DID YOU KNOW?
Colorado per-pupil funding for K-12 education has declined since 1986 to the point where Colorado invests almost $2,800 LESS per K-12 student than the national average today. Largely as a result of the decline in funding for K-12, almost 60% of Colorado’s 178 School Districts are now choosing to operate on a 4-day school week in order to reduce costs.
ALREADY KNOW ABOUT AMENDMENT 23?
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WHAT IS AMENDMENT 23?
Amendment 23 is an amendment to Colorado’s constitution which voters adopted In 2000 and which mandates minimum funding levels for K-12 education. Amendment 23 was motivated primarily by the voters’ prior adoption of the Taxpayers’ Bill of Rights (TABOR) Amendment to the state constitution in 1992 which resulted in reduced funding for many state programs.
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Also In Our Interactive Fiscal Policy Series:
WHAT DID AMENDMENT 23 DO?
1) Amendment 23 mandated MINIMUM FUNDING for K-12 based on the Student Enrollment and Inflation
2) Amendment 23 INCREASED funding for K-12 for 10 years
3) Amendment 23 created the State Education Fund (SEF)
A Brief History of K-12 Funding
Since Colorado’s statehood, funding K-12 education has been a partnership effort between both state and local governments through an increasingly complex series of fiscal formulas, state laws and a constitutional spending mandate. At 40% of the state’s budget, K-12 education is the largest expenditure out of Colorado’s General Fund and consumes 50% of local property tax revenues.
To understand Amendment 23, you have to understand the history of how Colorado has funded K-12 education. Please scroll through the timeline below to learn more!
- Colorado’s constitution requires the state to create a “thorough and uniform system of free public schools” in order for Colorado to be admitted to the Union.
Learn MoreWhile a matter of state responsibility, the framers of Colorado’s constitution were insistent that the decisions regarding the programming of public education would be a LOCAL responsibility. During the Colorado constitutional convention in 1876, the initial draft of the constitution put the state department of education explicitly in control of instruction and curriculum. The delegates rejected this framework and instead established two provisions in Article IX, one of which explicitly put control of instruction in control of local school boards and the other of which put choice of textbooks exclusively in control of local school boards. Colorado is one of only six states to establish such local control within its constitution (the others being FL, GA, KS, MT and VA) and has arguably emphasized more than any other state the importance of ensuring that local school boards control K-12 instruction.
- Although local governments were exclusively responsible for the funding and programming of public education for the first 60 years of Colorado’s statehood, the state began to make its first investment in public education in the 1930’s as part of the effort to recover from the Great Depression.
Learn MoreFor the first 60 years of statehood, local governments were almost exclusively responsible for the funding and programming of public education. State funding for K-12 was limited to monies generated by state school trust lands and was used to support the training of teachers. In 1913, the legislature established that these monies also help support minimum teacher salaries. In 1937, as part of the effort to recover from the Great Depression, the state began to make its first significant investment in public education by dedicating part of the state’s new income tax to support local school districts.
- The state legislature’s first statutory school funding formula was adopted in 1943. In 1952, the state adopted its first School Finance Act which provided each school district with a set amount of money in each calendar year, however, it was criticized from the outset for not eliminating the spending disparities among school districts.
- In response to the Soviet Union’s successful launch of the first artificial satellite, Sputnik-1, President Dwight D. Eisenhower signed into law the National Defense Education Act to promote education in science and technology in the interest of national security.
- The federal government’s role in public education grew significantly in the mid-1960s when the Johnson administration pushed through the Elementary and Secondary Education Act (ESEA).
Learn MoreIn response to the Soviet Union’s successful launch of the first artificial satellite, Sputnik-1, President Dwight D. Eisenhower signed into law the National Defense Education Act to promote education in science and technology in the interest of national security. This action marked the beginning of large-scale involvement by the federal government in education, although this initial effort simply provided a funding stream to encourage science and math and didn’t attempt to establish federal authority in determining education programming.
The federal government’s role in public education grew significantly in the mid-1960s when the Johnson administration pushed through the Elementary and Secondary Education Act (ESEA) which emphasized equal access to education, aiming to shorten the achievement gaps between students by providing federal funding to support schools with children from impoverished families. The Act provided a funding stream to the states and local school districts contingent upon the state and school districts creating programs that met federal requirements, although the Act limited the federal government’s requirements to only those programs which dealt with the targeted student groups.
- Prior to the 1970s, it was simply accepted that a child’s opportunity for a K-12 education was largely dependent on their ZIP code, their ethnicity, and their social status.
