Colorado legislators made a bet on the economy in April, guessing that state revenues would improve enough by June to trigger a $67.5 million boost for school funding next school year.
The bet appeared to have paid off Monday, when quarterly revenue forecasts were released by the staff of the Legislative Council and by the Office of State Planning and Budgeting. Because the OSPB’s June forecast was higher than the amount estimated in March, an extra $67.5 million will be available to K-12 education.
“I’m thrilled that it actually worked,” said Rep. Tom Massey, R-Poncha Springs and architect of the idea.
School funding for 2011-12 was a key issue for lawmakers during the session that ended May 11. Lawmakers worked hard to reduce Gov. John Hickenlooper’s proposed $332 million cut in school funding, and the Senate managed to take the cut down to $250 million before sending SB 11-230 to the House.
Massey, chair of the House Education Committee, and a group of minority House Democrats worked the cut down to $227.5 million and also pushed through the provision adding another $67.5 million in school aid if state revenue forecasts improved by June.
Massey and his allies had hoped to take the K-12 cut to $160 million, but the Hickenlooper administration was nervous about that, leading to the delayed-decision compromise on the $67.5 million.
“I’m thrilled that it actually worked,” Massey told Education News Colorado Monday. At the time the bill was being debated, Massey said, “I thought there was a better than a 50-50 chance” that revenues would improve enough to free up the $67.5 million. “This way it kind of worked out for everybody,” he said, meaning those who wanted to protect school funding and those who wanted to be conservative about committing the money too early.
The OSPB forecast document reported, “The June General Fund revenue forecast increased by $78.1 million compared with the March forecast, thus the maximum $67.5 million will be credited to the Public School Fund,” which is one of the accounts used to pay for schools. Under the provisions of another law, between $257.5 and $310 million will go to the State Education Fund, another account used for school finance. That money will be available for use next year when lawmakers are crafting the 2012-13 budget.
There also was broader good news in the revenue forecasts, although it was tempered by continued economic uncertainty and the complicated challenges facing future state budgets.
Legislative chief economist Natalie Mullis told the Joint Budget Committee and other lawmakers that her forecast shows continued slow economic growth but warned that there are “a lot of imbalances in the economy that are going to slow that growth for the next several years.”
Mullis said her March forecasts were probably too low and that the June study shows the economy and state revenues are growing at a “turtle’s pace, not a snail’s pace.”
Henry Sobanet, director of OSPB, said, “We have a similar view of the economy” but a somewhat more conservative one. The report from his staff cautioned “The strong growth in revenue in FY 2010-11 is expected to be one-time in nature” and that 2011-12 revenue “is expected to be essentially flat.”
Sobanet said he doesn’t expect the legislature will have to make mid-year cuts in the 2011-12 budget, which goes into effect July 1. Lawmakers had to make mid-year cuts earlier this year and in 2010.
Mullis said the 2012 legislature will have about $685 million more to spend on the 2012-13 budget than was available for 2011-12. But she cautioned that figure doesn’t take into account spending pressures that will be driven by cost increases and growth in caseloads, such as school enrollment and the number of Medicaid patients.
“Most likely … we still will be having to cut in 2012-13,” said Rep. Mark Ferrandino, D-Denver and a member of the JBC.
Both economists also warned of possible challenges in 2013-14, including automatic reinstatement of some tax credits, scheduled restoration of the senior citizen homestead exemption and the possible triggering of a 2009 law that diverts money to transportation, construction and the state reserve when personal income increases more than 5 percent a year.
“We could see tightness developing in the general fund,” Sobanet said.
Such tightness could be bad news for school funding, which consumes more than 40 percent of the state general fund and which already is more than $800 million below the level of funding called for by Amendment 23.
Because of budget pressures, during the last two sessions the legislature has used a narrower interpretation of A23 that applies its automatic increases only to base school funding, which is about 75-80 percent of total funding.
The total state budget is about $20 million, but only about $7 billion of that comes from the tax-supported general fund. About $5.2 billion in state and local funds is budgeted for school district operating costs in 2011-12. About $3.3 billion of that are state funds.
The next revenue forecasts will be issued in late September, setting a base for the governor’s proposed 202-13 budget, which must be submitted Nov. 1, and for JBC pre-session deliberation in late fall. Another round of forecasts come out in late December, just before the legislature convenes, and the March forecasts are used as the basis for the annual budget bill.
Months to go before $67.5 million in available
The $67.5 million in additional funds for schools won’t be available to districts until the first part of 2012. The money will be allocated among districts that have increased overall enrollment and greater-than-projected numbers of at-risk students, plus districts whose local revenues come in lower than projected.
The actual amount of additional state revenue will be determined when the state closes its 2010-11 books in September, school enrollment counts aren’t taken until Oct. 1 and updated information on local revenues isn’t available until December.