Funding fight

Dougco threatens state in enrollment count dispute

Leaders of the Douglas County School District say they’ll sue the Colorado Department of Education in a $4.2 million dispute over counting of high school enrollment.

The district took the spat public with a news release Thursday, two days after outgoing education Commissioner Robert Hammond responded to a district appeal in the matter.

Also on Thursday, school board President Kevin Larsen and Vice President Doug Benevento sent an accusatory and polemical letter to Hammond, writing, “We intend to pursue our remedies in the Colorado courts with all deliberate speed.”

The letter said the district “rejects the Department’s position as arbitrary, capricious and not the result of reasoned agency decision-making.”

The Larsen-Benevento letter also claimed CDE’s actions in the enrollment dispute “convey the unmistakable whiff of policy retaliation” because of district/department differences over other, unrelated matters.

Department spokeswoman Dana Smith responded, “We don’t really know what they’re referring to here, but this issue is a matter of state law. We are required to implement that.”

The department annually audits a selection of school districts to compare student enrollment against the amount of state funding allocated. Districts that received more funding than supported by enrollment data are asked to pay money back to the state. Whether students were properly classified as part-time or full-time is a common issue in the audits. Larger districts usually are audited more frequently than small ones.

The department has billed Dougco, interest free, for $4.2 million, money that was provided for a few hundred high school students CDE believes were inaccurately classified as full-time.

Behind the disagreement

The dispute focuses primarily on the interpretation of full-time and part-time and on the extent of CDE discretion in the matter.

The district news release claims, “The students involved in the audit averaged 96.7 percent of the required seat time, making it illogical and unreasonable for CDE to reduce annual funding for those specific students by half.”

The letter from the two school board members also argues, “The department clearly has the lawful discretion to make any funding reductions proportionate to the time for which the department’s audit could not account in district documents.”

But Hammond’s Tuesday letter to Dougco Superintendent Elizabeth Fagan noted, “There is no provision in state law to allow for proportional funding – students are either considered full-time or part-time. … Full-time funding is based upon a student having a schedule for 360 hours, and part-time funding is available for students with schedules greater than 90 hours but less than 360 hours in the first semester.”

In contrast to district claims that CDE didn’t use its discretion properly, Hammond’s letter noted that CDE did reconsider the classification of some students and reduced the amount owed by the district. “If the traditional calculation was applied in this audit, the district liability would have increased by approximately $737,000, resulting in a total audit liability of over $5.3 million.” The audit involved the fall enrollment counts for 2012 and 2013.

The disagreement appears to be rooted in counting changes and problems sparked by the district’s decision to increase the number of periods in high school schedules.

Other district claims

The Larsen-Benevento letter fired several broadsides at the department, including:

“We intend to work expeditiously with the General Assembly to divest the department of the discretion that the department has either failed to exercise here at all or, to the extent it has exercised any discretion, has done so with such obvious incompetence and backward thinking.”

The letter also said, “It is hard to believe that, in this age of nearly constant learning through technology … the department still employs a vast bureaucracy of well-pensioned employees who seriously spend valuable time – at taxpayer expense – tallying the number of minutes that a student sits in a seat, rather than the results achieved by that student.”

Current state law contains no provisions that tie individual student performance to school funding.

Hammond is retiring, so the dispute going forward will be in the hands of Interim Commissioner Elliott Asp.

Associate Commissioner Leanne Emm said full-time problems are “a very typical audit finding. … This happens to be an uncommonly larger finding because they had an issue with so many students.”

Department also in enrollment dispute with Sheridan

The department was sued by the Sheridan school district last March in a $1 million disagreement over high school students that CDE believes weren’t eligible for state funding because they also were taking classes at Arapahoe Community College.

The state asked Sheridan to repay nearly $1 million, and the district went to court, asking that the repayment requirement be voided. The suit is pending in Denver District Court. (Get more information in this previous Chalkbeat Colorado story.)

The Sheridan case doesn’t involve the full-time/part-time issue but rather the question of funding concurrent enrollment students – those taking both high school and college classes.

Emm said CDE doesn’t have any similar disputes currently pending with other districts.

finish line

A $1.6 billion tax increase for Colorado education just got a lot closer to the ballot

Joi Lin, a Boulder Valley Education Association employee, checks notary pages on petitions for Great Schools, Thriving communities. (Erica Meltzer/Chalkbeat)

Supporters of more funding for Colorado schools turned in more than 170,000 signatures Wednesday to place a $1.6 billion tax measure on the November ballot.

If approved, the measure would increase the corporate tax rate and the income tax rate on individuals earning $150,000 or more, with the additional revenue going to increase base per-student funding, to pay for full-day kindergarten, and to put more money toward students with special needs, such as those learning English, those with disabilities, and those who are gifted and talented.

