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School funding headed for collapse?

Colorado’s school funding system could hit a constitutional dead end in less than five years, a veteran analyst told the Joint Budget Committee Wednesday.

A discussion of the tough prospects facing school funding was the centerpiece of Carolyn Kampman’s briefing to the committee on the proposed K-12 budget for the 2012-13 school year. She also updated the committee – and more than a dozen other lawmakers who sat in – on funding for online students and the status of the Lobato v. State school funding lawsuit.

Every fall committee staff analysts such as Kampman brief the panel on each state agency, reviewing current spending, policy issues and making initial spending recommendations for the upcoming budget year.

Wednesday’s K-12 funding briefing departed from the usual script in taking a longer-term view of the dilemma facing the state.

Kampman walked lawmakers through an explanation of the two constitutional requirements that drive school funding:

• Amendment 23 requires that base per-pupil funding increase annually by the rate of inflation.

• State school finance law, which is designed to implement the constitution’s “thorough and uniform” education requirement, allocates different per-pupil amounts to individual districts based on what are called the “factors.” The primary factors are cost of living for staff, district size and the percentage of at-risk students. The system is intended to provide a “thorough and uniform” education to students in districts where it may be more expensive to educate students than it is elsewhere.

The legislature, faced two years ago with having to balance the state budget while revenues were dropping, introduced a new element called the “negative factor” into the equation. It’s used to reduce the total amount determined by Amendment 23 and the other factors to a dollar amount for school funding needed to balance the state budget.

What Kampman basically told lawmakers was that Amendment 23, school finance law and the negative factor are on a collision course that will make the whole system unconstitutional by 2015-16.

“If total program funding remains flat, the portion devoted to base per pupil funding will continue to crowd out the portion available to differentiate districts’ per pupil funding amounts. Absent a funding increase, there would be no funding available for differentiation by FY 2015-16 and funding would be insufficient to increase base per pupil funding as required by Amendment 23,” Kampman wrote in her briefing paper. (She used “differentiation” to refer to the factors.)

The briefing paper said that Gov. John Hickenlooper’s proposed 2012-13 cut of $88 million to current school funding of $5.2 billion would reduce the amount of money available for the factors to 7.5 percent of total spending. Kampman said that would accelerate the trend she’s warning about.

She recommended that the JBC work with legislative leaders, the House and Senate education committees and the governor’s office to discuss a school funding amount for 2012-13. Also recommended was discussion of whether new laws, constitutional changes and/or additional funding are needed “to ensure that the General Assembly can continue to comply with the constitutional mandate to provide for the maintenance of a thorough and uniform public school system,” in the words of the briefing paper.

School finance snapshots

  • Current total program funding – $5.2 billion
  • Average per-pupil funding – $6,468
  • Funded enrollment – 805,891
  • Governor’s proposed 2012-13 cut – 1.7 percent
  • Cut in per-pupil funding – $162
  • Historic school funding high was $5.6 million in 2009-10 for 789,497 students

“I think this is one of the most important issues we’re going to be dealing with,” said Rep. Cheri Gerou, R-Evergreen. She said she’d work to set up a meeting of the JBC and the two education committees as early as possible in the 2012 legislative session, which kicks off Jan. 11. The two committee chairs, Rep. Tom Massey, R-Poncha Springs, and Sen. Bob Bacon, D-Fort Collins, sat through Wednesday’s briefing.

Gerou, noting other pressures on the state budget like steeply rising Medicaid costs, quipped, “This is why I wake up at night screaming.”

Rep. Mark Ferrandino, D-Denver and a JBC member, said K-12 and Medicaid funding make it “conceivable that we could not fund higher education at all.”

Sen. Pat Steadman, D-Denver and also a committee member, commented, “We just keep digging a deeper hole in the school finance act.”

Funding for online schools

The briefing paper also included a section about online schools, an issue of increasing concern and a problem examined in a recent investigation by Education News Colorado and the Rocky Mountain Investigative News Network (read stories here).

The Legislative Audit Committee recently deadlocked on a request by Senate President Brandon Shaffer, D-Longmont, for a state audit of online schools (see story).

Kampman recommended lawmakers take a look at online education because of budgetary implications. Her briefing paper noted “existing systems for funding students and holding school districts accountable have proven to be an awkward fit as on-line learning has developed and expanded in Colorado.”

Her recommendation is that “the General Assembly continues to evaluate whether the existing framework for funding and evaluating on-line programs can and should be improved. Staff recommends further study and consideration of policy issues related to per-pupil funding levels and counting methods for on-line programs, limiting the amount of per-pupil funding that may be retained by an authorizer, and ensuring that financial reporting requirements are consistent and transparent.”

Among the key questions around online programs are high attrition rates rates of students and lagging achievement levels.

Some of the lawmakers at Wednesday’s hearing raised questions about the real meaning of attrition rates, suggesting deeper analysis of that problem is needed.

What’s next

The JBC will be briefed Dec. 1 on other parts of CDE’s budget, including the department’s request for $25.9 million in startup funds for a new testing system. Hickenlooper has recommended that money not be included in the 2012-13 budget, but CDE hopes to persuade lawmakers otherwise.

Department executives will have a chance at a Dec. 16 hearing to make their spending case and to answer questions raised at the two briefings.

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