Fiscal squeeze

Revenue forecasts highlight state’s budget dilemma

The improving economy continues to pump increased revenues into the state’s coffers, but constitutional limitations likely will reduce how much of that money lawmakers can spend during the 2015 session.

That could make it harder to whittle down the negative factor, the state’s $900 million shortfall in K-12 spending, and to provide more funding for programs like expanded preschool services and full-day kindergarten.

The latest quarterly revenue forecasts were presented to legislative leaders and Joint Budget Committee members Monday morning by economists from the governor’s Office of State Planning and Budgeting and the Legislative Council, the General Assembly’s research arm.

“We did increase our expectations for general fund revenue,” said Natalie Mullis, the legislature’s chief economist. In theory, she said, lawmakers could have $1.05 billion more to spend on the 2015-16 budget than what’s being spent in the current, 2014-15 budget.

“It’s not enough money to fund everything that every interest group is going to bring to you,” Mullis cautioned, to laughter from lawmakers. The basement Capitol hearing room was packed with lobbyists, the very people Mullis was referring to.

The challenge is created by the Taxpayer’s Bill of Rights, commonly known as TABOR, which sets ceilings on the amounts of revenue the legislature can spend each year. The state hasn’t hit the so-called TABOR limit for several years, but now revenues are growing fast enough that Mullis’ team estimates the state will owe taxpayers $120.3 million out of the 2015-16 budget and $620.4 million in 2016-17.

Read the forecasts

The OSPB has similar but somewhat different forecasts, including a projection that a $196.8 million refund will be required from surplus revenues in the current budget, plus $186.5 million in 2015-16 and $269.2 million in 2016-17. (Refunds would be made through a variety of mechanisms, including earned income credits, sales tax rebates and a temporary reduction in income tax rates.)

“We should plan for exceeding the TABOR limit in fiscal year 2014-15,” OSPB director Henry Sobanet told lawmakers. He also warned that the combined budget demands and spending restraints “will combine for an extremely tight environment” in 2016-17 and that lawmakers may not be able to spend much more in that year than they do in 2015-16.

And, a different provision of TABOR also will require lawmakers next year to make a $58.7 million rebate of some marijuana revenues. The mechanism for doing that hasn’t been determined.

The prospect of TABOR refunds worries education advocates, who would like some surplus revenues diverted to further reduce the negative factor. The 2014 legislature made a $110 million dent in the shortfall and stipulated that the negative factor couldn’t grow in the 2015-16 budget. Gov. John Hickenlooper has proposed that the negative factor be trimmed another $200 million in 2015-16 – but that cut would apply only for one year.

School district leaders say they’d be happy with the one-time cut but would be even happier if the negative factor were reduced permanently. A group of superintendents has proposed an additional $70 million in K-12 spending in 2015-16, $50 million focused on at-risk and $20 million for rural districts. Both the governor’s and the superintendents’ proposals have been received somewhat coolly by JBC members, even before Monday’s forecasts were issued.

The legislature can avoid making the TABOR refunds and keep excess revenues, but only by proposing a ballot measure seeking voter approval to do that. Putting a measure before voters requires passage in each chamber, something that might be a long shot, given split party control of the legislature. Hickenlooper also has indicated he supports the refunds, at least for now.

Districts may not get extra money in current year

Legislative economists also told lawmakers that it appears a mid-year adjustment in 2014-15 K-12 funding won’t be necessary because the enrollment projections made last spring were higher than actual enrollment this fall. Total enrollment was only 163 students fewer than expected, and the actual number of at-risk students was down about 4,560 (1.5 percent) from the projection made last spring.

Enrollment is the key variable in the school finance formula, and the actual student count regularly exceeds annual estimates, meaning lawmakers often give schools extra money in February or March.

That isn’t the case this year, and Legislative Council staff said that might give lawmakers the opportunity to make a $14 million mid-year reduction in the negative factor. (See the document at the bottom of this article for more details.

Forecast indicates past K-12 growth rates will continue

The December forecast from legislative staff always includes a two-year projection of K-12 student enrollment trends.

This year’s analysis found that enrollment grew 1.5 percent in the current school year and is expected to grow 1.4 percent in 2015-16 and 1.3 percent in 2016-17. Those rates are similar to the growth seen in recent years.

The largest rates of growth are expected in northern Colorado followed by the Denver metro area, with smaller increases in students elsewhere in the state and even slight declines in some regions.

