Study of the Financing of Public Schools (10/01/2009)

Final
STAFF SUMMARY OF MEETING

STUDY OF THE FINANCING OF PUBLIC SCHOOLS

Date:	10/01/2009	ATTENDANCE

Time:	09:07 AM to 03:02 PM	Bacon	X
		Johnston	E
Place:	SCR 356	King K.	*
		Massey	X
This Meeting was called to order by		Merrifield	X
	Representative Middleton	Scanlan	*
		Spence	X
This Report was prepared by		Stephens	E
	Jennifer Thomsen	Romer	X
		Middleton	X
		X = Present, E = Excused, A = Absent, * = Present after roll call

Bills Addressed:		Action Taken:
Call to Order Report on Alamosa Listening Session Impact of TABOR - Gallagher - Amendment 23 Update from Early Childhood Commission Discussion of Draft Legislation		- - -

All materials referred to in this summary are available on the web athttp://www.colorado.gov/cs/Satellite?c=Page&cid=1244045240660&pagename=CGA-LegislativeCouncil%2FCLCLayout.

09:07 AM -- Call to Order

The meeting was called to order by the chair, Representative Middleton. She provided information about the items the committee would discuss at the meeting.

09:10 AM -- Report on Alamosa Listening Session

Representative Massey provided a report on the listening session held in Alamosa on September 18. He said attendance at the meeting was good, with representation from several school districts and Boards of Cooperative Educational Services (BOCES). Representative Massey said they discussed the work of the committee and had a productive discussion. Representative Massey responded to a question from Representative Merrifield about conversations around fully funding the School Finance Act.

Representative Middleton explained that they also discussed rural broadband issues and accounting for the cost of technology. She said they also discussed funding supplemental on-line programs, noting that there are two proposals related to that issue. She said there was also discussion around funding of BOCES and clarification of some misunderstandings about the committee's discussion of this at the September 15 meeting. Representative Massey provided further information, talking about how regional service areas (RSAs) and BOCES should work collaboratively and noting that funding should continue to flow to the BOCES. He responded to comments from Senator Romer about this issue.

09:17 AM

Representative Middleton described the conversation around funding for small districts, saying that a pilot was suggested. Senator Romer commented on the state's National Math and Science Initiative (NMSI) grant application, and how that money might be used. Representative Middleton asked Stephen Bohrer, Executive Director of the San Luis Valley BOCES, to come to the table to add to the discussion about the meeting. Dr. Bohrer commented that the meeting attendees were pleased that their voices were heard. He described a rural utility services (RUS) grant that it is hoped will be used to address rural broadband issues. Dr. Bohrer spoke to the small district funding bill proposal and expressed concerns about the proposal.

09:25 AM

Representative Middleton responded to Dr. Bohrer's comments about small district funding.

09:25 AM -- Impact of TABOR, Gallagher, and Amendment 23 on School Finance

Todd Herreid, Legislative Council Staff, came to the table to speak to his memo on the impact of the Taxpayer's Bill of Rights (TABOR), the Gallagher Amendment, and Amendment 23 on school finance (Attachment A). He also noted that members had been provided a copy of a September 2003 Legislative Council Staff publication "House Joint Resolution 03-1033 Study: TABOR, Amendment 23, the Gallagher Amendment, and Other Fiscal Issues" (available on the Internet at http://www.state.co.us/gov_dir/leg_dir/lcsstaff/2003/FinalReports/03GallagherFinalReport.pdf). Senator Romer asked Mr. Herreid in his presentation to focus on the possibility that the state will be facing deflation for the first time since these amendments were adopted and on the impact of housing prices as they relate to Gallagher.

09:31 AM

Mr. Herreid began his presentation, explaining that state and local funds are the primary sources of revenue for school finance, and noting that there has been a shift in the proportion of funding from each of these sources. He explained that since the early 1990s, the state share has been rising as the local share has been falling. Mr. Herreid said he would explain how TABOR and Gallagher had contributed to this shift. He said Gallagher was adopted in 1982 as part of a larger property tax reform package, House Concurrent Resolution 82-1005. Mr. Herreid explained that it was meant to maintain a fixed relationship between residential and nonresidential tax rates, and he explained how that relationship works.

