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State revenues remain on steady course

New state revenue forecasts don’t significantly change the amount of money available to spend on K-12 schools, the issue expected to dominate education debates during the upcoming legislative session.

The quarterly revenue forecasts issued Friday also included the annual projections on school enrollment provided by legislative economists.

Statewide school enrollment projections show increases of 1.5 percent in 2014-15 and another 1.4 percent the following year. Assessed property values are expected to rise 2.2 percent next year, 5.9 percent in 2015 and 2.9 percent in 2016.

Enrollment is important for school districts because it’s the key factor in determining how much state funding they receive. And growth in property values influences how much money districts can raise locally.

Overall, “Colorado’s economy is continuing to expand and should see solid growth through the remainder of 2013 and 2014,” said the forecast from Legislative Council staff economists.

The projection from the executive branch Office of State Planning and Budget also cited growth but noted, “The economy is always vulnerable to adverse, often unexpected, events that could strain budget conditions.”

Economic activity drives state tax revenues, and both forecasts see little change in revenues from September’s predictions. The December forecast sets the table for budget discussions during the first part of the 2014 legislative session, and the March forecast drives final budget decisions.

Natalie Mullis, chief legislative economist, told lawmakers, “Right now is when you have the greatest budget flexibility,” because in future years automatic diversions to transportation and constitutionally required tax refunds may limit spending on other programs.

The December forecast is closely watched by the education community because it includes a school finance projection from legislative staff.

Economist Todd Herreid’s presentation to the Joint Budget Committee laid out these key projections:

  • To maintain current 2013-14 per-pupil funding of $6,652, lawmakers will need to add $55 million to the budget to account for enrollment growth higher than projected last spring, when the budget was written.
  • Schools will need an increase of $260 million over current spending of about $5.5 billion to cover 2014-15 enrollment growth and inflation, as required by the state constitution. That would take average per-pupil funding to $6,845.
  • The increase would have to rise to $297 million if lawmakers want to maintain what’s called the “negative factor” at current levels.

The negative factor is a formula lawmakers have used in recent years to keep K-12 funding at a level necessary to balance the overall state budget. It’s estimated that use of the factor has left school funding at least $1 billion lower than it would have been otherwise.

School districts and education interest groups are going to push hard to reduce the amount of the negative factor, something that might meet resistance from the Hickenlooper administration and the JBC because of their concerns about pressuring other parts of the state budget and about creating a level of K-12 spending that could be vulnerable to cuts during future downturns.

During a pre-session meeting with reporters Thursday, Hickenlooper said he was open to discussions about reducing the negative factor but didn’t indicate how high he might be willing to go.

A key focus of negative factor debates will be the State Education Fund, a dedicated account used to support both base school funding and special programs.

Because some recent state surpluses have been channeled into the fund, it’s expected to have a balance of more than $1 billion this year. That’s a tempting target for lawmakers interested both in trimming the negative factor and in funding pet projects. But the JBC and the administration want to carry a reasonable State Education Fund balance into future budget years as a cushion.

The legislative staff enrollment projections show continuation of regional differences that have existed for several years.

While statewide growth is projected at 1.4 percent, growth of 1.7 percent is forecast for Denver-area districts, and 1.6 percent is expected for the northern Front Range, while several rural areas are expected to see very small or no enrollment growth.

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