Looking Forward appendix: Department of Education

Overview

State General Fund expenditures for kindergarten through 12th grade (K-12) education will total more than $3 billion in 2007-08, comprising the largest portion of the state General Fund expenditures, at about 42 percent. Based on our report's projections, this amount will grow to more than $4 billion by FY 2012-13, which will comprise about 40 percent of the state General Fund expenditures. Our projections show that over the seven-year period from FY 2006-07 to FY 2012-13, the state would have to increase General Fund K-12 education spending by about $1.2 billion to keep services at the level they are today.

State education funds pay for assistance to school districts under the School Finance Act, education-related grants, management and administration of the Colorado Department of Education (CDE), public libraries, and the Colorado School for the Deaf and Blind.

These state funds are directed to CDE for specified purposes. CDE is responsible for distributing public school funds and other forms of state assistance to school districts for operating expenses and a range of other particular services designed to educate students. CDE is also authorized to administer state education accountability efforts, including the student assessment program, accreditation of school districts, the school accountability report (SAR), and the federal No Child Left Behind program. Through the State Board of Education, which governs the agency's commissioner and public policy decisions, CDE also oversees charter school decisions, public libraries and preschool programs.

The vast majority of state education funds are from the state General Fund (85.6 percent). The other 14 percent of public school funds come from the State Education Fund (SEF), a fund under Article IX, Section 17, of the state Constitution adopted by the voters as Amendment 23 in 2000. This provision sets aside one-third of 1 percent of state taxable income to fund the SEF, which helps pay for school finance and other specified public education purposes. In projecting state General Fund expenditures, we applied the current percentage of the General Fund to each major line item.

Major budget lines

The two largest components of the state education budget are public school finance and categorical programs, both included under assistance to school districts, and both defined in Amendment 23. Both of these items are subject to Amendment 23's requirement that state K-12 spending per pupil must increase annually by at least the rate of inflation plus 1 percent through 2011, and by at least the rate of inflation thereafter.

Several line items contain federal amounts, which were subtracted for this report because of its primary focus on state expenditures. Total federal funds for education in Colorado total just under $497 million per year, or about 12 percent of all K-12 appropriations in the state. Local property taxes are also excluded from the total amount in this report. These funds, which comprise a portion of public school finance expenditures, currently total about $1.85 billion, or about 36 percent of school finance.

Expenditure estimates

Projected increases in public school finance and the overall line item of categorical programs were estimated using the Legislative Council's September 2007 projected inflation rate. We also used Legislative Council's student enrollment estimates through 2011-12. The enrollment estimate for 2012-13 is based on the Colorado Demographer Office's projections of the age 5-17 population for those two calendar years. Although that is just a rough estimate, it is sufficiently reliable for the Joint Budget Committee staff to include in their mid-year fiscal estimates for the same purpose. Enrollment is estimated to rise by 1.8 to 2.0 percent per year through 2012-13.

Projections of future state expenditures for management and administration and the Colorado School for Deaf and Blind are based on averaging expenditures over the past three years. Projections for future state expenditures in grant programs are based on the remaining school capital construction amount that the state owes under the Giardino lawsuit settlement. No state increases were projected for appropriated sponsorships because only the federal amount has increased over the past several years, and no increases were projected for library funding because there was no increase last year and there are no foreseeable library funding restorations.

Assistance to school districts

This line item includes public school finance, categorical programs, grant programs, and appropriated sponsorships.

Public school finance

As mentioned earlier, projected increases include inflation plus student enrollment plus 1 percent through 2011, and inflation plus student enrollment in 2011-12 and 2012-13, as required by Amendment 23. The inflation estimates are based on September 2007 Legislative Council revenue estimates, and student enrollment figures are based on Colorado Legislative Council and the state demographer's estimates.

Legislative Council enrollment estimates include students funded by slots in the Colorado Preschool and Kindergarten Program (CPKP) at half-time Per Pupil Revenue (PPR) for FYs 2007-08 and 2008-09. No CPKP slots beyond 2008-09 were factored into Legislative Council's enrollment projections. SB 07-199 appropriated funds for 2,000 additional slots for FY 2007-08 and authorized 3,500 additional slots for 2008-09. Based on the Joint Budget Committee (JBC) projections, an additional 623 students in online programs are included in the total enrollment figures beginning in FY 2008-09 because SB 07-215 removed a restriction on funding students in these programs.