09:36 AM

Mr. Herreid responded to a question from Representative Massey about how second- and third-home ownership impacts tax receipts by causing more growth in residential property than in nonresidential property. Mr. Herreid, referencing figure 1 on page 2 of the memo (see Attachment A), talked about the progressive decline of residential assessment rates, explaining that the intent of Gallagher was that assessment rates would adjust up and down, but the adjustment has trended downward. Mr. Herreid explained that Gallagher impacts school finance by forcing the local share of total program down. Before TABOR was adopted, he said, districts had the flexibility to raise their mill levy to recoup decreased tax receipts. He also noted that, prior to the passage of TABOR, the General Assembly could set the local share by setting a uniform mill levy.

09:42 AM

Mr. Herreid next described the impact of TABOR on school finance. He noted that TABOR requires voter approval for mill levy increases and increases in the assessment rate for any class of property. Mr. Herreid responded to committee questions, including a question from Senator Romer who asked if TABOR eliminated the statewide mill levy for schools that was used in the 1950s and 1960s. Representative Massey asked what happens to residential assessment rates if nonresidential rates decrease. Mr. Herreid responded, explaining that there is gap between where the residential rate should be under Gallagher and where it is now. Committee discussion ensued.

09:48 AM

Mr. Herreid spoke next about the assessed value forecast, which is a yearly forecast. He explained that a new assessed value forecast will be released with the December economic forecast. He said information from the Colorado Department of Education (CDE) shows that assessed values are coming in stronger than forecast in December of 2008. Discussion on this issue continued, with further conversation around the possibility of a precipitous drop in the next reassessment cycle and how that will impact the state and local share of school finance.

09:54 AM

Committee conversation with Mr. Herreid continued, with Senator Romer noting that the 2011 reassessment will be a snapshot of the previous two years. Mr. Herreid clarified that it will reflect values from January 1, 2010 through June 30, 2011, so the rate will depend on what happens with the real estate market during that 18-month window. Discussion between Senator Romer and Mr. Herreid on this issue ensued, with Senator Romer asking if the 18-month window should be revisited. Mr. Herreid stated that this is the fundamental issue for the December forecast. Discussion continued between Senator Romer and Mr. Herreid.

09:59 AM

Representative Middleton asked, when dealing with the constitutional requirement for a thorough and uniform education and the differences in local share from district to district, whether the commercial assessment rate is a mirror of the residential rate. She also asked whether there is a way to level the playing field in terms of the disparities among districts. Mr. Herreid responded that the nonresidential rate is fixed at 29 percent of the actual value of those properties. He said questions around equity are a policy issue. Following passage of TABOR, he explained, the state lost control of the local share so the policy decision became one of setting total program, which sets the state share. He said the General Assembly has to decide what is equitable.

10:03 AM

Mr. Herreid continued his presentation, talking about school operating mill levies. He explained that in reassessment years there tends to be a ratcheting down of the school district mill levy, which impacts the declining local share and increasing state share. Senator Romer talked about how districts use the down years, speaking specifically to local debt service. Mr. Herreid talked about other mills districts can impose. Representative Massey commented on the difficulties faced in some districts around passing a mill levy override. Mr. Herreid provided an additional handout that lists school district mill levies and assessed values for FY 2008-09 (Attachment B), noting there are wide variations in total program mills.

10:11 AM

Mr. Herreid spoke next to Amendment 23, saying the inflation plus one provision is applied to base pupil funding and impacts the total program amount. He explained that the same formula applies to categorical funding. He talked about what the current decline in the consumer price index (CPI) means in terms of Amendment 23. Committee discussion on this issue ensued, with Senator Romer explaining the opinion of the Office of State Planning and Budgeting (OSPB) with regard to the formula. Mr. Herreid and Senator Romer discussed the formula issue as well as the enrollment and inflation forecasts made by Legislative Council Staff and OSPB. Mr. Herreid discussed the maintenance of effort (MOE) provision of Amendment 23, saying the General Fund obligation grows substantially because the State Education Fund does not contain the funds to make up the difference. Conversation between Senator Romer and Mr. Herreid ensued, with Senator Romer making comments about the intent of Amendment 23 and saying that the committee should make a policy statement about this issue.