K-12 enrollment chart

Incentives

Westminster district will give bonuses if state ratings rise, teachers wonder whether performance pay system is coming

PHOTO: Nicholas Garcia
Students work on an English assignment at M. Scott Carpenter Middle School in Westminster.

Teachers and employees in Westminster Public Schools will be able to earn a bonus if they help the struggling district improve its state ratings next year.

The district’s school board on Tuesday unanimously approved the $1.7 million plan for the one-year performance stipends, the district’s latest attempt to lift the quality of its schools.

School employees can earn $1,000 if their school meets a district-set score, or up to $2,000 if they reach a more ambitious goal the school sets. District employees, including the superintendent, can earn $1,000 if the district as a whole jumps up a rating next year.

“We recognize that everyone plays a critical role in increasing student achievement and we decided that if a particular school or the district as a whole can reach that next academic accreditation level, the employees directly responsible should be rewarded,” board president Dino Valente said in a statement.

The district is one of five that was flagged by the state for chronic low performance and was put on a state-ordered improvement plan this spring.

District officials have disputed state ratings, claiming the state’s system is not fairly assessing the performance of Westminster schools. Middle school teacher Melissa Duran, who also used to be president of the teacher’s union, drew a connection between that stance and the new stipends, saying any extra pay she gets would be based on one score.

“The district has gone to the state saying, ‘Why are you rating us on these tests, look at all the other things we’re doing’” Duran said. “Well, it’s the same thing for teachers. They’re still basing our effectiveness on a test score.”

Teachers interviewed Thursday said their first thoughts upon learning of the plan was that it sounded like the beginnings of performance pay.

“I already get the point that we are in need of having our test scores come up,” said math teacher Andy Hartman, who is also head of negotiations for the teacher’s union. “Putting this little carrot out there isn’t going to change anything. I personally do not like performance pay. It’s a very slippery slope.”

District leaders say they talked to all district principals after the announcement Wednesday, and heard positive feedback.

“A lot of the teachers think this is a good thing,” said Steve Saunders, the district’s spokesman.

National studies on the effectiveness of performance pay stipends and merit pay have shown mixed results. One recent study from Vanderbilt University concluded that they can be effective, but that the design of the systems makes a difference.

In Denver Public Schools, the district has a performance-pay system to give raises and bonuses to teachers in various situations. Studies of that model have found that some teachers don’t completely understand the system and that it’s not always tied to better student outcomes.

Westminster officials said they have never formally discussed performance pay, and said that these stipends are being funded for one year with an unanticipated IRS refund.

Westminster teachers said they have ideas for other strategies that could make a quick impact, such as higher pay for substitutes so teachers aren’t losing their planning periods filling in for each other when subs are difficult to find.

Waiting on a bonus that might come next year is not providing any new motivation, teachers said.

“It’s a slap in the face,” Duran said. “It’s not like we are not already working hard enough. Personally, I already give 110 percent. I’ve always given 110 percent.”

Last month, the school board also approved a new contract for teachers and staff. Under the new agreement, teachers and staff got a raise of at least 1 percent. They received a similar raise last year.

Human Resources

Leanne Emm, Colorado education department’s chief financial officer, to retire

Leanne Emm, the state education department's retiring chief financial officer. (Photo courtesy Colorado Department of Education)

A long-running joke among Colorado education officials, policymakers and activists is that only a handful of people really know how Colorado’s complex school funding system works.

One of those people — Leanne Emm, the state’s education department’s deputy commissioner — is retiring later this month after nearly 30 years in public service.

Emm announced her retirement in an email to other school finance officers late last month. Her last day at the department is Sept. 22.

“Each of you helps your students, communities, stakeholders and decision makers with a huge array of issues,” she said in her email. “I can only hope that I will have helped contribute to an understanding of budgetary pressures that we have within the state.”

Emm was appointed to her position in 2011 — about the same time the state’s schools were grappling with deep budget cuts due to Great Recession. She worked at Jeffco Public Schools for 14 years before joining the education department.

Katy Anthes, the state’s education commissioner, said Emm’s exit will be felt at both the state and local school district level.

“Leanne’s leadership and her deep knowledge of the school finance system will be sorely missed by all of us at CDE and by the districts she has supported over the years.” Anthes said in a statement. “I will be forever grateful for her support as I transitioned to this role. I’m sad to see her leave CDE, but I suspect that her love for the state of Colorado and passion for improving education will cause our paths to cross again.”