The 2007-08 amount for total state share of public school finance appropriated by the legislature ($3,266,328,775) was reduced in our projections to $3,200,421,047. We made this adjustment because a JBC model ( see endnote 1) shows that the state share will be lower due to $65.9 million more in revenues anticipated from local property taxes. The additional property tax amount is expected because of a stabilization of local mill levies enacted in the state school finance act in 2007 (SB 07-199). The state share projections are based on the JBC's model through 2012-13, which shows an increasing state share over that period, and the corresponding average state per pupil amounts are derived from those figures. JBC projects that the state share will increase because it estimates that assessed property values will grow less quickly than state expenditures. Our projections show that over the seven-year period from 2006-07 to 2012-13, the state would have to increase total state spending by about $1.385 billion in public school finance to keep services at the level they are today.

Categorical programs

The categorical programs are specified in the state Constitution, and as a whole must increase by inflation plus 1 percent through 2011, and by inflation thereafter. These programs include special education, English language proficiency acquisition, school transportation, vocational education, gifted and talented students, expelled and at-risk program, small attendance aid, comprehensive health education, and other accountable programs defined in law as a categorical program.

Grant programs

The largest state components of the grant programs are Read to Achieve and the school capital construction fund and reserve. Legislators appropriated a relatively small increase to Read to Achieve for 2007-08, after cutting it by about 75 percent the year before. No future increases or cuts to the program are projected. The Giardino settlement and implementing statute require the state to pay $190 million into the school capital construction expenditures reserve and the school construction and renovation fund over the 11 years from 2000-01 to 2010-11. (For the purposes of this report, these two funds are combined.) Excluding 2007-08, the state still owes $60 million to the two funds under the settlement as long as the state has sufficient General Fund revenues, so $20 million is projected to be spent per year through 2010-11. After 2011, no additional expenditures are projected for school capital construction or other grant programs.

Appropriated sponsored programs

Appropriated sponsored programs mostly include various federally-funded programs for local school districts, as well as interdepartmental transfers and funds for conference fees. Since 2004-05, this line item has declined by an average of $17,532 per year in state dollars, so future projections include that relatively small reduction. Federal funds, which comprise the vast majority of these programs, have increased over the past four fiscal years.

Management and administration

Although the management and administration line item has remained generally flat for the past three years, state funding did increase by an average of about $2.03 million per year since 2004-05 (23.4 percent), or 7.8 percent per year. This rate of increase is projected through 2012-13. This line item includes CDE administration of the Colorado Student Assessment Program (CSAP) and the State Charter School Institute.

Library programs

This section includes appropriations for all publicly funded libraries in the state, including institutional libraries, and those operated by school districts, institutions of higher education and local governments. Library programs received no increase in appropriations from 2006-07 to 2007-08 and no initiatives to increase state funding in this area are foreseen, so we project flat funding for this line item.

Colorado School for the Deaf and Blind

Total increases for the Colorado School for the Deaf and Blind have been about $585,000 (16 percent) over the past three fiscal years, or an average of about 5 percent per year during those years. This rate is included in the projected expenditure increases through 2012-13.

Methodological assumptions

• No changes to the school finance act: Any significant changes to the school finance act, such as adjustments to the at-risk or size factors, were excluded from these projections.

• Capital construction: Besides the $20 million per year expenditures projected through FY 2010-11 to fulfill the Giardino settlement, the report projects no other capital construction General Fund expenditures.

• Colorado Preschool and Kindergarten Program (CPKP): Public school enrollment estimates include only those CPKP slots authorized by the 2007 school finance bill.

• No Child Left Behind (NCLB): The projections do not account for any increased resources to help schools and districts ensure that 100 percent of their students reach proficiency on the CSAP by 2014, which is required by the federal NCLB law.

End notes

1 – E-mail message from Carolyn Kampman, Chief Legislative Analyst, Colorado Joint Budget Committee, Oct. 31, 2007.