Colorado speaker proposes new school funding approach that would curb — but not eliminate — cuts for many districts

A new school funding proposal would spare many Colorado school districts from significant funding cuts next year, softening — but not eliminating — budget cuts.

The new proposal, brought forward Friday by House Speaker Julie McCluskie to an audience of district CFOs during a meeting at the Capitol, comes as lawmakers analyze how to balance an estimated $1.2 billion budget deficit. The proposal offers an alternative path forward from a budget proposal Gov. Jared Polis released in January that would pull up to tens of millions of dollars from individual school districts — raising the threat of layoffs and reductions in programs and maintenance, particularly in small and rural districts.

Even so, balancing the state budget this legislative session will require public education to bear some degree of belt-tightening, McCluskie warned CFOs.

“I’m so proud of the progress that we’ve made, but where we stand today and where we stood a year ago are two different places,” McCluskie said during the 40-minute meeting. “The changes in the budget between this time this year and this time last year have been dramatic, and I believe that we have commitment from both sides of the aisle. I believe that we have a commitment from our (Joint Budget Committee) members to continue to work to do everything we can to drive more funding, as much funding as we can, to K-12. I think it is also important that we recognize the challenges that we are facing with a billion-dollar shortfall.”

Colorado is slated to launch a new school funding formula for the 2025-26 school year, one that would increase state spending on education by $500 million over six years. The new formula also prioritizes funding for rural schools and students who bring additional challenges to school, including those who live in poverty, kids with disabilities and students learning English.

McCluskie’s latest proposal — what she terms “an opening bid” — would fund schools with 10% of the total $500 million during the 2025-26 school year and would keep a four-year averaging tool in place. That tool would calculate funding for districts by averaging their student enrollment over the prior four years, preventing districts struggling with declining enrollment from sharp funding slashes.

Separately, Polis’ proposal recommends giving districts 18% of the total $500 million in the new school funding formula for the 2025-26 school year and funding schools based on a one-year count of students rather than by averaging, a longtime practice in Colorado.

A spokesperson for Polis previously told The Colorado Sun that funding schools based on multiyear averages of student counts is “an abuse of taxpayer money.” The governor has repeatedly argued that Colorado must fund districts based on the number of students currently in their classrooms rather than doling out money to districts for kids they previously served.

His proposal has drawn widespread concern from districts, especially those seeing their student population shrink, because of the sizable budget cuts it would trigger.

On Friday, Mark Ferrandino, the governor’s budget director, signaled a willingness to listen to districts and avoid removing averaging in one fell swoop.

“We are in a more difficult position, and our goal is to make sure, how do we fund kids where they are today?” Ferrandino said. “How do we implement the new formula in full and not delay that because that has long-term impacts on funding for districts? And so we’re committed to that. But as you know we proposed to eliminate averaging. We are open to both how does that get done over a series of years and are there other solutions that may be able to replace the averaging calculation now that we could learn from other states?”

Some districts would benefit more from Polis’ budget proposal

McCluskie’s proposal takes a more incremental approach to doing away with averaging. She wants to shift to funding districts based on a three-year average of their student count for the second and third years of the new formula while also continuing to increase how much money districts get.

Her plan would give districts more than $10 billion next year while Polis’ proposal would budget about $9.9 billion for public schools — a difference of about $130 million. Both represent an increase in state education spending from the $9.8 billion pumped into schools this year. During the last school year, Colorado spent more than $9.1 billion on K-12 education.

However, both proposals are less than the amount schools would receive if the new formula started next year as designed, which would give schools 18% of the additional $500 million they’ll get over six years and maintain four-year averaging. 

Through McCluskie’s proposal, districts would receive $33.7 million less next year than the total they would get under the original plan for the new formula.

A spreadsheet provided by McCluskie’s office that compares how districts would be affected by different funding scenarios shows that under her proposal, 18 of 178 districts would get less funding next year than what they got this current school year. That’s compared with 62 districts that would see a funding decrease from this year to next year under Polis’ budget proposal.

McCluskie said she is trying to incorporate a “hold harmless” provision into her school funding proposal so all districts would receive at a minimum the amount of funding they received this school year.

