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Funding picture could darken quickly

Colorado educators are happy with proposed increases in state K-12 funding for 2013-14, but those good feelings may be short lived.

Gov. John Hickenlooper has proposed a $196 million increase in K-12 support for the next budget year, a 2.86 percent increase in average per pupil funding. But a Joint Budget Committee staff briefing paper issued Wednesday points out that the structural problems facing the school finance system could rear up in a couple of years.

A key element of the Hickenlooper plan is paying for K-12 increases almost entirely from the State Education Fund, a dedicated account that’s separate from the state’s main General Fund. The education fund automatically receives a small percentage of state income taxes, and the legislature also can divert funds into it. The 2012 legislature ordered that all surplus revenues at the end of 2012-13, estimated at more than $700 million, be funneled to the education fund.

The logic for using the education fund to pay for the K-12 increase is that it frees up money in the general fund for other state needs, such as rising Medicaid costs.

But, committee analyst Craig Harper told legislators, the education fund may be able to bear that burden for only a couple of budget years, forcing the burden of the increased costs that have been built into K-12 funding back onto the general fund.

“The use of one-time funding (such as year-end transfers of General Fund to the State Education Fund) can delay the need for General Fund increases but can also require larger General Fund increase in future years,” Harper wrote in his briefing paper.

Harper also warned that the rising costs of the base per-pupil education funding required by the state constitution could consume available revenues as early as 2015-16, leaving no money for extra funding that compensates districts for the added costs of at-risk students and other needs that vary among districts.

The budget committee, with several members of the House and Senate education committees sitting in, spent a full afternoon on the 2013-14 education budget. Every fall the JBC receives briefings on every state agency, followed by hearings at which department heads respond to JBC questions. Department of Education brass will face the committee on Dec. 19.

Digging into the budget

Harper also dissected several specific education funding issues in his analysis for the committee. Here’s a brief rundown:

Future of the BEST program

The Building Excellent Schools Today school construction program came up at the very end of the JBC’s three-hour and 45-minute hearing, and legislator comments indicated the program could face some tough questions during the 2013 session.

Harper suggested that lawmakers consider capping the program’s revenue, which come mostly from income on state school trust lands; requiring the program to have a reserve, and setting a ceiling on the BEST board’s spending of its cash revenues.

“We ought to look at some control over that,” said JBC chair Sen. Pat Steadman, D-Denver, referring to the board’s cash spending.

Rep. Cheri Gerou, R-Evergreen / File photo
Rep. Cheri Gerou, R-Evergreen / File photo

Rep. Cheri Gerou, R-Evergreen, said, “I’d like to have a broader conversation about the way the BEST board is functioning. We have a relinquished a huge amount of financial control to people who aren’t accountable to anybody.”

Both Steadman and Gerou emphasized that they don’t question the purpose of the program but just wonder if it needs to be restructured.

The fiscal cliff

Harper also briefed the committee on what may happen if negotiations in Washington fail to pull the nation back from the “fiscal cliff,” triggering automatic cuts in many federal programs.

“Federal funds are a significant source of funding for education programs in Colorado, providing an estimated $628.7 million for a variety of programs in FY 2012-13,” Harper wrote in his briefing paper. “Although the U.S. Department of Education has indicated that sequestration would not affect education funding in FY 2012-13, the Colorado Department of Education estimates that sequestration could reduce available funding by $39 million in FY 2013-14, including potential reductions of $12.8 million in special education funding and $12.4 million in Title I funding.”

Testing costs

A few eyebrows were raised around the committee table as Walker discussed the Department of Education’s request for $4.2 million to help cover costs of developing new statewide tests for science and social studies, plus some specialized tests.

Harper noted that testing was a hot issue during the 2012 session, when lawmakers turned down CDE’s request for some $26 million to fund a full set of Colorado-only tests to replace the CSAPs.

Instead, lawmakers provided money only for the science and social studies tests and some others, but Harper said the costs are higher than estimated last year.

Legislators were particularly concerned about plans for giving the science and social studies tests online, questioning whether CDE fully considered the technological ability of school districts to administer online tests.

JBC member Rep. Claire Levy, D-Boulder, said Boulder Valley district officials are worried about that.

“If Boulder Valley is concerned about whether they can do this, they really need to think about whether this is feasible.”

Rep. Cherilyn Peniston, D-Westminster and incoming vice chair of House Education, said rural districts “don’t begin to have the equipment needed” to give online tests.

Lots of picky questions on higher ed budget

Given the state’s improved revenue picture, the JBC doesn’t face the unpleasant task of cutting higher education funding for 2013-14, as has been the case in recent years. But that didn’t mean committee members didn’t have lots of questions during Wednesday morning’s briefing on college and university spending.

The Hickenlooper administration is proposing a $30 million increase in state support of higher ed, up 5.8 percent from current levels. That would bring spending to $656.7 million, about $105 million of that for financial aid.

That overall proposal didn’t draw many committee questions, but members did produce a long list of queries on smaller issues that Department of Higher Education and campus leaders will have to answer during a Dec. 18 follow-up hearing.

Here’s a sampling of what JBC members want to know:

Tuition in 2013-14

Rep. Millie Hamner, D-Dillon and incoming chair of the House Education Committee, asks if the governor’s proposed higher ed funding increase would make it possible to reduce tuition rates.

“I would imagine there still would be tuition increases [but] that may increase tuition less” than in the past, said JBC analyst Patrick Brodhead.

Role of Department of Higher Education

Gerou, a longtime critic of the department, questioned whether the agency needs staff to promote college enrollment by Colorado high school graduates. Gerou said that outreach should be done by individual colleges and universities.

Master plan and performance funding

Gerou and other members wanted more detail on the Colorado Commission on Higher Education’s just-completed master plan (see this story for details).

A key goal of the plan is increasing the number of degrees and certificates awarded in Colorado, but Gerou wanted to know what kind of degrees the commission is interested in.

“I don’t want us to be educating people for failure” in fields where they can’t get jobs, Gerou said.

Hamner wanted a definition of “high quality,” a term used in the master plan to describe the kind of degrees that state wants.

And Rep. Crisanta Duran, D-Denver, wanted information on how colleges and universities are meeting such goals now.

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