- Through a combination of new federal laws and court rulings aimed at increasing access to public education, the federal government assumed a new role in providing funding to states to support the education opportunity for previously disadvantaged student populations.
- Title IX (1972) prohibited sex-based discrimination, Supreme Court case Lau v. Nichols (1974) prohibited discrimination based on race or national origin and determined that school systems in the United States must provide English language instruction.
Learn MorePrior to the 1970’s, it was simply accepted that a child’s opportunity for a K-12 education was largely dependent on their ZIP code, their ethnicity, and their social status. In Colorado, K-12 education was funded almost entirely by local governments through local property taxes and locally-established tax mill levies; neither the State nor Federal government played much of a role in either funding or K-12 programming. Not surprisingly, the wealthier school districts had the best schools and best education and there was significant disparity in the quality of education based on a student’s zip code. Despite the U.S. Supreme Court’s landmark ruling in 1954 which ruled that segregated schools were unconstitutional (Brown vs. Board of Education), states still struggled to effectively integrate ethnic minorities in public schools. Many states had laws that explicitly excluded children with certain types of disabilities from attending public school, including children who were blind or deaf and children labeled “emotionally disturbed” or “mentally retarded”.
In the 1970’s, through a combination of new federal laws and court rulings aimed at increasing access to public education, the federal government assumed a new role in providing funding to states to support the education opportunity for previously disadvantaged student populations. These new federal funds required that states also contribute, which began a new era of significant state responsibility for supporting K-12 education in partnership with local governments.
Title IX of the federal Education Amendments of 1972 prohibited sex-based discrimination in any school or other education program that receives federal money. The 1974 Supreme Court case Lau v. Nichols prohibited discrimination based on race or national origin and determined that school systems in the United States must provide English language instruction. The Education for All Handicapped Children Act (ESEA) in 1975 required public schools to evaluate handicapped children and create an educational plan to emulate as closely as possible the educational experience of non-disabled students. The successor federal legislation — the Individuals with Disabilities Education Act (IDEA) — expanded the federal government’s role by further limiting the discretion of states and local school districts in the use of federal funds for those target populations.
Although the federal government has never contributed more than about 5% of Colorado’s K-12 funding (primarily to support special education), State funding for K-12 in Colorado has increased dramatically from very little prior to 1970, to 40% of total K-12 funding by 1977, and 50% by 1992. The state’s share of funding K-12 has subsequently grown to over 60% as a result of the formulaic interaction of the Gallagher (1982), TABOR (1992), and Amendment 23 amendments to the state constitution, and therefore the State now plays a dominant role in K-12 programming as the majority funder.
- With the passage of the “Public School Finance Act of 1973”, the Colorado legislature took its first cut at adopting a comprehensive modern school finance system which attempted to equalize funding in the school districts across the state regardless of the property wealth in the local school district.
- By contributing state funds to match newly-available federal funds, the legislature began to raise the per-pupil funding in the least wealthy districts in the state and began to establish the role of the state in contributing funding to provide access to all students.
- In response to growing residential property values and the increasing property tax bill for homeowners, Colorado voters adopted the “Gallagher Amendment” to the state constitution which provided property tax relief to homeowners by freezing their share of the state’s property tax burden at 45%.
- The Gallagher Amendment begins a 38-year erosion of the local residential property tax base on which schools depend for local funding (schools receive about 50% of local property tax revenues). Local governments try to counter this erosion of their property tax base by “floating” their local tax rate (mill levy) upward to sustain a consistent funding stream to support K-12 education. (This ability to “float” local mill levies is later prohibited by the voters’ subsequent adoption of the TABOR Amendment in 1992.)
- Fifteen years after the passage of the 1973 Finance Act, the Colorado legislature took its second cut at creating a modern school finance act by establishing two new themes in the school finance debate: Student Equity and Taxpayer Equity.
Learn MoreSTUDENT EQUITY: The 1988 Act set as one of its goals funding an equitable level of education for every student in the state, regardless of local wealth and costs. That theme of student equity – providing equitable access to education for every student in the state – remains the dominant theme of school finance today.
TAXPAYER EQUITY: The 1988 Act recognized that both the local school district and the state had an important role in funding public education, and it sought to establish taxpayer equity by: balancing the responsibility for funding K-12 education between the state and local governments, with each assuming 50% of the burden (at the time, the state contributed approximately 43% of total K-12 funding), and standardizing the mill levy in all school districts so that every school district was to have the same mill levy — and therefore a similar amount of taxpayer effort to fund K-12 — regardless of the property values in the district.