Organizers said volunteers collected more than 111,000 signatures, with paid canvassers collecting the rest to build up a substantial cushion and make approval more certain.  The measure needs 98,492 valid signatures to get in front of voters. Inevitably, some signatures are rejected for a variety of reasons. The day before the Wednesday deadline, volunteers were going over petition packets a third time to check for mistakes before turning them in.

The Colorado Secretary of State’s Office still needs to verify the signatures. Under tougher requirements approved in 2016, those signatures need to represent 2 percent of the registered voters in each of the state’s 35 senate districts – and to pass, the measure will need support from 55 percent of voters.

Getting that support will be no easy task, considering that the last attempt to raise taxes for schools, Amendment 66 in 2013, was defeated 2 to 1. Colorado’s Taxpayer’s Bill of Rights requires all tax increases to be approved by voters, and they’ve been loathe to approve statewide taxes for any cause, even as local school districts have been more successful.

Cathy Kipp, a school board member from the Fort Collins-based Poudre district, personally collected more than 4,000 signatures around the state, and she said she was pleased to see support from ordinary people even in many conservative communities. That decisions about how to spend the money would be made locally is key to winning over voters, she said.

“The money will be spent however the local school district wants to spend it,” she said. “I knew teachers last time who didn’t want to vote for (Amendment 66) because it was so proscriptive.”

Kipp said Poudre likely would use the money to improve mental health services for students and raise teacher salaries.

Supporters believe the more challenging petition process, which required them to fan out across the state, will ultimately be to their advantage in the campaign to come.

“We have education supporters having conversations around the state about what additional revenue could mean for them,” said Susan Meek, a spokeswoman for Great Education Colorado, a key organization backing the tax increase. “The money will be spent locally. Every school district can go out and say what it would mean for them. Perhaps it is vocational-technical education. Perhaps it’s having school five days a week. Perhaps it is having a counselor in every school.”

And to make the case that a statewide tax on businesses and those with higher incomes is a better way to raise money than local taxes, supporters have broken down how much money each district would get and how large a property tax increase it would take to raise that money locally. Often, it’s a very big number.

Colorado ranks 28th among the states in per-student funding, according to the most recent report from the National Education Association, which includes local, state, and federal funding in its comparison. However, Colorado spends much less than other states of comparable wealth and generally gets poor marks for equity. School districts vary enormously in how much they spend on each student, and half the districts in the state are operating on four-day weeks because they can’t afford to be open more than that.

Since the Great Recession, state lawmakers have withheld roughly $7.5 billion that would have gone to K-12 education under a constitutionally mandated formula. The 2018-19 state budget includes a 6.95 percent increase for education, roughly $475 more per student, but supporters of more money for schools say that the increase doesn’t begin to address years of underfunding.

“It’s hard for people to understand how you can have one of the fastest growing economies in the nation and can’t fund schools at the level you did before the Great Recession,” said Tracie Rainey, executive director of the Colorado School Finance Project, another backer of the initiative.

The only way to really address the issue is a major source of new revenue, they say. And that’s what Initiative 93 would provide.

The tax measure calls for:

  • Raising the corporate income tax rate from 4.63 percent to 6 percent.
  • Raising the income tax rate from a flat 4.63 percent to between 5 percent and 8.25 percent for people earning more than $150,000. The highest tax rate would be paid by people earning $500,000 or more.
  • Setting the residential property assessment rate at 7 percent for schools. That’s lower than it is now but higher than it is predicted to be in 2019 because current law has the unintended effect of gradually reducing the residential assessment rate.
  • Setting the non-residential property assessment rate at 24 percent, less than the current 29 percent.

According to a fiscal analysis by the state, the average taxpayer earning more than $150,000 would pay an additional $519 a year, while those earning less would be unaffected. The average corporate taxpayer would pay an additional $11,085 a year. The change in property taxes would vary considerably around the state, but based on the average statewide school levy, many property owners would pay $28 more on each $100,000 of market value in 2019 than they otherwise would. Commercial property owners will see a decrease.

Total property tax revenue collected by school districts is expected to go down statewide, but the measure would partly stabilize property assessments, whose volatility has complicated school finance in Colorado.

A 1982 provision called the Gallagher Amendment sets a formula for the share of property taxes paid by residential and commercial owners, with the effect that skyrocketing values along the Front Range have ratcheted down residential assessment rates across the state. But in poorer rural communities without the tax base of cities like Denver or Boulder, that’s had devastating consequences for school districts, fire districts, and other small taxing entities, even as business owners, ranchers, and farmers have faced a heavier burden.

