After hopes of progress, some Colorado school districts fear deep cuts under Gov. Polis’ proposed budget

The joy that overwhelmed Colorado school districts in the spring when state leaders ushered in major funding progress for education has morphed into serious concern, with the prospect of significant funding cuts for many districts outlined in Gov. Jared Polis’ budget proposal.

Those cuts are part of Polis’ proposed solution to plug a $1 billion budget hole and have sent waves of confusion and frustration across school district leaders and education organizations, some who say the state is pulling the rug out from under them. 

They worry the financial hit would immediately undo the progress Colorado recently made by paying down a state debt owed to schools and revising the state’s school funding formula to better meet student needs. They fear it would also further pinch districts’ bottom lines at a time their federal COVID funds have run out, inflation has added to their costs and some districts have had to use their own funding to cover part of universal preschool and the state program that offers free school meals to all public school students. 

In a letter addressed to members of the Joint Budget Committee on Monday, a band of education groups detailed why they strongly oppose Polis’ proposal, writing, “the impact would be nothing short of catastrophic in many communities.”

The letter is signed by leaders of the Colorado Education Association, the Colorado Association of School Boards, the Colorado Rural Schools Alliance and the Colorado Association of School Executives.

Much of the discord over the governor’s budget proposal stems from different schools of thought on how best to count students to inform how much money districts receive. Generally, Colorado school districts receive a base level of funding for every student they educate and additional funding for students facing extra challenges, such as students with disabilities, kids living in poverty and those learning English.

The state’s new school funding formula — three decades in the making — prioritizes funding schools based on student needs rather than district needs. That means that more money will flow to districts educating more students with disabilities, kids from low-income households and students learning English instead of pumping more funding into districts that have a higher cost of living.

Colorado has long calculated school funding for districts by averaging their enrollment over five years, which creates a financial cushion for districts experiencing declining enrollment. The new formula would shift to funding districts based on a four-year average of their student counts.

Polis proposes a more dramatic change — removing averaging altogether and funding districts based on a one-year count, which would lead to wildly different funding figures for districts than what they were banking on under the new school funding formula. He also wants to implement the state’s new school funding formula more slowly, stretching it out over seven years instead of six years as originally planned.

His budget would increase school funding from the state’s general fund by about $115 million next year, boosting per-pupil funding and putting total education spending at $9.8 billion. 

However, that doesn’t necessarily translate to more funding for education overall, said Tracie Rainey, executive director of the nonprofit Colorado School Finance Project.

While per-pupil funding may increase under Polis’ proposal, the total dollar amount would decrease by $191 million from the amount schools are receiving this year, Rainey said. That’s because the state would be tallying fewer students by replacing averaging with a one-year count.

“You’re figuring out a different way to reduce funding, which is changing how you count students,” she said.

The letter to the JBC notes that districts whose funding would dip under Polis’ proposal would lose, on average, a dollar amount equal to 10%-15% of their total budget. Some districts would lose up to about 30% of their total budget.

“Our organizations recognize Colorado’s budget shortfall and the challenges that poses to the state, and we know that decisions about how to bridge the gap are not easy ones,” the letter states. “But school districts are facing similarly difficult budget scenarios and simply cannot absorb more cuts like what is currently being proposed by Governor Polis.”

Both the governor’s team and JBC staff have emphasized that numbers within the budget proposal are preliminary. Those figures will likely change after the next revenue forecast Thursday, when legislative council staff will release updated numbers related to student counts and assessed value.

“Governor Polis is committed to protecting Colorado’s historic investments in education and that’s exactly what this budget does,” spokesperson Shelby Wieman wrote in an emailed statement. “We will continue working to ensure our students and educators have the resources they need to thrive. The changes outlined in this proposal would bring Colorado in line with the rest of the country and help fund students where they are.” 

Is another budget stabilization factor in the making?