While the Act sought to standardize the mill levy between districts, it also permitted local school districts to ask their voters to approve “Mill Levy Overrides” to provide additional local funding which is NOT considered as part of the Local Share of the school finance formula (and therefore would not result in a corresponding decrease in state funding) up to 5% of their “total program” funds as calculated by the School Finance Act or $200k, whichever was greater. This ability for individual school districts to seek local voter support for additional funds opened the door for continued disparate educational opportunities as some districts might seek and secure such additional funding and others would not. Local educational opportunities would become increasingly disparate in ensuing years as K-12 funding was reduced and the legislature responded by expanding the “limited” opportunity for school districts to seek additional local funding through Mill Levy Overrides.
- For the first time, a series of new educational “standards” are developed, both nationally and at the state level, which require additional K-12 investments for specific priorities such as educational proficiency, closing achievement gaps between socio-economic classes, providing assistance to those for whom English is not their primary language, and providing special assistance to those with learning disabilities and academically-gifted students.
- Many of these new mandates are either unfunded or insufficiently funded.
- Congress’ adoption of the “No Child Left Behind Act” in 2001 also begins to insert the federal government into K-12 administration which had previously been under the jurisdiction of local and state governments. (The voters’ adoption of the TABOR Amendment in 1992 further challenged the state’s ability to adequately fund these new educational standards.)
- Colorado voters adopted the “Taxpayer’s Bill of Rights” (TABOR) amendment to the state constitution, which limits funding for state and local governments (of which K-12 is the largest component at 40% of the state budget) and prohibits state and local government from sustaining consistent funding streams to support K-12 without ongoing voter approval.
- TABOR has had two significant impacts on K-12 funding: it has increased TAXPAYER INEQUITY in funding K-12, and it has contributed to shifting the K-12 funding burden from Local government to State government.
Learn MoreTABOR has increased TAXPAYER INEQUITY in funding K-12: Because the Department of Education interpreted TABOR to permanently force mill levies to be lower in school districts with higher revenues, it created new disparity in local mill levy rates, perversely keeping mill levies high in poorer districts, which have little economic growth, and forcing them lower in wealthier districts, which enjoy strong economies. While almost all of Colorado’s 176 school districts maintained a similar mill levy rate between 38-40 mills prior to the adoption of TABOR in 1992, the interpretation of TABOR’s revenue limitation contributed to a reduction in the mill levies for all school districts with wildly disparate rates ranging from 2 to 38 mills by 2007, creating equally disparate levels of local taxpayer contribution to support K-12 statewide.
TABOR has contributed to shifting the K-12 funding burden from Local government to State government: Because of TABOR’s erosion of Local mill levies, the State has had to assume more of the funding responsibility. Additionally, from 1992 to 2020 (before Coloradans repealed the Gallagher Amendment to the state’s constitution), the Gallagher Amendment eroded the local Residential property tax base and TABOR prohibited local governments from raising mill levies to offset that erosion in the same way they had done during the first 10 years of the Gallagher Amendment. This erosion of the local tax base also contributed to shifting the K-12 funding burden to the State. In 1989, the state was responsible for contributing 43% of total K-12 funding; the state’s share had grown to 66% in 2015 and currently stands at 58% in 2020 .
Because of the adverse impact which the TABOR Amendment and its interaction with the Gallagher Amendment was having on school funding, and because the legislature never fully funded the 1988 School Finance Act, the legislature made another attempt to achieve equity in K-12 funding in the “School Finance Act of 1994” which created the current funding formula with two main components: “Total Program” Funding, and Categorical Funding.
Learn More“Total Program” Funding “BASE funding” represents the minimum amount of funding required to educate a student with no special needs. The “base” represents costs for such things as salaries for teachers and administrators, staff development, technology, software, and class materials.
“FACTOR funding” provides additional funding to address disparities between school districts based on: Cost-of-Living (COL) for their community: Schools can receive additional funds if they operate in areas that have a higher cost of living. Personnel costs: The formula recognizes that differences in the cost of living primarily affect the salaries that must be paid to hire and retain qualified personnel, therefore, the cost-of-living factor is applied only to the portion of each school district’s base that relates to personnel, as defined by the personnel costs factor. Size of the School District: Smaller school districts which cannot realize the same economies of scale as larger school districts are eligible for additional funding. “At-Risk” students: Schools with a higher number of students who qualify for free- and reduced-lunch based on federal guidelines are eligible to receive additional funding to deal with these higher per-pupil costs. This additional funding is based on both the number of at-risk students in the district and the proportion of at-risk students in the district.