The state has had to make up much of the difference, and lawmakers are meeting during the off-season to try to come up with a fix. Any change would require voter approval – and could be a tough sell in part because it would be hard to explain.

Initiative 93 only deals with the assessment rate for schools in order to comply with Colorado’s single-subject rule for ballot measures, but it does represent a partial Gallagher fix. This provision was included for several reasons. One, it means that new revenue will actually increase school funding, rather than simply backfilling ever declining local taxes, and two, it provides some tax relief to ranchers and farmers, a selling point in rural communities that have been more reluctant to approve tax increases. And there’s a third argument, that stabilizing property tax revenue will free up more money in the state budget for other needs beyond education.

There are other things that make this effort different from past attempts, supporters say. Amendment 66 was widely perceived as a top-down effort that came from Denver. It raised taxes on everyone, and it made changes to the school finance formula that created winners and losers among districts, making it hard for many school board members and superintendents to support it.

Supporters of Initiative 93 describe it as being built from the ground up over a two-year process that included lots of input from school districts across the state, as well as from advocacy organizations like the NAACP and Padres y Jóvenes Unidos. It raises taxes only on businesses and higher-income earners, who represent less than 8 percent of individual income tax returns, and while it encourages the legislature to adopt a new school finance formula, it ensures that every district will see an increase.

Skeptics see just another attempt to throw money at the problem.

“Things are different this time, and it’s that they’re asking for more money,” said Luke Ragland of the conservative education reform group Ready Colorado.

A better approach, Ragland said, would be to tie increased funding to policies that could be expected to improve educational outcomes. There’s no guarantee that this money will make it into the classroom or into teachers’ paychecks, he said.

“There are places in terms of human capital, in terms of attracting talent and keeping it in the classroom, where more money would make a difference, but not just pouring more money into the current system,” he said.

Supporters of the measure will be campaigning in a complicated political environment, possibly sharing the ballot with a major tax increase for transportation, as well as a governor’s race and legislative contests that will determine control of the state Senate, where Republicans currently hold a one-seat majority.

Candidates up and down the ballot likely will be asked to take a position on the ballot measure, layering partisan politics over a measure that supporters hope will have broad appeal.

“You start this analysis with the assumption that it’s an uphill battle because we don’t really pass statewide tax increases, while schools pass lots of local taxes and bond measures,” said political consultant and pollster Floyd Ciruli. “The difference is trust. At the statewide level, people don’t trust that the money will go to benefit their local schools.”

Ciruli sees advantages, though, to asking voters in a mid-term election. Turnout will be higher than in an off-year, when older, more conservative voters tend to dominate, and even-year voters are more likely to have Democratic tendencies and be more open to taxes.

The contentious Democratic primary, which focused on education, also “primed” voters to see low funding as a key problem for schools, he said.

“The environment is pro-education,” Ciruli said. That places the tax measure “in the ballpark, but it’s still a challenge to do a statewide tax increase.”

Lisa Weil, executive director of Great Education Colorado, said the organizations working on the measure decided not to worry too much about “conventional wisdom” and move forward until they saw a compelling reason not to put something on the ballot.

“We’re not naive about the fact that we’re in a political environment, but we’re also creating that political environment,” she said. “Our entire state has a hunger to do right by kids.”

IPS referendum

To bring down potential tax hikes, chamber proposes slashing Indianapolis Public Schools budget

PHOTO: Alan Petersime
Students walk through the halls at the Career Technology Center at Arsenal Technical High School.

In a political showdown, one of the most vocal supporters of Indianapolis Public Schools is pressuring the district’s administration to make aggressive budget cuts and significantly reduce its request for more taxpayer money.

The Indy Chamber unveiled a plan Wednesday proposing nearly $500 million in sweeping cuts to Indianapolis Public Schools over eight years. And the chamber drew a line for its support of requesting more money from taxpayers: Chamber officials say they believe the district should only ask for $152 million in additional funding through tax increases, a significant reduction from what started as a nearly $1 billion request.

The district is set to decide next week how much it will seek from taxpayers in November.

Philanthropist and influential business leader Al Hubbard, who played a significant role in the analysis, gave an unvarnished pitch for the district to embrace the chamber’s recommendation during a press conference.

“Our hope is that they are going to embrace this proposal,” Hubbard said. “If they propose a referendum that’s higher than this, we will have to oppose them.”

But the district pushed back. In a statement, Superintendent Lewis Ferebee said the district will continue to work with the chamber as officials work toward a referendum amount. But he raised concerns about the cost-cutting measures recommended, particularly what he described as closing a “devastating” number of schools.

“IPS is committed to further action to reduce unnecessary expenditures,” Ferebee said. “We believe, however, that a responsible referendum request cannot be anchored solely in revenue from cost savings that to this point are on paper only.”

