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Compact model of school finance plan still in the shop

Colorado Capitol

A stripped-down version of last year’s school finance overhaul may soon join the growing line of bills that hope to tap a one-time surplus of K-12 funding.

But that proposal may face resistance from groups that want to increase basic school funding, not pay for new programs, and it may conflict with plans to save some surplus funds for the future.

Sen. Mike Johnston’s Senate Bill 13-213 didn’t go into effect because voters subsequently defeated Amendment 66, the ballot measure that would have paid for it. So the Denver Democrat now is scavenging parts of that plan to build a smaller model he hopes to sell to the 2014 legislature.

Johnston said last week that the bill could be introduced within a few weeks, but the timetable likely depends on how much support Johnston can gather. The bill’s contents are a moving target, and some influential interest groups that have kicked the tires aren’t impressed. Negotiations are continuing.

On the other hand, taking the bill public soon may be necessary to give Johnston’s ideas visibility in the discussion over how to use what could be as much as $1 billion available in the State Education Fund (SEF), an account that’s dedicated to K-12 spending.

“We need to make our case in the midst of all the other education debate,” said Johnston, who is working on the bill with Rep. Millie Hamner, D-Dillon, and Rep. Carole Murray, R-Castle Rock.

Six bills with a combined draw on the SEF of $40 million already have been introduced. Another 10 bills without specific price tags also are in the mix, including potentially expensive plans to expand full-day kindergarten and broaden services for English language learners.

The 2013 coalition is fraying

Johnston’s SB 13-213 and A66 were a big political compromise intended to unite various education interests, from reform groups to school districts, because the $1 billion in new income tax revenue would have paid for some initiatives reformers wanted and for partial restoration of recent years’ budget cuts, something districts wanted. (Refresh your memory on the details in this story from the Chalkbeat Colorado archives.)

Since there’s now no new money for anybody, jockeying for what funding is available has intensified competition among interest groups, and all eyes are focused on the SEF.

The fund is more flush than it’s been in years, primarily because a 2012 law put $1.1 billion in state surpluses into the SEF. Legislative economists project the SEF will contain about $2 billion when the 2014-15 budget year starts next July 1. Some $850 million already is scheduled to be spent, leaving a balance of just under $1.2 billion when the 2014-15 year ends.

Executive branch economists in the Office of State Planning and Budgeting take a more conservative view, estimating there will be $1.6 billion in the SEF at start of 2014-15, $887 million in planned spending and a $712 million ending balance.

Whatever the number, it’s a tempting target for lawmakers, even it’s one-time money, unlike the $1 billion-plus that A66 would have generated for schools every year.

Johnston-Hamner bill would combine key initiatives

While other legislators are proposing individual dips into that pot, Johnston is working to assemble a plan that would combine several spending programs in a single bill.

Those ideas are downsized versions of some programs and spending proposed in SB 13-213, leading some statehouse observers to dub the new measure “Son of 213.” Its reported formal working title is the Student Success Act.

“We have some concepts out there,” Johnston said, without going into details. He noted he’s looking for Republican support for the bill. (Republican lawmakers, Johnston allies on previous education bills, abandoned him last year over SB 13-213 because they opposed the tax increase.)

According to several people familiar with the discussions, the following elements are being considered for inclusion in the bill. The cost is estimated at $230 to $250 million, about half in one-time spending and half in recurring annual costs. As with the elements, the cost is a moving target.

  • Increased kindergarten funding – The bill may include $100 million to increase state reimbursement for kindergarten students as an incentive to expand full-day programs. (Kindergarten reportedly has replaced increased preschool funding as a priority in an effort to gain GOP support.)
  • Reform implementation – Also under consideration is $100 million for districts to help them pay for implementation of new standards, tests and educator evaluations.
  • Early literacy – Districts also could receive $20 million to help fund implementation of the 2012 READ, which requires students to be reading at grade level by the time they enter fourth grade.
  • English language learners – The measure may include $15 million for expansion of services to these students.
  • Enrollment counting – Conversion to the average daily membership method of counting enrollment could get $10 million for technology costs.
  • Financial transparency – Districts also could receive $5 million for the costs of improved spending reporting to the public.
  • Charter school construction – Also under consideration is providing an additional $20-$25 million to charter schools for facilities needs.

Republican lawmakers already have introduced individual bills related to kindergarten funding, English language learners, enrollment counting, financial transparency and charter construction needs. While those bills are unlikely to pass on their own in the Democratic-majority General Assembly, including those issues in his bill could give Johnston a lever to gain some GOP support.

Districts push back on earmarked funding

Plans to dip into the SEF face two big hurdles.

The first is the push by the Colorado Association of School Boards, the Colorado Association of School Executives and the Colorado Education Association to reduce the “negative factor,” the formula used by the legislature to reduce annual school funding from how the state funding formula otherwise would have calculated it. It’s a device used to balance the overall state budget.

Gov. John Hickenlooper’s revised 2014-15 budget proposal calls for $5.7 billion in K-12 spending, including $3.78 billion in state funds. That would be a $241.1 million increase over this school year. On top of that districts would receive $276.7 million in what’s called categorical funding, money that’s earmarked for ELL students, special education, transportation and certain other costs.

The current negative factor is estimated at $1.004 billion. The governor’s budget would take it to about $1.002 billion next year.

In the wake of A66’s defeat, district interests are pushing hard to use any extra money to “buy down” the negative factor and not to fund new programs like Johnston is proposing.

The school boards group is pushing for a buy down of at least $100 million, and the Denver Area Superintendents Council is suggesting a $275 million increase in school spending, most of it to reduce the negative factor and some of it to increase support for at-risk students. A newly formed group of high-poverty districts also may push for additional at-risk funding.

Without some movement on the negative factor, key education interest groups are highly skeptical about Johnston’s bill-in-progress. District lobbyists say they aren’t getting much sympathy about the negative factor from Democratic leaders, at least in the House.

Spend now or spend later?

The second hurdle to big raids on the SEF is the desire by the Hickenlooper administration and legislative budget writers to maintain a healthy balance in the fund as a cushion against education spending needs in future years, especially if the economy takes a downturn.

K-12 schools are funded by a combination of money from the SEF and the state’s main General Fund. If the schools spending base is increased, even if that initially comes from the education fund, the General Fund bears most of the burden in future budget years. That’s because the state constitution requires base funding to increase by enrollment and inflation every year.

The administration would like to leave a balance of about $700 million in the SEF at the end of 2014-15, letting it decline to $400 million at the end of 2017-18. (In addition to the one-time infusion of cash, the SEF receives an annual share of income tax revenues totaling more than $500 million a year.) Keeping a healthy balance in the education fund allows budget writers to reduce the pressure of K-12 spending on the General Fund.

So lawmakers face a three competing interests when they consider school funding this session – new programs, reducing the negative factor and saving for future education costs.

The riddle likely won’t be answered until April, after new state revenue forecasts are issued in late March, after the main state budget bill firms up and after legislative leaders choose the winners from among all the new spending bills proposed by lawmakers, both for education and other state programs.

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