It’s Been 30 Years Since Colorado Redid Its School Funding Formula. Some Lawmakers Hope Now’s The Time

June 5, 2021
An empty classroom at Goldrick Elementary School, Dec. 7, 2017. (Kevin J. Beaty/Denverite)An empty classroom at Goldrick Elementary School, Dec. 7, 2017. (Kevin J. Beaty/Denverite)Kevin J. Beaty/Denverite
An empty classroom at Goldrick Elementary School in Denver.

Colorado’s formula that decides how public schools get money is more than a quarter of a century old.

Trying to update the School Finance Act of 1994 hasn’t been easy.

“The whole formula is like a quadratic equation,” said House Education Committee member Rep. Mark Baisley, R-Roxborough Park. “It's really complex. There are so many variables.”

For years, state lawmakers have struggled with overhauling the system because it would create “winners and losers” – some districts would benefit, while others would lose funding. The politics of losing money is never an easy sell, but it’s one made even tougher in a state that funds students at more than $2,800 below the national average per pupil. And because of TABOR, the Taxpayer’s Bill of Rights, voters have also turned down several statewide measures to raise funds for schools.

But this legislative session there have been some breakthroughs, largely because of new revenue on the way after the Colorado Supreme Court recently ruled that lawmakers can raise school district property taxes gradually  — an increase residents already approved when they voted that property taxes for school districts should be exempt from TABOR's tax revenue limits years ago.  It will increase local funding for schools by roughly $100 million the first year and then less each year until it’s fully implemented. 

On Thursday, the state legislature passed the Public School Finance Act, the legislation that sets funding levels each year. This year lawmakers made a permanent change in the allocation formula in the bill — it would send more money to districts to teach students who come from low-income families or who are English language learners.

“We need to come out of this pandemic, learning something from it and not going back to the same thing that used to be,” said House Education Committee chair Rep. Barbara McLachlan, D-Durango. “We're addressing students so that we're not funding by their zip code, we're funding by the need of every student.”

The bill adjusts the definition of “at-risk pupils” to include students eligible to receive federal “reduced-price lunch,” instead of only “free” lunches. Altogether, the changes would give districts an additional $118 million next year.

The School Finance Act also restores funding to grant programs that were cut last year. Lawmakers also chiseled away at the debt owed to schools, whittling it down to $572 million from $1.1 billion. And in the main budget bill, state lawmakers included an extra $10 million for special education students next year.

Altogether, the state’s average per pupil funding next fiscal year, if Gov. Jared Polis signs the bill, will be $8,991, an increase of $868 per student —10.7 percent — over this year.

Finally, on Friday, lawmakers were also close to signing off on appointing an interim study committee to continue to look at additional ways to modernize how Colorado funds schools. The committee, if approved, will examine property wealth differences across the state and try to address the inequity that it has created.   Some districts have had an easier time raising local revenues for their school districts because of their property values  — and thus higher property taxes available for their school districts — as well as the willingness of their local voters.

But lawmakers on both sides of the aisle agree, much more work needs to be done to update the funding formula they say is outdated.

“How do we modernize the formula, make it more transparent, equitable, and student centered,” said state Rep. Julie McCluskie, D-Dillon.

Lawmakers say more study is needed on other issues

Last week, lawmakers introduced a proposal that would have created a matching fund for school districts to incentivize voters to pass special property taxes to fund schools. Historically, wealthier districts in Colorado have passed higher property taxes for schools while others haven’t – lawmakers say that has increased inequity.

These special mill levy override elections raise local tax dollars for targeted needs like mental health counselors. The bill was “to help us provide more equity to our school districts that are in lower wealth communities,” McCluskie said.

“Communities like mine, Summit County, where we've had so much success with mill levy overrides, means my school district has a lot more wealth to invest in classrooms, in student learning, in teacher salaries and wages,” she said. “Poor communities that have not been able to run these (mill levy overrides) primarily because if they did, it would generate so few dollars. They don't have the access to that additional funding.”

In Colorado’s districts with lower property wealth, the proportion of local tax dollars supporting education has dwindled, forcing the state to make up the difference. It’s estimated that $1.5 billion has been generated in special elections to increase the money available to local school districts, but that is often in higher property wealth districts.

The difference in how much districts can raise in such special elections is also striking, ranging from an estimated $20,000 per mill increase collected in some small rural districts to a district like Denver which can raise $19 million per mill increase. One mill levies one dollar of tax on property owners per $1,000 dollars of assessed value.

“As long as Colorado is going to depend on local elections to ensure that school districts have the resources that they need, then we've got to have some support from our states to level that playing field,” said Bret Miles, executive director of the Colorado Association of School Executives. The legislature would have to determine how much local communities should generate for their public schools. 

But bill sponsors realized that the matching fund idea proved more controversial, with some Republican lawmakers uncomfortable with the idea of the legislature offering a “carrot” to voters to pass a property tax increase.

Lawmakers decided instead to propose the creation of a special eight-member legislative committee that would meet for two years to recommend additional ways to modernize how Colorado funds schools. If approved, the committee will examine:

  • How to define students living in poverty. Some states do not use students’ participation in federal subsidized lunches as the proxy for poverty, as Colorado does.
  • How the state currently gives extra money to school districts with a high cost of living, known as the cost-of-living factor. Districts with a high cost of living get more money per student.
  • The unique challenges related to funding rural schools, especially small, remote districts.
  • The incentive matching fund for districts that have been unable to pass mill levy overrides and the different taxing capacity and property wealth of districts.
  • The funding of state-authorized charter schools.
  • How the state funds special education. School districts receive far less than they are supposed to for each student.

McCluskie said she’s hopeful more work with stakeholders could make a mill levy override match fund proposal ready for the next legislative session, “trying to get closer to that 50-50 (split) that local communities are paying for half of their public school funding needs and that the state is providing the rest.”

Some school districts maintain that some adjustments like size and cost of living should still be considered because districts have different costs of operation — as well as differences in what they’re able to pay teachers.

Leslie Colwell of the Colorado Children’s Campaign said she wants to see dollars allocated in a fundamentally different way, where money is targeted to the unique needs of students instead of “archaic systems and district characteristics.” 

“We continue to finance public education through methods that have no demonstrable link to the cost of delivering a rigorous education that leads to high achievement for all students,” she said. “That’s despite the fact that we know a lot more about the investments that lead to improvement in student outcomes.”

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