“Categorical” funding The State provides additional support for unique student needs in the categories of Special Education, English Language Learners, Gifted & Talented, Career and Technical education, Transportation needs, and Small Attendance Centers. The categorical funding for Special Education and English Language Learners served as the evidence of state support necessary to receive additional matching federal funds.
The 1994 Act also established that each district would contribute the same funding “effort” of 40 tax mills, or about 50% of the total K-12 funding needed. (In 1994 most districts were raising between 38 and 40 mills and local funding represented about 60% of the revenue for school districts.)
The 1994 Act increased from 5% to 10% the allowable amount of additional funding which local school districts were permitted to ask their voters to approve through “mill levy overrides” which is NOT considered as part of the Local Share of the school finance formula. This allowable cap on mill levy override revenues has subsequently been increased to the point that, beginning in FY 2009-10, a district’s override revenues cannot exceed 25% of its Total Program funding (or 30% for rural districts) or $200,000, whichever is greater. Because school districts with more property wealth have had more success than poorer districts in securing local voter approval for such mill levy overrides, this increasing allowance to utilize overrides has resulted in increasing the funding disparity between school districts.
The 1994 Act also codified into statute TABOR’s limits on revenue growth. This statutory directive went beyond TABOR’s restrictions by requiring school districts to automatically and immediately reduce their mill levy if the growth in property values caused local revenues to exceed TABOR’s limit. This interpretation of how TABOR’s revenue limit applies to school district mill levies was stricter than how it’s interpreted to apply to either the state or other local governments which are allowed the choice to comply with TABOR through a variety of mechanisms, including refunding excess revenue and/or temporary reductions in tax rates. The Colorado Department of Education (CDE) went even further by interpreting the 1994 Act to require school districts to permanently reduce their mill levies when their revenues exceeded TABOR’s revenue limit EVEN IF LOCAL VOTERS APPROVED THAT THEIR SCHOOL DISTRICT SHOULD BE EXEMPT from this application of TABOR. This interpretation by CDE began a 13-year erosion of local mill levies until the legislature “froze” school mill levies in 2007, and contributed to the shift in funding K-12 from Local to State government.
- The George W. Bush administration successfully passed the No Child Left Behind (NCLB) Act in 2001, which further expanded the role of the federal government in K-12 education by applying the federal government’s rules and regulations to the education of ALL students rather than only those within a specific target group. One outcome of NCLB is that state accountability systems are no longer entirely within the control of the state, but, rather, must include the national requirements or the state risks losing federal funding.
- In order to stabilize local school district mill levies that the Department of Education’s 1994 interpretation of TABOR was continually forcing to be lower, the legislature adopted the Mill Levy Stabilization Act (SB 07-199), which capped local district mill levies at no more than 27 mills and froze mill levies for districts with mill levies of 27 mills or less.
Learn MoreThe mill levy cap/freeze applied to the 174 out of 178 school districts whose voters had “de-Bruced” local school district revenues and enabled their school district to keep additional revenues beyond TABOR’s spending cap. At the time, the highest local mill levy assessed by any school district amounted to 33 mills, and the 27-mill limit was determined to be the highest mill levy for which the State could afford to backfill the reduction in local funding for those districts which were already higher than that.
Today, mill levies for individual school districts range from 1.7 to 27 mills, with most districts in the Denver and Pueblo metro areas at or near the cap, and the lowest mill levy category in high property wealth districts either in the resort communities such as Aspen and Telluride or districts in the oil and gas producing areas of Weld County, the Piceance Basin in northwest Colorado, and the San Juan Basin in southwest Colorado.
- The legislature created the BEST competitive grant program to provide school districts with matching funds for the construction of new schools as well as general construction and renovation of existing school facilities.
- BEST is funded through multiple revenue sources, including State Land Board proceeds, marijuana excise tax, Colorado Lottery spillover funds, and interest accrued in the Public School Capital Construction Assistance Fund.
- BEST grants have totaled about $100 million/year and a match from local school districts. (To put this amount in context, the state estimated in 2008 that the identified need for school construction amounted to somewhere between $13.9 billion and $18 billion.)
- Because Amendment 23 requires that statewide base funding for K-12 continue to grow at the rate of student enrollment plus inflation regardless of the state’s economic condition, K-12’s share of the state’s budget has increased during times of economic recessions in 2002 and 2008 as the state has had to reduce discretionary funding for other program areas.
- With the drop in state revenue as a result of the “Great Recession” of 2008-2010, the legislature was faced with the prospect of having to drastically cut funding for other programs like Higher Education to comply with Amendment 23’s funding mandate. In order to preserve funding for other programs, the state chose to apply Amendment 23’s funding mandate to EXCLUDE the additional “factor” funding which addressed school disparity (district’s size, cost of living, personnel costs and at-risk students).