The committee took a brief recess.

10:36 AM -- Update from the Early Childhood and School Readiness Commission

The committee returned from its recess.

Representative Solano, chair of the Early Childhood and School Readiness Commission (commission) and Representative Peniston, commission member, came to the table to discuss the work of the commission and how that work overlaps with the committee's work. Representative Solano noted that the Colorado Children's Campaign is assisting the commission in carrying out its duties. She also noted that several members of the committee also serve on the commission.

10:39 AM

Representative Solano talked about the benefits of investing in early childhood education. She said investments in high-quality early childhood education are directly related to student achievement throughout a child's educational career. She said there is significant national research supporting this link and she talked about Colorado data around the success of the Colorado Preschool Program (CPP). Representative Solano said investment in early childhood education saves the state money in the long run. She cited national estimates that show a cost-savings ratio of between 1:4 and 1:7 dollars. She spoke specifically about corrections savings.

10:43 AM

Representative Solano provided a brief history of the commission and its work, saying it first examined program quality and business involvement. She explained that the commission later became involved in establishing the school readiness grant program. The most recent iteration of the commission, she said, created early childhood councils and the early childhood governance model that is currently being pursued by the Lieutenant Governor. Representative Solano said the current commission has explored what stable, high-quality early childhood programs do for children and families, including decreasing the achievement gap. She talked about seeing the CPP work in concert with other programs. She said the fact that early childhood programs are making an impact on the achievement gap should not be marginalized, and she reiterated that it saves the state dollars that would later be used on interventions that many times come too late.

10:48 AM

Representative Solano described themes seen by the current commission, including preparation of high-risk children for academic success. Representative Solano said the fastest growing population of people living in poverty are children ages 0 to 5. She talked about the impacts of poverty on children's development. She said the commission has focused on professional development, trying to raise the standards and professionalism in the early childhood education field, as well as recruiting and retaining high-quality teachers. She said the commission is looking at the Colorado Child Care Assistance Program (CCCAP) and its interaction with other programs such as CPP and Head Start. She talked about the issue of stability for children, talking about aligning child care assistance funds with high-quality early childhood education programs. She talked about difficulties around families transitioning on and off child care assistance programs.

10:54 AM

She talked about federal funding opportunities around early childhood education. She said Race to the Top (RtT) does not mention the importance of early childhood education. She talked about the federal Early Learning Challenge Grants, and said she's talked to Congressman Polis about this opportunity for federal funding. She said she hopes the dialog with the committee will continue, saying quality early childhood education cannot be seen as an add-on or be marginalized because it is the foundation of education.

10:56 AM

Representative Massey said the commission has done a good job of raising awareness of the importance of early childhood education, but faces challenges in keeping the discussion going in this time of diminishing resources. Senator Bacon talked about issues around CCCAP, asking if a sliding scale could be considered for eligibility. Representative Solano said that issue has been a focus of commission discussions, noting that there are large disparities among counties. She said the commission is meeting on October 2, and said they will discuss what they can do legislatively to provide stability for children. Representative Peniston commented that when early childhood education cannot be fully funded by the state, the impact reaches beyond at-risk kids. When parents have to withdraw their children from programs because they cannot afford them, she said, the low enrollment causes a decline in quality which affects children remaining in the program. All children are at-risk, she said.

11:02 AM

Representative Middleton said one proposed committee bill expands the at-risk definition to include CPP-eligible children for a period of years. She also talked about struggles faced by teachers already in the system when changes are made to qualification rules, asking how those teachers can be helped. Representative Solano responded. Representative Benefield talked about how early childhood education systems educate parents, teaching them to be partners with educators, which helps children succeed. Representative Massey said the commission was also tasked with studying health and well-being, and said in that regard the commission overlaps with other committees as well.

