JBC Update – Budget Balancing Document

This staff report is an extremely important document to use in understanding the state budget and the work of the Joint Budget Committee. COVID-19 has had a tremendous impact on our budget and future funding for every service the state provides.

FY2020-21 Education JBC Staff Budget Balancing Document 4/27/20 – http://leg.colorado.gov/sites/default/files/edu_bal_fy20-21.pdf

Pay attention to the various items on the index as they pertain to cuts in services and turn to page 46 for specific information on public school finance (content below):

 

SCHOOL FINANCE OPTIONS

JBC ACTION AS OF 3/16/20:

The Committee has not yet taken action on school finance appropriations for FY 2020-21. However, current law would require the Long Bill to include the appropriations necessary to hold the budget stabilization factor constant (at no more than $572.4 million) in FY 2020-21.

RECOMMENDATION/OPTION: Staff will return to the Committee with revised recommendations for school finance following the updated revenue forecast in May. This section is intended to briefly outline some of the major options that would be available to the Committee and the General Assembly to address school finance in FY 2020-21.

ANALYSIS:

Additional Background:

Given that school finance (the state’s share of total program funding) represents approximately 95 percent of the Department’s General Fund appropriations, avoiding adjustments to school finance under the current circumstances may not be possible. Staff offers potential options related to school finance in three basic categories: (1) the budget stabilization factor; (2) options related to pupil counts; and (3) options related to the formula factors.

Budget Stabilization Factor: Originally called the negative factor and added to the school finance formula to address revenue shortfalls in FY 2010-11 based on revenue shortfalls in the last downturn, the budget stabilization factor reduces total program funding by a fixed percentage for every district receiving state funds for school finance. In the current year, the budget stabilization factor stands at $572.4 million, representing a 7.0 percent reduction to total program funding for most school districts. Based on current projections of total program funding (which may change prior to staff’s recommendation), each increase of $100.0 million in the budget stabilization factor would equate to approximately 1.2 percent of total program funding (so setting the budget stabilization factor at 672.4 million would equate to a reduction of 8.2 percent for affected districts).

Staff notes that while the percentage reduction is the same, the impact on school districts may vary. For example, rural districts with high per pupil amounts will see a larger reduction per pupil (in dollar terms) than districts with lower per pupil amounts. In addition, districts with significant mill levy overrides may be able to offset the impact of the budget stabilization factor on total program funding, although they will still take a reduction to their total budget.

Options Related to Pupil Counts: Total program funding is calculated on a per pupil basis. As a result, options that affect pupil counts can change the cost of school finance. Staff is aware of three available mechanisms to affect pupil counts (and potentially reduce total program funding).

  • Full-day Kindergarten: The transition to full-day kindergarten in H.B. 19-1262 increased the funded pupil count by counting each full-day kindergarten student as 1.0 student FTE rather than 0.58 under previous law. Preliminary estimates by legislative staff indicate that this change is increasing the state’s share of total program funding by approximately $220 million in FY 2020-21.
  • Colorado Preschool Program: The General Assembly sets the number of Colorado Preschool Program/Early Childhood At-risk Enhancement “slots” in statute (currently set at a total of 29,360 half-day slots). With an average cost to the State of approximately $4,226 per slot in FY 2020-21, that equates to a total cost of approximately $124.1 million in FY 2020-21. As another view, adding or subtracting 237 slots equates to a change of approximately $1.0 million in the state share of total program funding.
  • ASCENT: The Accelerating College through Concurrent Enrollment (ASCENT) program allows participating students to extend high school beyond twelfth grade in order to attend college courses (“fifth year” students). The General Assembly caps the number of ASCENT slots through an annual footnote in the Long Bill (currently approved for 500 slots for FY 2020-21, with no change from the FY 2019-20 appropriation). The School Finance Act funds each ASCENT slot at a fixed amount statewide ($7,793 per slot in FY 2019-20, equating to a total of $3.9 million). Thus, adjusting the number of ASCENT slots also directly changes the cost of total program funding.

Formula Factors: Finally, staff notes that the General Assembly could adjust the factors in the school finance formula (primarily cost of living, size, and at-risk) to target potential reductions to school finance funding. The budget stabilization factor is applied as a fixed percentage to total program funding and reduces all of the factors proportionately. Adjusting the factors themselves could allow the General Assembly to preserve funding based on specific needs.

Finally, staff notes that the Public School Finance section of the Long Bill includes two additional line items that the Committee may consider for reductions: (1) At-risk Supplemental Aid ($5.1 million cash funds from the State Public School Fund) and (2) At-risk Per Pupil Additional Funding ($5.0 million cash funds from the State Public School Fund. Staff is not currently recommending adjustments to either of those line items.