- This has since resulted in a reduction in annual K-12 funding by about $700-900 million annually which has allowed the state to continue to support other priorities such as Higher Education.
Learn MoreBy applying Amendment 23’s K-12 funding mandate to only “base funding” and eliminating “Factor” funding from this annual inflationary increase, the state essentially converted approximately $1.5 billion in previously MANDATED K-12 funding to now be DISCRETIONARY. Since 2010, the state has opted to contribute about $600-800 million annually in discretionary funding to K-12 to partially offset the $1.5 billion cut in previously mandated support.
Because the state applies the Negative Factor as an across-the-board percentage cut applied equally to all school districts which receive state funds, the smaller rural school districts are most adversely impacted because they don’t have the economies of scale to mitigate that impact.
While the Negative Factor has effectively nullified Amendment 23’s funding mandate for the time being, and subsequently stemmed the growth of K-12’s share of the state General Fund budget, it is likely that Amendment 23’s funding mandate may be realized again at some point in the future if the state endures an economic downturn similar to 2008 and is forced to exhaust all of its remaining discretionary funding for K-12. If the state were to reduce funding for more than one school district to ONLY its calculated amount of “base funding” (unless that district is considered “fully-funded” at that base funding amount), this would likely be in violation of previous court decisions in the Lujan and Lobato cases which established that funding between districts must be differentiated to achieve the requirements of “equity” and “adequacy”.
- With the voters’ adoption of the use of RECREATIONAL marijuana, K-12 education receives a portion of recreational (a.k.a. retail) marijuana tax revenues in three forms:
- The first $40 million of the 15% Excise Tax on recreational marijuana is dedicated to the state’s “Building Excellent Schools Today” (BEST) program to help pay for school construction costs. Although recreational marijuana sales haven’t yet generated enough revenue to fully satisfy this funding requirement, the $40 million benefit would represent approximately 3% of the total estimated $13.9 billion in K-12 construction needs as estimated by the Colorado Department of Education in 2009.
- Any remaining amount of the 15% Excise Tax on recreational marijuana BEYOND the first $40 million (which is dedicated to help pay for school construction) is dedicated to the K-12 “Public School Fund” which can support either school construction or the state’s K-12 funding obligation as defined in the School Finance Act. (As of 2019, there have not yet been enough recreational marijuana sales to trigger this threshold payment.)
- 12.59% of the State’s 90% share of the 15% Sales Tax on recreational marijuana is dedicated to the K-12 “Public School Fund”. This amounted to about $30 million in 2017-18.
- Additionally, the Department of Education receives grant funds from the Marijuana Cash Fund appropriated by the legislature. These grants totaled $136 million in FY19-20.
- The social-distancing requirements mandated by COVID created unprecedented upheaval in education throughout the world. Traditional classroom learning opportunities were closed, student learning rates declined dramatically (particularly among vulnerable populations) and anxiety among teachers, students and parents soared as our education system was forced to adapt to a new entirely virtual learning environment.
- School closures have underlined the importance of in-person schooling to children’s mental and physical health. In many ways, we won’t know the full impact of COVID on our education system for years to come, if ever.
Learn MoreWhile everyone in our education system felt the obvious adverse impacts of the new virtual learning world, we learned to adapt and, in many ways, created opportunities to make our education system stronger and more effective.
- COVID has strengthened communication between teachers and parents, and it’s well-documented that such parental engagement contributes to increased attendance rates and academic achievement.
- The virtual learning environment has actually proven to be more effective for some students, including children who suffer from anxiety or are the victims of bullying.
- The need for and value of individual academic tutoring was recognized as a necessary tool for enabling many students to succeed. A recent study in Britain found that 12 hours of tutoring could advance a child’s math skills as much as would three months of conventional schooling.
- The education community, along with most other aspects of our society, was forced to embrace the technology of virtual engagement, which has now opened doors to learning that, while previously available, were not widely understood or embraced.
- Federal COVID stimulus funds have helped school districts to increase their investment in computers, which helps to level the educational opportunity for all students.
- Venture capital investment in educational-technology firms more than doubled from $7 billion in 2019 to $16 billion in 2020. , according to Holon IQ, a research group.
- Perhaps the most valuable observation from COVID’s upheaval of our education system is that traditional one-size-fits-all classroom instruction is much less effective than more creative learning models which tailor education strategies to each child’s unique learning style ability.