11:08 AM

Senator Bacon talked about the importance of early childhood education and care and discussed the impact it has in other countries. He talked about challenges due to lack of resources and said other countries that have educational successes are interested in early childhood education and serve the child's health as well. Representative Middleton asked if the commission had discussed how to integrate early childhood funding into a P-20 system. Representative Massey said the commission had not discussed that issue specifically. Senator Hudak talked about high-quality full-day kindergarten, commenting that students who have been in a high-quality early education program who are put into a large half-day kindergarten class lose ground. She also talked about the need for adequate wrap-around services for students. She suggested adding Head Start eligibility to the bill that adds CPP eligibility to the definition of at-risk. Representative Middleton responded to Senator Hudak's comments.

11:15 AM

Representative Middleton talked about business involvement and the need for business community investment in expanding facilities. Representative Solano said the commission has discussed capital needs and has talked about the lack of space as a major impediment to adding full-day kindergarten.

11:19 AM

The committee recessed for lunch.

01:05 PM -- Discussion of Draft Legislation

Representative Middleton announced that the committee would be discussing 11 bill drafts, as well as two proposals from Senator Johnston. She clarified that the committee would review the legislation, take comments, and propose or suggest amendments, and would vote on the legislation at the October 22 meeting.

01:08 PM

Bill 2 -- Representative Massey -- Extend Repeal of Supplemental On-Line (Attachment C). Representative Massey presented the bill, explaining that it removes the sunset of supplemental on-line education services. Senator Spence asked how much is spent on supplemental on-line each year, Representative Massey responded, noting that $500,000 is appropriated each year. Senator Bacon asked whether an evaluation of the program should be added. The committee discussed this issue, with Representative Merrifield noting that the program had recently been reviewed. Committee discussion on this issue ensued.

01:14 PM

Bill 5 -- Representative Massey -- School Speech-Language Pathology Assistants (Attachment D). Representative Massey presented the bill, saying he would like to allow districts to use a waiver system, rather than watering down minimum requirements for speech-language pathology assistants. Bruce Caughey, Colorado Association of School Executives (CASE), came to the table to speak to the bill. He expressed support for the use of waivers rather than the lowering of standards. Committee discussion ensued. Representative Merrifield suggested that the committee look at the number of higher education institutions in the state that provide speech-language pathology training. Mr. Caughey said there is a supply and demand mismatch, and commented that the proposed bill is an emergency fix. He said that addressing the number of programs training assistants is a long-term fix. Senator King asked whether any institutions offer associates degrees in the area of speech-language pathology. Senator Spence asked for clarification of the bill's tie-in with school finance under the committee's charge. Representative Middleton said the bill had come up after being identified as a high-need area with regard to special education. Representative Massey responded to Senator Spence's comments as well.

01:23 PM

Bill 6 -- Representative Scanlan and Representative Massey -- Public School Transparency Financial Information On-Line (Attachment E). Representative Scanlan presented the bill, noting it allows a three-year phase-in period for requiring school districts to post financial information on-line. Representative Massey talked about time lines that had been discussed in the drafting of the proposal, noting that the time lines in the bill are appropriate. Committee discussion ensued. Senator King commented that monthly rather than quarterly financial statements would be easier to post. Representative Massey agreed that most districts do monthly rather than quarterly reports. Brita Darling, Office of Legislative Legal Services, came to the table to respond to committee questions about the proposal. Representative Merrifield said he has heard some concerns, though not major ones, with the bill. He said on-line schools should be included in the posting requirement and he asked how small districts that do not have websites would comply. Representative Massey responded, saying that smaller district could share websites. He also spoke to Senator King's earlier comments about monthly versus quarterly reporting. The committee discussed the proposal and the format of the on-line reports.

