School Finance Act could be overhauled

Public could ultimately decide possible ballot measure

Members of the Colorado General Assembly aren’t waiting for a decision from the Colorado Supreme Court in Lobato v. State of Colorado.

Last Friday, Sens. Michael Johnston, D-Denver, and Rollie Heath, D-Boulder, introduced Senate Bill 13-213, a new Public School Finance Act that Johnston says will address some of the issues raised in Lobato.

If passed by the General Assembly, SB 213 will go to the ballot this November to be approved by voters and would go into effect for the 2015-16 school year. In the meantime, the current Public School Finance Act of 1994 will continue to be the mechanism for K-12 funding.

SB 213 “is a dramatic overhaul of the current act,” Johnston said this week.

“If you look at the items in the Lobato case and opinion, the [trial] court asked the Legislature to take the lead in planning and designing a system that would be equitable and adequate,” Johnston told The Colorado Statesman this week. That system “would include attentiveness to populations that have been neglected, liked special education, gifted and talented, English language learners (ELL), at-risk; all [are] directly funded in this formula.” The bill also would offer “offer extended school year for students who need extra support; we’re funding full-day kindergarten for early childhood readiness, we’re putting in place an ongoing process to analyze the cost of providing K-12, and analyze our return on investments.”

Johnston said his bill will cover some of the concerns from Lobato. “Lobato says you have to figure out what number drives what outcomes. What matters most is outcomes. It doesn’t matter if you put in $4 billion more if it doesn’t generate any different results.”

Even if the Lobato ruling goes against the plaintiffs, Johnston said the bill will move forward.

“There’s a fundamental inequity in the school finance act,” he said. “This is what we’re hearing from parents, teachers and kids. [SB 213] is essential to making Colorado a place where businesses want to relocate and parents want to live.”

What isn’t known yet: the exact amount that SB 213 will ask voters to approve. A fiscal note is not yet available, and Johnston has reportedly said the bill could seek about $1 billion in new revenues. However, estimates from education advocates, such as Great Education Colorado, claim the state is already underfunding K-12 by as much as $3.4 billion per year.

The new school finance act contained in SB 213 differs substantially from the previous act in a number of areas:

Preschool and kindergarten: the current school finance act funds a limited number of slots for 3, 4 and 5-year olds in half-day preschool. Under SB 213, all students who meet the eligibility requirements would be funded, although preschool students would still be funded as half-day pupils. Kindergarten students are currently funded as half-day pupils; under SB 213 all kindergartners would be funded for all-day school.

Enrollment funding: the current act sets funding based on the number of pupils enrolled on a headcount date, usually October 1. The new bill would use enrollment on an average daily membership (ADM) as the basis for calculating funding.

Negative factor: in the current act, the funding formula takes into account a cost of living factor, personnel and nonpersonnel costs, and a size factor. The act then reduces the district’s total program funding, using the so-called “negative factor.” Under SB 213, the negative factor would be eliminated.

At-risk definitions: the definition of at-risk students would be redefined under SB 213. Currently, the term refers to students who are eligible for free lunch programs under federal law and those with limited English proficiency. A student who meets both criteria is counted only for purposes of at-risk funding. The new act creates separate formula weights for at-risk and ELL students. An at-risk student is defined as one who is eligible for free or reduced-priced lunches under federal law; an ELL student is one who is enrolled in English language proficiency programs, with a maximum of five years. A student can be counted under both criteria, and that impacts funding.

The bill also seeks to eliminate minimum per pupil funding and makes substantial changes to how funding is calculated using mill levies from the local districts. That includes taking into account the district’s real property assessed valuations, median family incomes, and at–risk student percentages.

Review of return on investment: the Lobato case argues that the state has never used studies or research to calculate school funding, Under SB 213, and beginning in January 2016, the Colorado Department of Education is charged with preparing a report that analyzes the increases in academic growth and achievement in districts that have received an increased financial investment from the school finance act. The report, according to the bill, must include cost studies that identify funding deficits and the amounts needed to correct those deficits. Those studies would be repeated every four years.

The bill also envisions a more transparent public finance reporting system. Current law requires the Colorado Board of Education to develop a state-wide financial, student management and human resource electronic data communications and reporting system. Under SB 213, the system must include reporting of expenditures, including salary and benefits, at each school. The department of education is then required to create a website that will translate that data into a format that can be understood by the “layperson.”

Finally, SB 213 eliminates the general fund appropriations for certain categoricals, such as English language proficiency programs and services for expelled and at-risk students, since those programs will be funded through the broader school finance formula. Those dollars would then go to gifted and talented students.

Rep. Cheri Gerou, R-Evergreen, a member of the Joint Budget Committee, said this week that Johnston’s bill raised concerns among teachers in her district that rural districts “would make out like a bandit.” But rural members of the House Republican caucus are excited about the bill for the same reason, she added.

With the Lobato ruling not expected for at least several months, legislators plan to continue work on the state budget and the school finance act for 2013-14 in a business as usual fashion.

The 2013-14 school finance act will be carried by Sen. Evie Hudak, D-Arvada, who told ,em>The Statesman this week that it will be more or less the same as last year’s act. However, she said she hoped that with the revenue forecasts to be released next Monday, the bill could reduce the impact from the negative factor, the mathematical formula that the legislature has used the last few years to reduce K-12 funding and balance the budget. The current reduction is 16 percent. Hudak said it can’t be eliminated entirely because that would require as much as $1 billion.

JBC Chair Sen. Pat Steadman, D-Denver, said this week that Lobato won’t impact the 2013-14 Long Appropriations Bill or the school finance act. Both are expected to be introduced by the end of the month. “We will proceed on course, funding schools as we do now and try to do better, but until there is a final ruling in the case I don’t see a reason for us to do anything out of the ordinary,” Steadman said.

Speaker of the House Mark Ferrandino, D-Denver, noted that both House caucuses said they wanted to put more money into K-12 education in the opening day speeches. “We will increase funding for K-12 this year, but we’re $1 billion underfunded,” Ferrandino said. “We won’t be able to make that all up or even a significant portion of it. We’re just going to stop digging.”

Much will depend on the March 18 revenue forecast; Ferrandino said the federal sequester will likely have an impact on the revenue picture.

As to Johnston’s bill, Ferrandino said it will move the state “in the right direction.”

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