School districts across the state — in metro, suburban and rural regions — are looking at the possibility of funding cuts under Polis’ proposed budget. Delta County Joint District No. 50 on the Western Slope, which educates more than 4,100 students in preschool through 12th grade, would lose more than $2 million. State funding for Jeffco Public Schools, the state’s second largest school district, would drop by $23 million. In Cherry Creek School District, district officials are eyeing a potential $17 million cut.

The estimated $2 million-plus hit in Delta County represents about 4% of the district’s total budget, according to Michael Madden, director of finance.

Navigating through that kind of financial setback is especially daunting in Madden’s district, where enrollment has been steadily declining since 2020 and where 84% of the operating budget is designated for staff salaries and benefits.

Madden said it would be “impossible” for the district to absorb that financial blow in other parts of its budget.

“We might survive for a little while digging into (our) fund balance a little bit,” he said, “but this would be generally where school finance would be going long term and so we wouldn’t be able to sustain going into (our) fund balance very long.”

Asked if Polis’ budget proposal could prompt staff layoffs or salary freezes, Madden said it’s “a fine line” of trying to convey the potential fiscal challenges ahead without worrying employees.

“Any time you’ve got a decrease in revenue, (layoffs and salary freezes are) something we’ve got to work to avoid,” he said. “We do not want to go backwards on our staffing, whether it’s the rate we pay or the number of teachers per student we have.”

In Jeffco Public Schools, the prospect of a $23 million reduction in state funding feels especially painful after the district closed 21 schools over two years, Superintendent Tracy Dorland said.

One concern with the state’s averaging provision is that it sends money to schools for students they don’t currently serve — often referred to as “phantom students.” But district leaders like Dorland say those extra dollars are needed in Colorado, which trails the national average of per-pupil funding by $2,000-$3,000.

At the same time, districts can’t neatly rearrange their operations by slashing a teaching position or closing a school when their student count falls, she said, as enrollment tends to drop across school grades. 

“This is really a reinstatement of the (budget stabilization) factor in sheep’s clothing,” Dorland said.

The budget stabilization factor, an accounting tool that emerged during the Great Recession when Colorado faced a budget crisis, permitted the state to pay schools less than what they were owed under the state constitution. Eliminating that IOU was a major accomplishment of the legislature earlier this year after shortchanging school funding for an entire generation of students. 

Scott Smith, chief financial and operating officer of Cherry Creek School District, said Polis’ budget proposal “completely undoes” all the hard work that went into establishing a new school finance formula. He now questions the negotiations between state and district leaders in crafting that formula.

“The unfortunate fact is that we’ve paid off the budget stabilization factor and after one year we’re going to be right back in it again, no matter how they try to disguise it or no matter what language they try to use to avoid calling it the (budget stabilization) factor, it’s absolutely back,” Smith said.

The possibility of a $17 million funding drop in his district would cover 170 teaching positions, he said, making an already tight district budget even tighter.

The Cherry Creek School District has had to divert some of its K-12 funding to cover costs of universal preschool, the state’s newly expanded preschool program. Smith said the district subsidizes 40% of its universal preschool program — about $10 million a year — to compensate its early childhood teachers. Operating its half-day preschool program costs about $6,000 per student while the state distributes only $4,000 per student.

“Unfortunately it comes at the expense of everything else that we do,” Smith said. “So whether it’s giving raises to teachers or making class sizes smaller or offering new programs, we have to take money that we get through the School Finance Act, which is already wholly inadequate, and then allocate it to these underfunded mandates.”

Additionally, the district has used its own funding to make adjustments for the state’s Healthy School Meals for All program — including upgrading cafeterias along with cooking and serving equipment to handle an influx of students going through the lunch line. That program, which provides free school breakfasts and lunches for all public school students regardless of their household income, came under scrutiny earlier this year amid a budget shortfall, Colorado Public Radio reported.

Polis’ office rejects the idea that his proposal is teeing up another budget stabilization factor, saying the state would be meeting its constitutional obligation to increase per-pupil funding of actual students by inflation while also implementing part of the new school funding formula.