01:31 PM

Committee discussion of Bill 6 continued, with further questions from Senator King around the items that would be required to be posted under the provisions of the bill. Conversation between Senator King and Representative Scanlan on these issued ensued. Representative Middleton suggested changing the language to require posting "at least quarterly." Representative Scanlan noted that the Financial Policies and Procedures Advisory Committee would recommend policies and procedures related to the format of the on-line reports. She responded to a question from Senator Bacon about the time lines created in the bill. Ms. Darling provided clarification to the question as well. Representative Benefield asked whether the bill would require posting of gifts, grants, and donations collected by the districts' foundations. Representative Middleton responded, saying those moneys would be reflected in districts' financial statements. Committee discussion of this issue ensued, with conversation around funds granted for restricted purposes and student activities accounts. The committee agreed that the bill would go forward, but the bill sponsors would work to address members' questions and concerns.

01:45 PM

Jane Urschel, Colorado Association of School Boards (CASB), came to the table to speak to the bill. She said CASB has a resolution coming before its assembly that will strongly support transparency. Melissa Callahan de Vita, Mesa Valley School District, also spoke to the bill. Ms. Callahan de Vita talked about her district's monthly and quarterly statements. She explained that general fund revenue is not currently included in statements.

01:48 PM

Bill 7 -- Senator King -- Mill Levy Freeze Savings to State Education Fund (Attachment F). Senator King presented the bill. He spoke first about the solvency of the State Education Fund. He provided two handouts -- a memorandum from Legislative Council Staff dated June 18, 2009, and a memorandum from Joint Budget Committee Staff dated September 25, 2009 (Attachments G and H). Mr. Herreid came to the table to speak to the solvency of the State Education Fund. Conversation between Senator King and Mr. Herreid on the State Education Fund, the General Fund demands of education funding, and the School Finance Act ensued. Senator Bacon commented on the proposed shift of money to the State Education Fund. Senator Spence noted that shifting the funds to the State Education Fund would earmark the funds for educational purposes. Committee discussion of the bill ensued, with conversation around the choices that have to be made with regard to the budget. Senator Romer asked for clarification of the current situation with regard to the maintenance of effort provisions of Amendment 23 and commented that the current year might not be the year to make the proposed change. Conversation between Senators King and Romer ensued.

02:02 PM

Bill 8 -- Representative Middleton -- School Finance Act Modifications (Attachment I). Representative Middleton presented the bill, which incorporates a number of changes she discussed at the committee's September 15 meeting. She first described the stable funding pilot program for small school districts created by the bill. Representative Massey said the bill incorporates the consolidation discussion as well. She responded to committee questions about the proposal, including one from Senator King about how the proposal differs from current averaging provisions. Representative Merrifield asked how the bill ties in with Bill 11.

02:07 PM

Bill 11 -- Representative Massey -- Stable Funding for Small School Districts (Attachment J). Representative Massey explained that Bill 11 contains just the small district funding portion of Bill 8 and said that if Bill 8 is approved, Bill 11 will be unnecessary. Senator Bacon commented on the section of Bill 8 that directs funding to technology, saying he is reluctant to put more requirements into the pilot program. Representative Massey responded, saying the bill does not take the path of forced consolidations.

02:12 PM

Bill 8 -- Representative Middleton -- School Finance Act Modifications (Attachment I) -- Continued.Representative Middleton explained the portion of Bill 8 that requires the specified allotment to technology. She responded to questions from Senator Bacon about these provisions. She continued, talking about the provisions of the bill that would provide additional resources to BOCES when there are more resources available. She also described the provisions expanding the definition of at-risk to include CPP-eligible students and noted that Senator Hudak suggested adding Head Start eligible students.

02:15 PM

Dale McCall, Colorado BOCES Association, came to the table to speak to the BOCES funding section of Bill 8. He expressed concern about BOCES getting funding at the expense of member districts and said he supports a future trigger for the increased funding. Representative Middleton responded to his comments, explaining her intent. Mr. McCall commented that the BOCES are working to strengthen relationships with CDE. Representative Merrifield asked for further clarification of the provisions of the bill related to technology. Representative Massey noted that a professional development piece had been added as well. Senator Spence asked for clarification, which Representative Middleton provided, by explaining that the intent is not that districts set aside money for technology, rather that the state would provide funding for technology.

