toward closing the $18 million gap between state-approved charter schools and what district-run charter schools are projected to receive starting in 2020, CSI officials said.

“Gov. Hickenlooper believes that working to make school funding as fair as possible is important,” Jacque Montgomery, Hickenlooper’s spokeswoman, said in a statement. “This is the next step in making sure that is true for more children.”

If lawmakers approve Hickenlooper’s request, the New Legacy charter school in Aurora would receive about $580 more per student in the 2018-19 school year.

Jennifer Douglas, the school’s principal, said she would put that money toward teacher salaries and training — especially in the school’s early education center.

“As a small school, serving students with complex needs, it is challenging and we need to tap into every dollar we can,” she said.

The three-year old school in Aurora serves both teen mothers and their toddlers. Before the school opened, Douglas sent in her charter application to both the Aurora school board and CSI. Both approved her charter application, but because at the time her school would receive greater access to federal dollars through CSI, Douglas asked to be governed by the state.

Douglas said that her preferred solution to close the funding gap would be to see local tax increases follow students, regardless of school type or governance model. Until that day, she said, lawmakers must “ensure that schools have the resources they need to take care of the students in our state and give them the education they deserve.”

For Hickenlooper’s request to become a reality, it must first be approved by the legislature’s budget committee and then by both chambers. In a hyper-partisan election year, nothing is a guarantee, but it appears Hickenlooper’s proposal won’t face the same fight that the 2017 charter school funding bill encountered.

State Rep. Jovan Melton, an Aurora Democrat who helped lead the charge against the charter school funding bill, said he was likely going to support Hickenlooper’s proposal.

“You almost have to do it to be in alignment with the law,” Melton said. “I don’t think with a good conscious I could vote against it. I’m probably going to hold my nose and vote yes.”

Payment dispute

Fired testing company seeks $25.3 million for work on TNReady’s bumpy rollout

PHOTO: TN.gov

Tennessee officials won’t talk about the state’s ongoing dispute with the testing company it fired last year, but the company’s president is.

Henry Scherich

Henry Scherich says Tennessee owes Measurement Inc. $25.3 million for services associated with TNReady, the state’s new standardized test for its public schools. That’s nearly a quarter of the company’s five-year, $108 million contract with the state, which Tennessee officials canceled after technical problems roiled the test’s 2016 rollout.

So far, the state has paid the Durham, North Carolina-based company about $545,000 for its services, representing about 2 percent of the total bill, according to a claim recently obtained by Chalkbeat.

Measurement Inc. filed the claim with the state in February in an effort to get the rest of the money that it says it’s owed. Since then, lawyers for both sides have been in discussions, and the company filed a lawsuit in June with the Tennessee Claims Commission. The commission has directed the State Department of Education to respond to the complaint by Nov. 30.

“We’re moving forward,” Scherich told Chalkbeat when asked about the status of the talks. “… We’re simply asking to be paid for the services we provided.”

Education Commissioner Candice McQueen declined last week to discuss the dispute, which she called “an ongoing pending lawsuit.” A spokesman for the attorney general’s office also declined to comment on Monday.

Scherich said he and other company officials have not been called to Nashville for hearings or depositions.

“Our lawyers and the state’s lawyers are still skirmishing each other,” he said. “…They argue about lots of things. It’s kind of like we’re establishing the ground rules for how this process is going to proceed.”

PHOTO: Grace Tatter
Education Commissioner Candice McQueen announced the firing of Measurement Inc. and the suspensions of most testing in April 2016.

Tennessee’s dramatic testing failure started on Feb. 8, 2016, when students logged on during the first morning of testing and were unable to load TNReady off the new online platform developed by Measurement Inc. The fallout culminated several months later when McQueen fired the company and canceled testing altogether for grades 3-8. In between were months of delays after McQueen instructed districts to revert to paper-and-pencil materials that would be provided by Measurement Inc. under the terms of their contract. Many of those materials never arrived.

The company’s claim suggests that the state was hasty in its decision to cancel online testing and therefore shares blame for a year of incomplete testing.

The Tennessee Department of Education “unilaterally and unjustifiably ordered the cancellation of all statewide electronic testing that occurred on February 8, 2016, following a transitory slowdown of network services that morning,” the claim says.

(In an exclusive interview with Chalkbeat the day before his company was fired, Scherich said Measurement Inc.’s online platform did not have enough servers for the 48,000 students who logged on that first day — a problem that he said could have been fixed eventually.)

The claim also charges that McQueen’s subsequent order to substitute paper test materials was “unnecessary and irresponsible” and impossible to meet because of the logistical challenge of printing and distributing them statewide in a matter of weeks.

In her letter terminating the state’s contracts with Measurement Inc., McQueen describes daily problems with the company’s online platform in the months leading up to the botched launch. “This was not just a testing day hiccup; the online platform failed to function on day one of testing,” she wrote.

McQueen said those experiences contributed to her department’s conclusion that Measurement Inc. was unable to provide a reliable, consistent online platform and left her with no option but to order paper and pencil tests. She also cited the company’s failure to meet its own paper test delivery deadlines for her ultimate decision to terminate the contracts and suspend testing.

The last sentence of the four-page termination letter says the state would “work with (Measurement Inc.) to determine reconciliation for appropriate compensation due, if any, for services and deliverables that have been completed as of the termination date after liquidated damages have been assessed.”

In addition to its invoices for work under the contract, Scherich said his company is owed another $400,000 for delivering test-related materials to the state after its contract was ended.

“We didn’t want to be a company that stood in the way of the programs of the state of Tennessee, so we provided all the information they requested,” Scherich said. “We were told we would be paid, we provided the information, and then we’ve not been paid.”

Founded in 1980, Measurement Inc. had been doing testing-related work for Tennessee for more than a decade before being awarded the 2014 TNReady contract, its biggest job ever. The company had a fast deadline — only a year — to create the state’s test for grades 3-11 math and English language arts after a vote months earlier by the legislature prompted Tennessee to pull out of PARCC, a consortium of other states with a shared Common Core-aligned assessment.

Scherich said the loss of the TNReady contract was “a major hit” for his company, but that Measurement Inc. has paid every employee and subcontractor who worked on the project. “We have had to go into debt to keep ourselves viable while we wait for this situation with Tennessee to be resolved,” he said, adding that the company continues to do work in about 20 other states.

To pursue its claim, Measurement Inc. has hired the Tennessee law firm of Lewis, Thomason, King, Krieg & Waldrop, which has offices in Nashville and Knoxville.

“I’m sure we’ll work out something amicable with the state over time,” he said. “I’m an optimistic person. But I think our lawyers and their lawyers will have to have a lot of negotiations.”

Below are Measurement Inc.’s claim against the state, and the state’s letter terminating its contracts with the company.

Editor’s note: This story has been updated with details about the claim’s status.