Increase falls short of covering ongoing expenses, results in budget reductions
With the adjournment of the state Legislature on May 10, the funding picture for Colorado’s 178 school districts became much clearer. Adams 12 Five Star Schools planned for the worst case scenario – the need to make more than $13 million in cuts for next school year.
Funding for school districts is largely dependent on the School Finance Act initiated by state legislation. In the end, the Legislature put more dollars toward education than anticipated after property tax revenue came in higher than expected. However, the Five Star District’s ongoing expenses are still greater than this new revenue. As a result, the district plans to make reductions of $6.8 million for 2017-2018.
What changed to make the budget situation better than expected?
Funding for K-12 education has declined sharply in the years following the Great Recession of the late 2000s. State lawmakers set school funding levels each year and starting in the 2009-2010 school year those allocations have fallen short of the amount needed to keep up with inflation and growing statewide enrollment. For the 2016-2017 school year, the Five Star District was funded about 11.5 percent lower than the 2008-2009 school year when adjusting for inflation. In dollars and cents, the state funding reductions (called the “negative factor”) over the past eight years total more than $290 million for the Five Star District alone.
Fortunately, the Legislature has funded increases in inflation for next school year and here’s what made that possible:
- Gallagher Amendment adjustment not as severe as anticipated
When the district anticipated a potential cut of more than $13 million for next year, most of the reduction was expected to be a result of a provision in the Colorado Constitution called the Gallagher Amendment. Gallagher requires reductions in the residential assessment rate for property tax purposes when increases in home values outpace increases in the value of commercial property.
In January 2016, the state’s Division of Property Taxation projected the assessment rate would drop to 6.56 percent from 7.96 percent. In late April, the division issued its final findings and set the rate at 7.2 percent, making more dollars available for the Legislature to invest in education.
- Reallocation of past overrides to charters starts for 2019-2020 Fiscal Year
Communities can choose to invest in their local schools when state funding is not adequate through passing what is commonly referred to as a “mill levy override”. Five Star District voters have passed four such overrides from 1991 to 2008. Revenue from these overrides is constant at $35.4 million a year and does not grow with inflation and enrollment.
We anticipated a bill that would require the sharing of override dollars with charter schools to go into effect for next year’s budget. Instead, the Legislature passed House Bill 17-1375 which will impact the budget starting with the 2019-2020 school year.
What do the reductions mean for schools?
For next school year, the district will reduce its expenses by $6.8 million, which includes:
- $1.4 million in reductions at the district level which means reductions to operating budgets and the elimination of some positions.
- $1.5 million in school-based reductions spread across our more than 50 schools.
The impact of these reductions will vary depending on the school and the level (elementary, middle, K-8, high). At the elementary level, this may mean less flexibility in providing relief for certain grade levels at schools that have higher class sizes. At the secondary level, some elective options with smaller student-interest may not be offered.
The district has received questions about the impact of the budget on specials at the elementary level. Instructional time in art, PE and music is not being reduced. Some schools, given their lower enrollment, may not require a full-time teacher to offer specials. This may result in teachers who desire a full-time position to look for opportunities elsewhere.
How can a school district address the issue of reduced funding?
There are three primary ways a school district can soften the blow of state revenue cuts:
- Pass a local mill levy override. Local voters can generate additional property tax revenue for their local school district through passage of an override, which generates ongoing dollars to support compensation, programming and other academic opportunities. Districts that have passed an override, in or after 2010, have used the dollars to help ease the pain of cuts at the state level. Voters in the Five Star District last passed an override in 2008. Funding generated from the voter-approved 2016 Bond can only be used for building renovations and construction, not daily operations.
- Increase enrollment. The amount of state funding a school district receives is based on the number of students it serves. While the Five Star District has seen significant growth and overcrowding in newer parts of the district, some of the older, more established neighborhoods have experienced enrollment declines. This creates negative pressure on the district’s revenue.
- Use available fund balance. All fiscally responsible organizations save dollars for a “rainy day” like the Great Recession. Adams 12 Five Star Schools is no different. The problem is the “rainy day” has turned into a “rainy decade” and has depleted the district’s fund balance from roughly $46 million in 2012-2013 to about $27 million currently.
Next school year we will engage the Five Star community in a conversation about your vision for what an ideal education looks like in the Five Star District, and what it will take to make that vision a reality. We look forward to your participation in that conversation.