02:22 PM

Committee discussion continued, with Senator King asking if the provisions addressing the definition of at-risk related only to the pilot program. Representative Middleton responded, saying only the small district funding piece is part of the pilot. Conversation between Representative Middleton and Senator King ensued. Representative Massey suggested clarifying the expansion of at-risk and said with that clarification he would be willing to pull Bill 11 in favor of Bill 8.

02:24 PM

Bill 10 -- Representative Middleton -- Modifications to School Finance Administration (Attachment K). Representative Middleton explained that the bill includes the recommendations made by Vody Herrmann, Assistant Commissioner for School Finance at the CDE, of items that are obsolete or unfunded. Representative Middleton walked through each section of the bill and the committee discussed the provisions that would be repealed. Senator King suggested, and the committee agreed, that section 7 of the bill should be removed. Representative Merrifield suggested removing sections 8 and 9 from the bill as well, and the committee agreed. The committee also agreed to strike section 1 of the bill and they agreed that section 3 needed further investigation.

02:34 PM

Bill 9 -- Senator Johnston -- Intent to Increase At-Risk Funding (Attachment L). Senator Bacon asked for a clear definition of the source of the increased funding. The committee agreed to set the bill aside because Senator Johnston was not in attendance at the meeting. The bill will be discussed at the October 22 meeting.

02:35 PM

Bill 1 -- Senator Romer -- School Improvement Zones (Attachment M). Senator Romer presented the bill. He said a number of stakeholders believe the bill's goals can be accomplished without a bill, but said he feels the discussion is important. Senator Romer noted that there are concerns around governance and he said he believes significant grant funding may be available. Senator Spence made comments to the bill and said it is her view that it adds an additional layer of bureaucracy. She asked why a district would go this route rather than the innovative school route and she noted that the innovative school concept has buy-in from the teachers and the community. Senator Romer responded to these comments. Representative Massey expressed concern about the provisions requiring the state to pay salary and benefits for chief executive officers. Representative Merrifield said he does not believe the bill is necessary. Senator Romer responded to the committee's questions and comments and said he would take the proposal to the RtT committee. Representative Middleton talked about the different mechanisms for improving schools.

02:44 PM

Bill 3 -- Senator King -- School Awards Program Fund (Attachment N).Senator King presented the bill, explaining that it would provide funding for school awards programs. Committee discussion of the bill ensued, with discussion of the Read-to-Achieve cash fund, which is identified as the funding mechanism in the bill. Senator King said he is happy to change the funding for the bill gifts, grants, and donations. Representative Benefield, a member of the Read-to-Achieve Board, expressed strong concern about using Read-to-Achieve funds for the bill.

02:46 PM

Bill 4 -- Senator King -- Weighted Student Funding Formula Grants (Attachment O). Senator King explained that the bill provides a planning grant for districts to implement weighted student funding. Senator King responded to a question from Senator Spence regarding the funding of the grant program.

02:49 PM

Representative Middleton described Senator Johnston's proposal concerning average daily membership (ADM), for which a bill has not been drafted (Attachment P). The committee discussed the proposal and the idea of using ADM. The committee agreed that a bill draft could be contemplated further at the October 22 meeting. Senator Spence asked for clarification of school districts' concerns with using ADM. Representative Middleton responded, referring back to the count date conversations at the committee's August 27 meeting.

02:56 PM

Representative Middleton described Senator Johnston's proposal concerning at-risk funding following the child, for which a bill has not been drafted (see Attachment P). The committee discussed the proposal, with Senator King noting that it would drive a $5 million fiscal note. The committee discussed possible funding streams and agreed to review a bill draft at the October 22 meeting.

03:01 PM

Representative Middleton explained that at the committee's meeting on October 22 there would be a presentation on the National Math and Science Initiative (NMSI) grant application and said the committee would vote on legislation and discuss other recommendations for the committee's final report.

03:02 PM

The committee adjourned.