Joint Committee Committee on Joint Education (01/22/2014)

Final
STAFF SUMMARY OF MEETING

COMMITTEE ON JOINT EDUCATION

Date:	01/22/2014	ATTENDANCE

Time:	09:49 AM to 12:04 PM	Buckner	X
		Court	X
Place:	HCR 0112	Everett	X
		Fields	*
This Meeting was called to order by		Holbert	*
	Senator Kerr	Johnston	X
		Marble	X
This Report was prepared by		McNulty	X
	Rachel Kurtz-Phelan	Murray	X
		Peniston	X
		Pettersen	X
		Priola	*
		Renfroe	E
		Scheffel	X
		Todd	X
		Wilson	X
		Young	X
		Zenzinger	E
		Kerr	X
		Hamner	X
		X = Present, E = Excused, A = Absent, * = Present after roll call

Bills Addressed:		Action Taken:
Presentation by the Joint Budget Committee per Joint Rule 25 Presentation by the Office of the State Auditor on Unimplemented Audit Recs Presentation on School Finance		Witness Testimony and/or Committee Discussion Only Witness Testimony and/or Committee Discussion Only Witness Testimony and/or Committee Discussion Only

09:51 AM -- Presentation by the Joint Budget Committee per Joint Rule 25

Senator Kerr, Chair, welcomed the committee members and the members of the Colorado Association of School Boards who were in attendance. He invited members of the Joint Budget Committee (JBC) to the table to begin their presentation required under Joint Legislative Rule 25(d). Committee members received copies of the JBC's FY 2014-15 staff budget briefing summary (briefing summary documents may be accessed at: http://www.tornado.state.co.us/gov_dir/leg_dir/jbc/2013-14/briefingsummary.htm). Senator Steadman discussed the FY 2014-15 budget request for the Department of Education (CDE), detailing the requested line item appropriations listed in the briefing document and highlighting some issues that are projected to impact the department's budget. Senator Steadman discussed the requested increase in total program funding, which is split between General Fund and State Education Fund (SEF), and requested funding increases for categorical programs. He told the committee about a constitutional mandate to provide a funding increase equal to inflation for categorical programs, and stated that English language learner (ELL) and special education programs historically get annual increases that are larger than inflation. He talked about the specific funding requests made by the department to: improve technology and software systems; implement new statewide assessments; improve technical support to districts for college and career-ready programs; support education recognition programs such as the Colorado Teacher of the Year award; and provide technical support to assist districts with ELL programs and services.

10:00 AM

Senator Steadman continued to review CDE's budget request, specifically discussing an increase in cash funding to cover lease purchase payments for the Building Excellent Schools Today (BEST) program. He told the committee members that the JBC members received briefings from JBC staff members about: the resolution of the Lobato v. Colorado case; school funding; state support for ELLs; early university assessment tools; standardized assessments and Partnership for Assessment of Readiness for College and Careers (PARCC); and the BEST program. Representative Gerou explained the JBC's role in grant funding for the BEST program and several legislative changes that the JBC will request during the legislative session. The committee discussed the impact of Taxpayer Bill Of Rights (TABOR) and earned income tax credits on BEST funding.

10:08 AM

Representative Holbert commented on the BEST program and the need for bipartisan support. Senator Kerr asked about the excise tax revenue to go towards funding capital construction for schools. Senator Steadman discussed the budget request for the Department of Higher Education (DHE). He reviewed several of the requests, including: a $40 million increase in financial aid for students across the state; a $60 million increase in operational funding for the entire higher education system; a General Fund increase to support the Fort Lewis College Native American tuition waiver; and funding for dependent tuition assistance programs. Senator Steadman told the committee that the JBC received briefings from its staff on the following topics: an analysis of the financial health of various institutions of higher education across the state; an analysis of the status of current laws giving tuition flexibility to institutions; increases to need-based and merit-based financial aid programs; tuition increases and affordability; student loan debt; and outcomes-based funding models for funding institutions of higher education.