COVID brought a large influx of additional funding from the federal government to assist education in weathering and recovering from the COVID storm. In 2020 and 2021, Colorado received $2.5 billion in one-time federal COVID stimulus funds for education. The majority of that funding (approximately $1.6 billion) has gone to school districts which serve low-income students through the Title I formula. All of these COVID stimulus funds must be spent on COVID-related purposes, including paying for such costs as additional school sanitization, upgrading HVAC systems to improve air quality, hiring additional staff to support hybrid (in classroom and virtual) learning environments, and technology investments to allow for online learning (laptops, wifi infrastructure and maintenance). Because these COVID funds must be spent by 2024, they cannot be used to support ongoing education programming needs beyond the anticipated short-term impact of COVID.
Crisis often breeds innovation, and, like the city of New Orleans which used its recovery from Hurricane Katrina to make sweeping educational reforms which contributed to improving graduation rates by 9-13 percentage points, Colorado may have an opportunity to turn the COVID crisis into a transformative opportunity to improve our state’s education system.
1) Mandated INCREASED funding for K-12 for 10 years
By increasing funding by 1% per year for ten years, Amendment 23 proposed to return funding for K-12 to the level it was in 1988 when Colorado’s per-pupil investment was roughly equal to the national average.
2) Mandated MINIMUM FUNDING for K-12 based on Student Enrollment and Inflation
Amendment 23, as originally interpreted, required that the state annually increase both “BASE funding” and “FACTOR funding” by the rate of inflation PLUS student population, and increase “Categorical funding” by the rate of inflation, alone.
I) “BASE funding” represents the minimum amount of funding required to educate a student with no special needs. The “base” represents costs for such things as salaries for teachers and administrators, staff development, technology, software, and class materials. Prior to the State’s reinterpretation of Amendment 23 in 2010, “base funding” also included additional “factor funding” to compensate for disparity between schools caused by their unique percentage of “At Risk” students, their Cost-of-Living, and their District
II) “FACTOR funding” provides additional funding to address disparities between school districts based on:
- The Cost-of-Living for their community
Schools whose employees live in areas with a higher cost of living are eligible for additional funding.
- Size of the School District
Smaller school districts which cannot realize the same economies of scale as larger school districts are eligible for additional funding.
- Number of “At-Risk” students
Schools with a higher number of students who qualify for free lunch based on federal guidelines are eligible to receive additional funding to deal with these higher per-pupil costs.
III) “Categorical funding” is calculated outside of the state’s School Finance Act and is intended to provide additional support for unique student needs in the areas of Special Education, English Language Learners, Gifted & Talented, Career and Technical education, Transportation needs, and Small Attendance Centers. Because Amendment 23 requires that Categorical funding grow at only the annual rate of inflation and NOT student enrollment, and since this formula was put in place in 1994 and has never been updated, it doesn’t account for the cost of the additional 300,000 students which have been added to the K-12 population since then.
Because the Amendment 23 funding requirement for K-12 applies regardless of the state’s economic condition, K-12’s share of the state’s budget has increased during times of economic recessions in 2002 and 2008 as the state has had to reduce discretionary funding for other program areas.
The state relies heavily on its General Fund (the state’s checking account) to pay for Amendment 23’s funding mandate, to the point today that K-12 education constitutes the largest expenditure out of the General Fund at about 40%. In addition to General Funds, the state utilizes funds from the State Education Fund (which receives about 7% of the state’s income tax revenue as required by Amendment 23).
As a result of reduced state revenues caused by the Great Recession of 2008-10, the state reinterpreted Amendment 23 starting in 2010 so that “Factor” funding was no longer considered to be part of the Amendment 23 constitutional funding requirement.
3) Created the State Education Fund (SEF)
In creating the SEF, Amendment 23 diverts an amount equal to one-third of one percent of taxable income to the fund, or about 7.2% of the total revenue which the state collects through its income tax. Money in the SEF may be used to meet the minimum K-12 funding requirements which Amendment 23 also established. In addition, the General Assembly may appropriate money from the SEF for a variety of other education-related purposes as specified in the state constitution.
(a.k.a. Budget Stabilization Factor)
With the drop in state revenue as a result of the “Great Recession” of 2008-2010, and Amendment 23’s requirement that state funding for K-12 continue to grow at the rate of student enrollment plus inflation, the legislature chose to reinterpret Amendment 23’s funding mandate to EXCLUDE the additional “factor” funding which addressed school disparity (district’s size, cost of living, personnel costs and at-risk students). This has since resulted in a reduction in annual K-12 funding by about $700-900 million annually which has allowed the state to continue to support other priorities such as Higher Education.
