Budget Backgrounder

Fiscal Year 2025-26 

Updated March 27, 2025

Based on the state’s latest revenue forecast and the Joint Budget Committee finalizing its figure-setting for K-12 education, Adams 12 Five Star Schools has developed its budget plan for the 2025-26 school year. The district must cut about $27.5 million. We are hopeful that the Colorado General Assembly will reject any proposed budget that would make these cuts even deeper. This budget backgrounder is designed to give an overview of the factors that influence the budget.  

Inadequate Funding

According to the findings of two recent school finance adequacy studies, which were mandated and funded by Colorado Senate Bill 23-287, the state already underfunds the Five Star District by upwards of $272 million. In response, our Board of Education recently adopted a resolution urging the legislature to allocate more funding for Colorado schools consistent with these studies.

During the COVID-19 pandemic, temporary federal funds known as Elementary and Secondary School Emergency Relief (ESSER), alleviated some of this intense funding pressure and allowed the district to pay for additional staff members to support students. But while that funding was temporary, the needs were not, forcing the district to make difficult cuts once ESSER dollars were no longer available.

Additionally, over the past 30 years, the legislature has passed multiple measures allowing high property wealth districts to increase their funding by up to 50 percent through local property tax measures called mill levy overrides. Low property wealth districts, like Five Star Schools and one-third of all Colorado school districts, find themselves funded at least $80 million lower than high property wealth school districts that can raise money through more modest tax increases.

State Revenue Forecasts 

The state delivers four economic and revenue forecasts during the course of the year; in March, June, September and December. The governor and the legislature use these forecasts to guide their budget work. Conditions can change from one forecast to another, impacting the total amount a school district must cut from its budget. For fiscal year 2025-26, the state is expecting a $1.2 billion shortfall.

Enrollment 

K-12 funding in Colorado is based on the number of students enrolled in a district. Simply put: The more students, the more funding. Unfortunately, there’s not a 1:1 relationship between student enrollment and the costs to run a school. You could see an enrollment decline or gain of 10 students across six grade levels in an elementary school, but you still need the same number of teachers, a principal, custodian and other staff. 

Adams 12 Five Star Schools, along with roughly 80 percent of Colorado’s 178 school districts, is experiencing declining enrollment primarily due to lower birth rates. Enrollment reductions over the past four years will result in a $10.1 million funding loss for next year. 

Increased Costs 

At the same time the state’s budget shortfall is taking additional revenue away from school districts from one year to the next, school districts’ costs are increasing. Here are some examples of those increasing costs: 

• For employee salaries to keep up with inflation, they would need to increase 2.3 percent, at an annual increase in cost to the district of approximately $10 million.
• Health care costs are projected to go up 7.09 percent for 2026, which is an annual increase in cost to the district of $1 million. 
• The district must budget $1.2 million in increased costs for utilities, maintenance and custodial supplies, and technology licensing costs.

Preserving Budget Reserves

Budget planning is further complicated by economic and political unknowns. The state's budget analysts now predict a 40 percent chance of a recession this year. If that were to happen, the state could pull back some of the district’s funding in the middle of next year and/or reduce funding the following year. The state has a $50 million deficit in the free school meals program, and it can't pay for all the costs for the new universal preschool program; there might be budget impacts to us in both of those programs. 

At the federal level, there are many unknowns about how the changes at the Department of Education may impact the district’s Title I and special education funding, and it's also possible there could be changes to Medicaid funding that we receive to support students with special needs. Those funds add up to more than $20 million a year. With so much uncertainty, we also need to have sufficient funds held in reserve should any of these situations occur.