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How the K-12 cut works

The Senate Appropriations Committee meeting Thursday will be a key step in the long process whose impacts will be felt next August when many Colorado students return to schools with larger class sizes, fewer teachers, changed bus schedules and other signs of tight economic times.

The committee will take testimony, discuss and then vote on Senate Bill 11-230, the 2011-12 School Finance Act, starting at 1:30 p.m. in Capitol committee room 356. You can listen to the meeting with this audio stream. Earlier in the day, the panel will consider other bills that affect school finance, including Senate Bill 11-209, the long appropriations bill.

While the afternoon hearing is expected to feature familiar laments from witnesses about the effects of education budget cuts, the outcome of the committee vote isn’t in much doubt.

The constitution requires the legislature to pass a balanced budget every year, and SB 11-230 is part of an interconnected, exhaustively negotiated package of 27 measures designed to produce such a budget for 2011-12. While the budget package will consume hours of Senate and House debate through the end of next week, nothing of significance is expected to change in the budget deal that was finally reached at midday Tuesday.

The bottom line for K-12 education is that 2011-12 will see $250 million in total program funding cuts from 2011-12 levels. That represents an average cut of 4.6 percent. Total program spending, the combination of state and local funds used to pay for basic school operations, would drop from $5.44 billion this year to about $5.15 billion in 2011-12. Average per-pupil funding would drop from $6,823 to $6,439.

That cut would be on top of the $260 million reduction schools received this year compared to 2009-10 levels.

Districts react

For the past several weeks, school districts have been planning on the assumption that the cut would be $332 million, the amount suggested by Gov. John Hickenlooper.

While the $250 million cut is relatively welcome news, district financial officers are still calculating what it might mean. But it doesn’t look like it will prompt major changes in district plans.

“The recommendation that came out of the employee summit was to hold firm on the reductions for ‘11-12 even if the state gave money back to the district. Any money that will be coming back will be put into reserves to help offset reductions for ‘12-13,” said Lynn Setzer, spokeswoman for the Jeffco schools, the state’s largest district. Jeffco used a collaborative process involving employees and other groups to develop its 2011-12 budget.

John Creighton, president of the St. Vrain district board, said, “It’s nice to have a few extra million dollars” but that the reduction of the statewide cut “isn’t a big change.”

John Creighton, president of St. Vrain school board
John Creighton, president of St. Vrain school board

Creighton explained that his district takes a multi-year view when budgeting and that despite the smaller state cut “we may need to raise class sizes this year” to prepare for more budget cuts in 2012-13.

Janelle Asmus, spokeswoman for the Adams 12 Five Star schools, said, “We’re still in the process of determining what that dollar amount will mean to us. So while we don’t have specifics, our intent is to mitigate the reduction we’ve planned in classroom teachers. Our hope is we can have fewer classrooms with increased class sizes.”

And Diane Lewis of the Aurora schools said Wednesday, “We are still assessing our budget situation.”

Although districts will know exactly how much state aid they’re losing, the financial situation of individual districts varies widely depending on many factors, including available reserves, union contracts, costs of such things as health insurance and whether a district has a property-tax increase or not.

Inside the budget package

The size of the checks districts receive from the Department of Education every month is driven by the interlocking set of budget bills. This year’s cuts include programs in addition to total program funding. Here’s a quick look at the machinery behind the reductions:

Senate Bill 11-209 – The so-called “long bill” is the main state budget measure. Among changes in the bill are a $9 million increase in spending authority for the BEST program, a $4 million increase for categorical programs (transportation, special ed, English-language learners and other programs) and elimination of $2.9 million to help districts with cash-flow needs.

The bill also takes half of the $5 million in funding from the Colorado Counselor Corps and eliminates funding for the Closing the Achievement Gap program, a small program that supports the main school breakfast program, the School Awards Program, the School Leadership Academy, the Supplemental On-line Grant Program, Family Literacy Education grants and the Healthy Choices Dropout Prevention Pilot Program.

If you’re a real policy wonk and actually read the long bill or the budget narrative – links below – don’t be confused. In some places, the long bill increases education funding as an accounting device, but those increases will be reduced by SB 11-230.

Senate Bill 11-230 – The School Finance Act is the mechanism used to adjust K-12 funding to a level the state can afford. Using an add-and-subtract formula, the bill would reduce state general fund support of schools but replace some of that with $36 million in school trust lands revenue and additional money from the State Education Fund to arrive at the $250 million cut. Part of the budget deal involves leaving about $120 million in the State Education Fund as a reserve for the 2012-13 budget. The bill sets base per pupil funding for 2011-12 at $5,634.77. The base is not the same as average per-pupil funding, which is calculated after other forms of state aid are added to the base.

Senate Bill 11-218 – The bill sweeps $109,434 from six small special funds in CDE and puts the money in the State Education Fund.

Senate Bill 11-226 – This measure take money from various cash funds throughout state government and puts it in the general fund. One transfer is $1.8 million from the Read-to-Achieve Cash Fund in CDE. The Read-to-Achieve fund receives tobacco settlement money and will continue in operation.

Senate Bill 11-184 – If passed into law, this bill would create a “tax amnesty” for 60 days next summer during which businesses and individuals could pay back taxes without penalty. An estimated $9.5 million of the amount raised would be earmarked for education.

State colleges and universities

Higher education funding, at least in the legislature, is much more straightforward than K-12 support. The state uses the long bill to give general fund money to colleges and universities, and campuses make up most of the rest of their revenue with tuition, fees and outside grants.

The long bill basically contains the Hickenlooper administration’s higher ed proposal, which was accepted by the budget committee weeks ago.

That plan includes $519 million in state support for colleges and universities, down from the $555 million that had been requested and down about $124 million from this year. Overall higher education revenues of roughly $2 billion, the majority of which comes from tuition, are projected to be down at least $30 million.

Higher education is affected by two other bills. Senate Bill 11-222 would take $1.1 million from the Higher Education Maintenance and Reserve Fund to the general fund, and Senate Bill 11-076 would continue the current system under which colleges (and state government) pay 2.5 percent less into employee pensions and the employees pay 2.5 percent more.

Part of the House-Senate fight over the budget involved an amendment to SB 11-076 that would have allowed school boards (and local government) to impose a similar sway on their employees. Republican proponents had argued that would give school boards a way to soften classroom cuts, but they’ve dropped that proposal as part of the budget compromise.

Overall state general fund spending next year will be about $7.1 billion out of a total state budget of about $19 billion. The larger amount includes federal money and various dedicated funds that the legislature doesn’t appropriate.

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