By reinterpreting Amendment 23 and eliminating “Factor” funding from the K-12 constitutional funding mandate, the state essentially converted approximately $1.5 billion in previously MANDATED K-12 funding to now be DISCRETIONARY. Since 2010, the state has opted to contribute about $600-800 million annually in discretionary funding to K-12 to partially offset the $1.5 billion cut in previously mandated support.
Because the state applies the Negative Factor as an across-the-board percentage cut applied equally to all school districts, the smaller rural school districts are most adversely impacted because they don’t have the economies of scale to mitigate that impact.
While the Negative Factor has effectively nullified Amendment 23’s funding mandate for the time being, and subsequently stemmed the growth of K-12’s share of the state General Fund budget, it is likely that Amendment 23’s funding mandate may be realized again at some point in the future if the state endures an economic downturn similar to 2008 and is forced to exhaust all of its remaining discretionary funding for K-12.
HOW K-12 IS FUNDED TODAY?
Total Program Funding
1) Total Program Funding
Total Program Funding is a formula defined in the State’s “School Finance Act” and includes three basic parts:
a. BASE funding
- Colorado’s K-12 funding requirement begins with a “base” amount which represents the minimum amount of funding required to educate a student with no special needs. The “base” represents costs for such things as salaries for teachers and administrators, staff development, technology, software, and class materials.
- Because of the adoption of Amendment 23 to the state constitution in 2000, the state is required to annually grow “Base” funding for K-12 education at the rate of student enrollment plus inflation.
b. FACTOR funding
- Recognizing that different school districts have different characteristics which require different funding needs, the School Finance Act provides for additional funding for school districts based on:
I. The Cost-of-Living for their community
Schools whose employees live in areas with a higher cost of living are eligible for additional funding.
II. Size of the School District
Smaller school districts which cannot realize the same economies of scale as larger school districts are eligible for additional funding.
III. Number of “At-Risk” students
Schools with a higher number of students who qualify for free lunch based on federal guidelines are eligible to receive additional funding to deal with these higher per-pupil costs.
• Although the constitutional K-12 funding requirement of Amendment 23 was originally interpreted to ALSO require the state to annually grow “Factor” funding at the rate of student enrollment plus population, the state reinterpreted Amendment 23 starting in 2010 so that “Factor” funding is no longer part of the Amendment 23 constitutional requirement.
c. NEGATIVE FACTOR
• As a result of the state’s decision in 2010 to reinterpret Amendment 23’s funding requirement for K-12 education, the state is no longer required to annually grow “Factor” funding. Starting in 2010, this meant that the $1.5 billion in annual “Factor” funding which the state was previously REQUIRED to fund was now DISCRETIONARY for the state to fund, and the state has since chosen to provide K-12 education with $600-$800 million in annual “Factor” funding since 2010. The amount of “Factor” funding which the state chooses NOT to fund each year has been referred to as the “Negative Factor” or the “Budget Stabilization Factor” and that amount is subtracted from the “Factor funding” calculation described above.
2) Categorical Funding
Categorical funding is calculated outside of the state’s School Finance Act and is intended to provide additional support for unique student needs in the areas of Special Education, English Language Learners, Gifted & Talented, Career and Technical education, Transportation needs, and Small Attendance Centers.
• Categorical funding constitutes a relatively small amount of total K-12 funding needs ($250 million) and is required to grow at the annual rate of inflation. (It’s worth noting that Categorical funding is NOT required to also grow at the rate of student enrollment and, since this formula was put in place in 1994 and has never been updated, it doesn’t account for the cost of the additional 300,000 students which have been added to the K-12 population since then.
3) Federal Funding
Additional Federal Funds are allocated to school districts to fund certain federally-required programs or serve specific students (i.e. special education and English language learners).
4) Other Funding
In addition to the aforementioned sources of funding from Local government (local property and use taxes) and State government (School Finance Act), local School Districts receive varying amounts of funding through these other revenue streams:
a) Local Mill Levy Override funds approved by local voters to support local education programs and priorities. These dollars are in addition to the traditional mill levy also approved by voters which contributes to the School Finance Act calculation.
b) Grants: Typically for a specific purpose and for a particular length of time.
c) Bond Dollars: Additional funding approved by local voters to pay for capital construction. Bond dollars cannot be used for general operations (i.e. salaries or supplies) in a School District.
HOW K-12 EDUCATION FUNDING HAS CHANGED OVER TIME
Since 1973, as the State has sought to equalize the K-12 education experience to appropriately provide an equal opportunity for all students, and as Coloradans have voted to limit the flexibility of state fiscal policy to support such efforts through the adoption of the Gallagher Amendment (1982) and TABOR Amendment (1992), while mandating funding for K-12 via Amendment 23, two concerning trends in education funding have developed:
1) The State has had to assume a larger share of the responsibility for funding K-12 education, from 43% in 1989 to 66% in 2015.