“In a tight budget environment, it is important that we fund actual students where they are,” Wieman, the governor’s spokesperson, wrote in the emailed statement. “This also ensures we do not have to ever bring back the budget stabilization factor that we eliminated last year and can also deliver on the new funding from the new school finance act passed last year and build on it over time to better fund our schools.”

Smith, of Cherry Creek School District, added that he is outraged that the state is “balancing the budget on the backs of K-12 once again.”

“If we want to really develop great human beings and great productive members of our society in the future, just like anything in life, you have to invest in it,” he said. “And we need to step up and make sure that we’re doing that because our kids are worth it.”

Lawmakers weigh school funding needs against state deficit

Polis’ office calls Colorado a “significant outlier” in the way it funds schools through its averaging mechanism — which has become increasingly costly.

Averaging cost the state about $20 million a year in the last decade. Today, it costs more than $120 million a year through the school funding formula as declining enrollment has become a broader trend.

“If you go back in history, this wasn’t the amount of money we had expected to be spending on averaging,” Mark Ferrandino, the governor’s budget director, told JBC members Monday during a hearing. “It wasn’t what the goal of the policy was when it was implemented back in that time.”

States across the country rely on all sorts of models to fund their school districts based on student counts, said Marguerite Roza, a research professor and director of Georgetown University’s Edunomics Lab, a research center that focuses on education finance and works to inform education policy. Some have a count day in the fall and a count day in the spring, for instance. Others fund districts based on student attendance.

“Most really lean toward funding the current year students and most with some sort of offset for the prior year or the prior two years,” Roza said. “That’s really unusual to think of it as looking back for five years.”

Budget cuts in schools due to declining enrollment have become more common across the country, she noted, “and it’s not going to go away.” 

Lawmakers have spent the days leading up to Thursday’s revenue forecast agonizing over how to preserve funding for schools while also finding ways to make the state budget whole.

Republican state Sen. Barbara Kirkmeyer, of Brighton, told The Colorado Sun that the new school funding formula is simply out of financial reach.

“We can’t afford the additional funding that was put forward in (House Bill) 1448,” Kirkmeyer said, citing the legislation that created the new formula. “We can’t afford it this year. We can’t afford it next year.”

That means the state will likely have to turn to a special trigger within the legislation that directs the JBC to pause the implementation of the new funding formula in the event of fiscal challenges, she said.

Ferrandino told JBC members Monday that the governor’s office believes it is possible to roll out the new school funding formula in a sustainable way with his proposed changes.

“The governor felt that we needed (a new formula) and this was the right approach on a policy and that if we phase it in over a slower amount and make these other changes we could be able to sustain it without putting too much pressure or undo pressure on the general fund,” he said. “We also want to make sure that the money is getting to the students where they are and for the needs that they have.”

Kirkmeyer, however, dubbed Polis’ plan to do away with averaging and cut funding as the “Polis stabilization factor” rather than the budget stabilization factor. She called his intention to cut school funding “irresponsible” and criticized him for attempting to make substantial changes to the new school finance formula without legislative or public debate. 

JBC Chair Jeff Bridges, a Democrat from Greenwood Village, doubled down on the need to make funding cuts throughout the state budget and acknowledged the hardship that follows. He said he hopes cuts to K-12 funding can be minimized.

“At the end of the day, though, if I have to choose between funding students that don’t exist and adequately funding students who do, I’m going to be with the students we actually have, recognizing that may mean that some school districts get less,” Bridges said during the Monday hearing. “You can’t cut funding without some people getting less money. That is math. That’s how it works. How those cuts are felt by different districts depends on the facts in the district. This is a terrible budget year, and this is the first of many.”

JBC Vice Chair Rep. Shannon Bird reminded her colleagues that school districts can’t seamlessly bend to adjust to budget cuts. They still must maintain buildings and pay for teachers and administrators.

“Those aren’t flexible, easy things to change,” the Westminster Democrat said. “We want to keep our schools whole. We literally just bought off the budget stabilization factor last year. We don’t want to be, whether it’s directly or indirectly, turning around the very next year and cutting our schools. So, I for one, will be looking for every other place to cut because I want to honor that commitment.”