New funding formula that promises $500M for Colorado schools hits another legislative roadblock

The rollout of Colorado’s long-awaited, widely celebrated new school funding formula is meeting a new level of uncertainty this legislative session, with a fresh round of debates over whether Colorado actually has the money. 

State lawmakers across the aisle agree they want to fund schools in a more sustainable way and ensure they bolster school funding for rural districts and for kids with the most significant learning needs.

But a complicated set of funding calculation errors going back nearly 20 years is threatening to put the new formula — slated to begin for the 2025-26 school year — on hold.

Some lawmakers, including House Speaker Julie McCluskie, a Dillon Democrat and key driver of the new school funding formula, are downplaying the issue, saying the calculation errors have been corrected and that the funding formula can still work as intended, albeit with a legislative fix.

Other lawmakers, such as State Sen. Barbara Kirkmeyer, a Brighton Republican and member of the Joint Budget Committee, aren’t convinced the state has the funding to bring the new school funding formula to life next year.

Here’s an explainer of the funding mistakes that are putting new hurdles in front of the new school funding formula:

When the legislature passed a law to adopt a new school finance formula last year, which promised to pump an additional $500 million into schools over six years, they agreed to incorporate three so-called triggers into the law. Those triggers automatically stop the rollout of the new formula should the economy hit a downturn.

Much of the additional funding for the new school funding formula is slated to come from the state education fund. McCluskie describes that fund as a “bank account” that ensures the state can meet its constitutional obligation under Amendment 23 to increase education spending every year.

Under Amendment 23, which was passed by voters in 2000, the state must transfer a specific amount of funding from its general fund to the state education fund every year: one-third of 1% of taxable income.

One of the triggers within the new school funding formula law is activated if the amount of money the state transfers into the state education fund takes a 5% dip from one year to the next. Nothing is certain until March, when the JBC selects the revenue forecast it will use to inform the state budget. But current projections from Colorado Legislative Council staff suggest that the amount of money sent to the state education fund during this current fiscal year will be at least 5% less than the amount transferred to the state education fund during the last fiscal year.

That means Colorado will hit the trigger, provoking a halt to the new school funding formula. 

But instead of economic strain, a one-time jump in revenue stemming from the state’s longtime funding calculation errors has set off the trigger, according to the legislature’s chief economist Greg Sobetski, who discovered the errors and worked to fix them.

The main question Sobetski has been asking for the past seven years: Did the amount of money transferred to the state education fund accurately represent Colorado taxable income over the past 25 years since Amendment 23 was established?

Sobetski told The Colorado Sun he found that mistakes in the transfers over 19 fiscal years added up to $135 million less in the state education fund than what should have been deposited there.

That amounts to roughly 1.3% of the $10.5 billion the state has transferred from the general fund to the state education fund over the past 19 years, Sobetski said. 

The state has since corrected that mistake and put an additional $135 million into the state education fund. Trouble is, with the additional funding Sobetski now expects there will be a year-to-year drop of at least 5%. That would automatically stop the implementation of the new school funding formula.

Where do Colorado lawmakers go from here?

Lawmakers see different solutions to moving past the wrinkle caused by the $135 million one-time funding boost to the state education fund.

McCluskie wants to push forward a “technical fix” through legislation.

“I am committed to seeing (the new school funding formula) implemented,” McCluskie told The Colorado Sun. “We need to run the technical fix so that when there are adjustments made to the state ed fund that skew the balance one way or the other and it’s not due to economic downturns or loss of money in the state, that we don’t turn off the formula.”

During a JBC hearing last week, JBC staff presented a draft midyear adjustment bill for school funding. JBC staff recommended clarifying that the trigger related to a 5% drop in transfers to the state education fund would remain in place but would exclude the “extra bump” of funding related to correcting errors from the past couple decades.

“In this case, we have an artificially high transfer because we’re fixing multiple years of errors from the past,” JBC Staff Director Craig Harper told JBC members. “That’s going to make it look like the percentage of taxable income is lower the next year, and it’s just not actually a real comparison.”

The JBC opted to introduce the midyear adjustment bill without that clarification, with JBC Chair Sen. Jeff Bridges, D-Greenwood Village, saying he felt “really blindsided.”

Meanwhile, Kirkmeyer, another JBC member, passionately called for more than a technical fix and the need for “discussion on the Senate floor.”

“This is changing the law that we just voted on in the last session,” Kirkmeyer said. “If there are cleanups that need to be made, go put them in that bill and we can have adequate debate through the legislative process.”

Harper advised the JBC that lawmakers can address this kind of fix later this session in the “must pass” school finance bill.

“We had seen this as a technical fix, and it’s clearly a more complicated issue than that,” Harper said.

Kirkmeyer also raised broader concerns about whether the state can afford to debut the new school funding formula next year.

“We need historic revenues and historic transfers into the state ed fund,” she wrote in a text to The Sun, “and, unfortunately, it doesn’t look like the state will be able to meet its obligation outlined by the sponsors and proponents of (House Bill) 1448.”

State Sen. Chris Kolker, a Centennial Democrat and chair of the Senate Education Committee, said he has serious doubts about the sustainability of the new school funding formula and is writing his own school finance bill. He believes carrying the current school funding formula into next year will deliver more money to schools than the new formula would under Gov. Jared Polis’ latest budget proposal.

“What have we done for the last 10 years?” Kolker said. “Students of the state are tired of us writing IOUs to them.”

Meanwhile, McCluskie and State Rep. Meghan Lukens, a Steamboat Springs Democrat and chair of the House Education Committee, continue to defend the new school funding formula, doubling down on the need for state funding to reach the students who need it most.

“Colorado students deserve a school finance formula that delivers resources to districts based on students’ needs and characteristics,” Lukens wrote in a text message to The Sun, “and we must move forward with this important goal that the legislature overwhelmingly supported.”