State economic forecasts released on Monday show revenues higher than predicted in the December estimates, creating a significant windfall for one of the state funds that supports K-12 education.
Economists from the executive branch Office of State Planning and Budgeting and Legislative Council, the General Assembly’s research office, both found increased revenue growth. For instance, the OSPB analysis estimated state revenues will grow $548.2 million, or 7.1 percent, in the current 2012-13 budget year. That’s $227.9 million more than was projected in the last quarterly forecast, issued in December.
Revenues are rising because of state economic growth that is outpacing the nation’s economic recovery.
The increasing state collections have important effects on the State Education Fund (SEF), a dedicated account that can be used only for K-12 spending, both for annual school support and for special programs.
A 2012 state law directs that all excess state revenues be directed to the SEF at the end of 2012-13 budget year. That transfer could amount to about $848 million, according to the Legislative Council economists, but may be as high as $949 million, according to the OSPB. That’s on top of $466 million projected to automatically flow to the SEF from a share of state income taxes.
But all of that good news doesn’t necessarily mean a big boost for proposed K-12 spending in 2013-14.
Hickenlooper administration officials want to focus increases on one-time projects, such as construction, rather than building the base spending of permanent programs, such as K-12. Building up base spending can have negative consequences in future years when state revenues drop.
“We do think there is room to grow appropriations for 2013-14,” OSPB Director Henry Sobanet told members of the Joint Budget Committee Monday afternoon. “Our intention is we don’t do things that will be base building.”
While increased education funding is a Hickenlooper priority, the administration also is interested in raising budgets for child welfare, state construction and other programs.
Sobanet and his staff also are concerned that 2012-13 revenue increases are driven by one-time sources, such as increased tax payments on capital gains. OSPB predicts revenues will grow only 3.1 percent in 2013-14, compared to 7.1 percent in the current year.
“There’s enough evidence [of one-time revenues] for us to be cautious about base building with one-time money,” Sobanet told the committee.
Sobanet later told reporters that he believes the SEF “needs to keep a balance of several hundred million dollars” each year so that it’s available to help supplement education spending over several years.
Hickenlooper originally requested a K-12 increase of $201.6 million in 2013-14, a 4.8 percent jump. Annual school spending, known as total program funding, is a combination of state and school district revenues, with the state supplying about two-thirds of the total cost.
The current 2012-13 state budget includes $5.3 billion in state and local funding for K-12 year, with a state share of about $3 billion.
Hickenlooper’s original budget plan proposed a grand total of $21.9 billion in 2013-14 state spending, up 5.5 percent. Spending from the general fund, the state’s main tax-supported account, was proposed at $8.1 billion, a 5 percent increase.
Annual school funding is authorized through two separate bills. Base per-pupil funding, which increases annually based on inflation as required by the state constitution, is contained in the main annual state budget, known as the long bill. Additional increases (or cuts) are set by a separate school finance bill. This year’s version hasn’t been introduced yet.
The JBC has tentatively decided to increase base K-12 funding in the long bill by 1.9 percent (the official inflation rate) but has not decided how to split school funding between the general fund and the SEF. Nor has it set a target figure for how much additional funding might be available for spending in the school finance bill.
Sobanet met again later with the committee on several specific smaller requests for various state agencies, but education wasn’t discussed.
He noted that the committee’s proposed budget for next year hasn’t been fully toted up and that several bills with price tags are moving through the legislature.
“We know that there’s new money available” but don’t know what the potential demands are, Sobanet said. “We’re at the very beginning stages” of totaling everything up.