The report came on the heels of months of work between the district and the chamber after the school board agreed to delay a plan to ask voters for more money in May. In exchange for the delay, the chamber committed to analyze Indianapolis Public Schools’ finances, help draft a new request — and, importantly, lend its political support to a tax increase.

The proposal now puts school officials are in a bind: If they adopt the chamber’s plan, or something similar, they will need to dramatically overhaul district spending in the coming years. Alternatively, if they reject the austerity measures, they could lose the chamber’s support and struggle to persuade voters that more funding is essential.

The largest savings in the chamber’s plan, expected to save $477 million over eight years, would come from:

  • Reducing the number of teachers through attrition ($126 million).
  • Eliminating busing for high school students and relying on public transit ($121 million).
  • Reducing unused space more than likely by closing schools ($100 million).
  • Cutting the central office staff by 50 percent ($33 million).
  • Reducing the number of custodians ($19 million).

Another $62 million would come from “operating efficiencies,” a bucket that includes wide-ranging suggestions such as cutting classroom assistants, contracting out nursing, expanding health savings accounts for employees, and switching to an internet phone system.

Ahmed Young, the chief of staff for the district, said Indianapolis Public Schools has significantly cut spending on its central office and sold underused properties in recent years. He said the district would continue to work with the chamber to come to an agreement in the coming days.

“There are elements that we disagree on obviously, and we are going to continue to lift up our hood and make sure our engine is running properly,” he said.

The plan also includes two potentially controversial real estate deals. It calls for leasing the Broad Ripple High School building to Purdue Polytechnic High School and Indianapolis Classical Schools, which runs Herron High School. That proposal has ignited controversy in recent weeks, as local political leaders have put increasing pressure on the district to accept an offer for the building, while Indianapolis Public Schools officials have said they plan to have an open process to gauge interest. The chamber is also calling for the district to look into selling its central office building, which officials are already considering.

The chamber contends that the cuts it recommends could balance the district’s budget — which is projected to have a deficit of about $45 million next school year. But the chamber is also proposing $243 million in extra spending on teacher and principal pay to reduce turnover and make Indianapolis Public Schools more competitive with nearby districts.

Indianapolis Public Schools spends the most per student of any comparable district, according to chamber data from 2016-17. But its teacher pay is relatively low compared to other districts, especially for mid- and late-career teachers. In part, that’s because the district only spends about 47 percent of its budget in classrooms, according to the chamber.

Under the chamber’s plan, teacher pay would go up by 16 percent and principal pay would rise to $150,000 per year by 2020-21. After that, all IPS employees would receive 2 percent raises each year.

To fund those raises, the chamber is proposing increasing local funding by $100 million for operating expenses, such as teacher pay, over eight years by asking voters to approve a tax increase. The plan also includes a second tax measure to raise $52 million for building improvements, primarily focused on safety, that was announced by the district in June.

That’s a significant decrease from the district’s original proposal for referendums. Indianapolis Public Schools officials announced last year that they would seek nearly $1 billion more over eight years from local taxpayers in May. After that plan failed to gain support from community leaders, the district first reduced its request and then delayed the vote until November.

The chamber acknowledged that the cuts it is recommending would be painful.

“What we are asking them to do is tough. Closing schools is very difficult. Reducing the number of employees is very difficult,” said Hubbard. “At the same time, we think it’s unfair to the taxpayer to pay for empty seats or to pay for unnecessary staff.”

School board president Michael O’Connor said the district has had a longstanding partnership with the Indy Chamber, and he expects them to come to an agreement in the coming days.

“If we keep that perspective, that we’ve been partners on a lot of very difficult things, in the forefront, and we keep talking between now and Tuesday afternoon at 5:45 p.m., I think we will probably find some common ground,” he said.

The chamber’s report echoes a similar finding in 2014, when the district was projected to run a budget deficit. The chamber made similar recommendations, including selling the district’s headquarters and relying more on public transportation. The administration eventually implemented some of those suggestions, but concerns about the deficit dissipated when it was revealed to be an accounting error.

The current Indianapolis Public Schools administration is often lauded by the business community, and the chamber, for steps it has taken to transform the district in recent years, including the push for more school choices and the closure of some underused high schools. Indy Chamber CEO Michael Huber echoed that support Wednesday, describing Ferebee as “one of the best superintendents in the country.”

“We very much believe in Dr. Ferebee’s abilities to implement these solutions,” Huber said. “We wouldn’t be wasting our time throwing out hypotheticals or theoretical solutions.”

The plan was crafted by consultants from Faegre Baker Daniels Consulting and Policy Analytics, LLC, who had access to reams of information and prior reports from Indianapolis Public Schools.

This story has been updated.