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Budget forecasts raise $159 million school finance question

The looming debate over mid-year changes in Colorado school funding got more focused Monday with a projection that the legislature has $159 million worth of flexibility in the K-12 budget.

Lawmakers could let school districts keep that amount, or they could reduce the state’s contribution to current 2015-16 spending. The new information, which became public with the release of quarterly state revenue forecast, puts hard numbers on a situation discussed at a Capitol budget briefing last week.

It may seem counterintuitive that school districts might face cuts even when extra funds are available. But that possibility is very real because of Colorado’s complicated school finance law and because increasing school spending also affects future support.

Total school funding — $6.2 billion this year — comes from a combination of state and local tax money. If there’s more local revenue than projected, the state is able to reduce its share. If enrollment is lower than what was forecast when the school finance law was passed in the spring, the legislature can reduce total spending in the middle of the school year.

Both enrollment and local revenue increased this year between the time the budget was written last spring and now. Lower enrollment means a potential saving of $24 million, while higher local revenues mean the state could reduce its share of school spending by $135 million, legislative staff economists told the Joint Budget Committee and other lawmakers during a briefing Monday.

“The news is very good from a budget perspective, a flexibility perspective,” said economist Mark Carey. He explained that lawmakers could cut school spending by $159 million, let the schools keep it or make a partial cut.

Cutting the funding would decrease current per-pupil funding of $7,284 by about $10, Carey said. Letting schools keep the money would raise average per-student support by $178.

School districts, squeezed by several years of budget cutting through the negative factor, would desperately like to keep the money. But lawmakers likely will have other ideas. Cutting the $159 million would in effect “save” the money for the 2016-17 budget year, possibly providing more funding for K-12 than otherwise would be available.

The negative factor is the formula the legislature uses to reduce school spending from what it otherwise would have been, in order to balance the overall state budget.

Student enrollment expected to keep growing

Legislative analysts forecast future enrollment trends in their December report, and they see continued modest growth.

“Statewide K-12 enrollment is projected to increase by 8,992 FTE students, or 1.1 percent, in the 2016-17 school year. Enrollment in the 2017-18 school year is expected to increase 1.0 percent, or by 8,177 FTE,” according to the analysis. (The legislative staff always calculates enrollment by full-time equivalent numbers, not student headcount. Some individual students, such as kindergarteners, aren’t counted as full-time.)

Statewide enrollment has increased between 1 and 1.5 percent annually for the last several years.

In a change from some past years, the analysts see growth across the state. “All nine forecast regions will experience growth in enrollment over the next two school years. Growth will be strongest in the southwest mountain, mountain and northern regions, where stronger job growth relative to other areas in the state is spurring strong growth in new residential developments attractive to families,” the analysis said.

See the document at the end of this article for the full enrollment forecast.

The rest of the story

Quarterly revenue forecasts cover much more than school fund and analyze impacts on the entire state budget plus details on the state’s economic health. See the Office of State Planning and Budgeting forecast here, and read the legislative staff document here.