Funding figures are not final, McCluskie noted, as enrollment numbers across districts remain in flux with new students showing up to schools and others leaving throughout the school year.

Meanwhile, 113 districts would take a budget hit under McCluskie’s proposal when compared with the amount they would receive under the original plan for launching the new school funding formula next year. Under Polis’ proposal, 117 would face a budget cut.

Her approach would save the state an estimated $40 million to $50 million, a fraction of the estimated $147 million in savings through Polis’ approach.

McCluskie suggested additional ways to explore saving on K-12 spending, including by potentially capping funding for the state’s Building Excellent Schools Today grant program, which supports new school buildings and construction and renovation projects, and by suspending some grant programs.

She also acknowledged that her proposal won’t leave every single district in a better position, with some districts’ bottom lines faring better under the governor’s recommendation.

McCluskie said her work is driven by the need to “tighten our belt, recognize the extraordinary circumstance that we’re in with the budget this year and meet the moment by finding a path forward that protects that investment we’ve made in our schools, protects turning on the finance formula.”

“At least for the moment, this feels like a good approach,” she said.

Some lawmakers remain wary of plunging into the new school funding formula next year, convinced the state simply does not have the money for it.

“The Speaker continues to confirm what I have been saying for months,” State Sen. Barbara Kirkmeyer, a Brighton Republican and member of the JBC, wrote in a text message to The Sun. “We do not have the money to implement a new school finance formula. Teachers, parents and superintendents have got to be frustrated and I worry this is another promise that won’t be kept.”

A shaky sense of trust 

McCluskie, a Dillon Democrat, devoted the bulk of Friday’s meeting to listening to feedback and worries from district CFOs, some of whom detailed their deteriorating trust in lawmakers.

“We had a deal last year that for a whole host of reasons and probably others that I don’t understand is not going to be honored,” Scott Smith, CFO of Cherry Creek Public Schools, said. “Why should we trust that any deal we reach now will be honored in the future?”

McCluskie responded that the deal struck last year around developing a new school funding formula “was done in good faith.”

“I don’t think there was anyone from any side of the issue that showed up without the intention of fully implementing the formula with all of the components that we came to agreement with,” she said. “Over this last year, we saw a dramatic increase in Medicaid expenditures, right? While I still continue acting in good faith, and as I said I want to fully implement everything that we made a commitment to last year, we are in a different budget reality and trying to consider all of the many options that we could now take as we move forward.”

CFOs urged McCluskie to take more time with any changes to averaging, warning that abandoning it immediately would be disastrous for schools and communities.

Jana Schleusner, CFO for Douglas County School District, called for a “slow roll” in pivoting away from averaging.

“I’m concerned about the governor’s words also of, we’re funding fictional students as if we have all this money that we’re using to fund, that we’re just swimming in this money when we are one of the lowest in the nation in how we fund education,” Schleusner said. “And I don’t want to drop lower on that list for how we prioritize our kids, and truthfully when you pull away the averaging for us, it means closing schools quickly which is really, really hard on our communities and our parents and our children and it means cutting teachers who are in our classrooms.”

McCluskie, who indicated she is open to other school funding ideas, said the state must “do a better job” helping districts amid declining enrollment plan how to adjust their operations so they no longer lean so heavily on averaging to insulate them from big funding dips.

The conversation also included CFOs’ fears about uncertainties with federal funding and policy changes, creating what Smith describes as “a compounding effect.” 

CFOs echoed one another in asking McCluskie about the possibility of routing any funding the state saves should it stop averaging student counts back into education — about $147 million under Polis’ budget proposal.

Her short answer? No.

“Could we eliminate averaging but put that $147 million into school funding?” McCluskie said. “Ideally, sure, I’d love that. I don’t believe that’s possible with our current budget environment.”

Near the end of the meeting, state leaders assured CFOs that scaling back funding for schools has not been an easy consideration.

“As we were preparing the budget and we were working on this … the decision on what we were going to do in school finance was one of the last things we decided because we really wanted to avoid having to make any changes,” Ferrandino told CFOs. “This is not something that was done lightly.”