The Public School Finance Act, expected to be introduced in the state Senate on Tuesday, will include an extra $23 million to reduce the state’s outstanding obligation to school districts, plus $30 million just for rural schools and $5 million for behavioral health needs.
None of this money was in the budget approved by the House and Senate last week, but recommended changes in the residential assessment rate, which determines how much of a home’s value is taxable, mean that Colorado likely will have an extra $107.6 million to put toward school finance.
Before this news, a single big-ticket priority, $175 million for full-day kindergarten, accounted for most of the new money going into education.
Dedicated funding for rural schools, allocated the past two years, was missing entirely from the budget. Neither outgoing Gov. John Hickenlooper nor Gov. Jared Polis asked for that money, and an effort by state Sen. Bob Rankin, a Carbondale Republican, to get budget writers to add it in failed to get the necessary support on the Joint Budget Committee.
While many districts will benefit financially from the state covering the full cost of kindergarten, some rural districts with small numbers of students would essentially break even. A few would have even lost money
Senate Education Chair Nancy Todd, co-sponsor of the school finance legislation, said she wanted to find ways to address the most pressing needs that schools have, but long term, the state needs to change the way it funds schools.
“This year is when we can invest some additional money, and then we need to come back and say, is this really the best approach?” said Todd, an Aurora Democrat, in an interview Monday. “Are there other ways we can address these needs and give additional support to districts?”
For the past two years, a special committee has been meeting to look at changes to how Colorado distributes money to schools, but without making much progress. Legislation this session extends that committee’s work for another year.
The extra money will come from local property taxes. Colorado law requires that nonresidential property owners pay 55 percent of all property taxes statewide, with residential owners covering the other 45 percent. To maintain this ratio, the Legislature sets a residential assessment rate based on projections about property values. Over several decades, that rate has sunk lower and lower, with significant implications for local taxing entities. In the case of school districts, the state has made up whatever districts lose from lower property tax revenues.
This year, state economists originally predicted a residential assessment rate of 6.78 percent, down from the current 7.2 percent. The 2019-20 budget was built based on those assumptions. But new forecasts show nonresidential property values increasing more than expected, which means the residential assessment rate doesn’t need to fall as much to maintain the required ratio. The Division of Property Taxation instead is recommending a rate of 7.15 percent.
That means local school districts can expect to bring in an extra $107.6 million, and a corresponding amount of state money is available for education.
The Colorado General Assembly will need to approve lowering the assessment rate. If it does nothing, it would stay at 7.2 percent, but that could invite taxpayer lawsuits.
The Colorado Education Association, the state’s largest teachers union, has been pushing lawmakers to put more money into education.
“Legislators who ran for office on public education issues could have a golden opportunity to honor students and educators by aggressively addressing the decade-long underfunding of Colorado public schools,” union President Amie Baca-Oehlert said in an email after the recommended residential assessment rate was announced.
Superintendents of rural districts have been pressing their case. For two years, Colorado’s rural schools have received a special allocation of $30 million to address a backlog of needs like building repairs and school bus replacement. Both years, the money was characterized as “one-time” money, but districts quickly came to rely on it.
Bret Miles of the Northeast Colorado BOCES – a cooperative of school districts – said that money has covered everything from textbooks to buses, and that’s allowed some districts to invest in people as well.
“People who had been reluctant to do something with salary because they knew they needed to replace a boiler or a big-time piece of kitchen equipment, when this money came along, they felt more comfortable doing something with salary or hiring that mental health professional they’ve wanted for so long,” Miles said.
Each year, Colorado takes money that, constitutionally, should go to schools and spends it on other budget needs, a move known as the budget stabilization factor or negative factor. The Legislature’s money maneuver costs rural schools more money per student than urban ones due to how the factor is calculated. Miles said that fact more than justifies spending additional money on rural schools.
“Until the negative factor is gone, there is a need for this targeted money,” he said. “They go hand in hand.”
The School Finance Act will include the full $30 million that rural schools had requested, as well as an additional $23 million to reduce the budget stabilization factor, Todd said. That would bring the total buydown for 2019-20 to $100 million. Schools would still be losing out on roughly $572 million, or more than $600 per student.
The School Finance Act will also set aside $5 million for mental health needs, with districts having broad discretion in how to spend it, Todd said. That’s in addition to a variety of grant programs that will be funded through separate bills this session. Each district would get at least $20,000 to spend on what it sees as its greatest need, whether it’s training for parents, an anti-bullying campaign or suicide prevention.
Todd said any additional money made available from increased local property taxes should be put in the state education fund.
Current economic forecasts call for a slowdown in growth, and the state may need to draw from its reserves in future years to maintain funding levels.