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School budget prospects look familiar

Colorado school districts may face 2013-14 budget prospects similar to this year’s situation – no cuts in state aid but not enough new funding to cover expected higher costs.

That was one of the messages in the quarterly revenue forecasts presented to the Joint Budget Committee by legislative and executive branch economists Thursday.

Both forecasts told a similar story: State revenues were higher than forecast in June, but revenue growth likely will slow, and economic and political uncertainties cloud the state’s prospects.

“The economy is expected to continue to lose momentum until the first half of 2013,” said legislative chief economist Natalie Mullis. “The risk of recession is rising.”

Funding of K-12 schools consumes about 40 percent of the state’s $7.6 billion general fund budget, so revenue forecasts are closely watched for the possible impact on school support.

The 2012 legislature budgeted $5.3 billion in state and local funding for K-12 in the current school year, including a state share of about $3 billion. The total amount kept average per-pupil funding flat at $6,474.24. School spending had been cut in the previous three budget years.

Henry Sobanet, director of the Office of State Planning and Budgeting, told the committee that in the 2013-14 budget, “We believe we’ll be able to accommodate inflation and enrollment in K-12 in a way the state hasn’t done in recent years.”

Asked after the briefing to elaborate, Sobanet said that doesn’t mean school funding can return to pre-recession conditions.

“The policy goal would be keeping the negative factor unchanged,” he said, explaining how the Hickenlooper administration is approaching the 2012-13 budget, which has to be presented by Nov. 1.

The negative factor is a calculation the legislature uses to reduce K-12 support to the amount needed to balance the overall state budget. Use of the factor reduced this year’s level of school support by about 17 percent from what spending would have been if the full terms of state school finance law and Amendment 23 had been applied. Use of the negative factor in recent years has cut an estimated $1 billion from school funding.

Tracie Rainey, executive director of the Colorado School Finance Project, attended the briefing. Asked afterwards about the prospects for 2013-14, she said it will be “maybe a little bit better” than current funding. “I still think the negative factor will grow,” she said, adding, “Nobody’s talking about restoring” funding to earlier levels.

Despite the fact that state funding remained flat for this year, many Colorado school districts had to make cuts and dip into reserves to cover rising costs. Fourteen districts have proposed ballot measures asking voters to approve local tax increases, primarily to cover money lost through past state cuts.

Both Sobanet’s staff and Legislature Council economists found state revenues have come in higher that predicted when the last forecasts were made in June. But both forecasts cautioned that those revenues may be one-time only, driven primarily by revenue from capital gains taxes.

Much of the extra revenue will flow automatically into the State Education Fund, a dedicated account that is used to supplement the school funding that comes from the state’s general fund. Having an education fund of more than $700 million will give lawmakers some flexibility in 2013, but that may be a one-time opportunity, Sobanet indicated.

The next revenue forecasts will be made in late December, setting the budget tone for the legislative session that will convene in January. Updated forecasts made in March are used to finalize the annual state budget, which must be completed before lawmakers adjourn in early May.

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