This increased responsibility on the state has contributed to forcing the state to reduce funding for other programs such as Higher Education, in which the state has reduced its support by 50% since 2000.
2) Funding per pupil in Colorado has continued to drop relative to the national average, from $232 ABOVE the national average in 1985 to almost $2,800 BELOW the national average in 2018.
It is worth noting that, even though the adoption of Amendment 23 in 2000 helped to ensure increased funding for K-12 at the rate of student enrollment plus inflation, Colorado has still continued to fall behind the national average in per-pupil funding for two reasons:
1. The costs associated with K-12 education have grown at a rate faster than inflation because of additional costs related to such things as school security, mandated testing, and mandated programs for students with special needs, and because many of the typical costs related to K-12 education – such as health insurance for teachers, pensions and energy costs – grow at a rate faster than inflation.
2. Most other states have continued to invest more in their K-12 programs to pay for the additional costs of K-12 education, thus leaving Colorado further behind.
INADEQUATE FUNDING OF K-12 EDUCATION HAS ADVERSELY IMPACTED PERFORMANCE
While funding is only one factor that contributes to the performance of K-12 education, it is an important factor, and there is growing evidence that inadequate funding is adversely impacting K-12 performance in several ways.
1. The growth in the number of school districts which have opted to move from a 5-day school week to a 4-day school week has almost tripled since 2000.
In 2000, 39 of Colorado’s 178 school districts had some or all of their schools on a 4-day school week; many of these were intentionally designed to utilize a 4-day week as part of their modified curriculum. By 2018, the number of school districts utilizing a 4-day school week had grown to 104, primarily as a result of their inability to fund a full 5-day week.
While it’s been primarily rural school districts which have been forced to use 4-day school weeks because of funding deficiencies, the Brighton school district in the Denver metro area was also forced to make this transition in 2018.
2. Colorado ranks 50th in teacher wage competitiveness.
This statistic from Rutgers Education Law Center compares teachers to non-teachers with similar education, experience and hours worked. Colorado is 2nd in number of novice teachers (1st or 2nd year) in the classroom (Source: Education Week, October 2016).
3. Colorado’s teacher-to-student ratio lags the national average.
4. Colorado’s graduation rate lags the national average in EVERY student subgroup.
5. Rural school districts are most adversely impacted.
The poorest school districts in Colorado’s rural areas are most adversely impacted by the state’s K-12 funding challenge because:
a. Rural areas don’t have the economies of scale to mitigate the impact of the funding reduction posed by the state’s Negative Factor which is applied equally to all school districts as an across-the-board percentage cut.
b. The Gallagher Amendment’s erosion of the local residential property tax base most adversely impacts those areas of the state with the slowest growth in residential property values, which is primarily in the rural areas.
THE BOTTOM LINE (Why YOU should care.)
Although Colorado has both a legal and strategic obligation to adequately fund K-12 Education, the Gallagher Amendment’s erosion of the local residential property tax base, coupled with the TABOR Amendment’s formulaic shrinkage of the state General Fund budget relative to the growth of the economy, coupled with increased expectations of K-12 without commensurate funding to pay for those mandates, has placed Colorado below the national average in every K-12 performance metric.
Although the Amendment 23 funding mandate was intended to correct funding deficiencies for K-12 Education and ensure equitable access to a quality education for all students, unfunded mandates on K-12 since then, coupled with the state’s reinterpretation of Amendment 23’s minimum funding requirement, have forced Colorado to continue to trend significantly below the national average in Per Pupil funding and created increasing inequities between school districts as those which are able seek additional funding from their local voters, and those which cannot secure such funding fall further behind.
Do you have a BETTER POLICY IDEA? We’d love to hear it!
Now that you know a little more about this issue, we want to hear from YOU. Tell us how you would address the challenges posed by this policy option.
Whitepaper: Understanding Amendment 23
Amendment 23 is an amendment to Colorado’s constitution which voters adopted In 2000 and which mandates minimum funding levels for K-12 education. Download our whitepaper on "Understanding Amendment 23"
School Finance in Colorado
The purpose of this publication is to help readers understand how Colorado finances its public elementary and secondary schools.
History of Public Education in the US
Throughout the history of public education in the US, public schools have filled multiple roles. These roles are an outgrowth of why public schools came into being and how they have evolved. This publication briefly reviews that history.