10:23 AM

The members of the JBC answered questions from the committee pertaining to caps on tuition increases. Representative Gerou told the committee that the state used to provide two-thirds of higher education funding and students provided the additional one-third, but that the split is now reversed. Representative Murray asked about the financial health of smaller institutions of higher education. Representative Gerou commented on the role of the Capital Development Committee in approving funding for capital construction projects on higher education institution campuses.

10:34 AM

Representative Court stated that competition in the higher education system is undermining the ability of each institution to succeed because they are all competing against each other. The committee discussed issues of affordability and the importance of figuring out how to balance the various funding needs of the SEF.

10:41 AM

The committee discussed the role of the Appropriations Committee in funding higher education institutions.

10:47 AM -- Presentation by the Office of the State Auditor on Unimplemented Audit Recs

Senator Kerr welcomed staff from the Office of the State Auditor (OSA), Kerri Hunter, Deputy State Auditor, Jenny Page, Audit Manager, and Jeffery Kahn, Audit Manager, to the table to begin their presentation on unimplemented audit recommendations to CDE and DHE. Staff distributed the Annual Report of Audit Recommendations Not Fully Implemented, October 2013 to the committee. The report is available on the Office of the State Auditor's website. Ms. Hunter explained that the report focuses on audit recommendations that departments either fully agreed to or partially agreed to implement but that were not fully implemented by June 30, 2013. Ms. Hunter provided background information on OSA and stated that the report helps hold agencies accountable.

10:55 AM

Ms. Page reviewed the financial audit recommendations made to DHE that are still outstanding and stated that CDE does not have any outstanding financial recommendations. She explained that financial recommendations are categorized by the level of severity, and reviewed the moderately severe recommendations to DHE that are currently outstanding. Next she reviewed the outstanding performance and Information Technology (IT) recommendations. She explained that performance audits examine whether agencies are operating efficiently and effectively and whether they are complying with laws and regulations. Ms. Page detailed the outstanding performance recommendations for DHE.

11:03 AM

Mr. Kahn told the committee that CDE received 17 financial recommendations, all of which have been fully implemented. He said that DHE received a total of 59 recommendations, 30 of which are financial, and that all but one of the performance recommendations have been implemented. He told the committee that the Colorado Community College System has one outstanding recommendation pertaining to Title IV funding, and that the University of Colorado system has one deficiency pertaining to the return of Title IV funding. Representative Court asked for confirmation that none of the outstanding recommendations pertain to capital construction.

11:10 AM -- Presentation on School Finance

Todd Herreid, Legislative Council Staff, and Craig Harper, Joint Budget Committee staff, came to the table and introduced themselves to the committee. Mr. Herreid explained that they would be presenting on school finance and the SEF. They distributed a handout to the committee (Attachment A). Mr. Herreid talked about the sources of funding for K-12 that come from state and local sources. He explained that state sources, including income and sales tax revenue, account for 65 percent of K-12 funding, and local sources, primarily property tax revenue, account for 35 percent. Mr. Herreid discussed K-12 funding trends and the history of the Negative Factor. Representative Hamner asked Mr. Herreid and Mr. Harper to further explain the Negative Factor. Mr. Harper talked about the federal funds that districts receive for specific uses such as funding special education and ELL programs, and about the year-over-year increase in the Governor's budget request for K-12 funding.

14JTEd0122AttachA.pdf

11:26 AM

Mr. Herreid explained that the Governor's budget request includes a small reduction in the Negative Factor. He talked about the $1.1 billion transfer from the General Fund surplus into the SEF in December 2013, and explained that any supplemental increase in funding to K-12 education this year will decrease the General Fund surplus that can be transferred into the SEF. He talked about the allowed uses of SEF funds and the anticipated balance in the SEF at the end of FY 2013-14. Representative Priola asked how the SEF is funded, and Mr. Herried responded that it is funded by income tax deposits, one-time General Fund surplus transfers, and a one-time refinancing of the Fire and Police Pension Association.

11:35 AM

Mr. Harper reviewed several options for school finance funding in FY 2014-15, including maintaining a flat Negative Factor, reducing the Negative Factor, and eliminating the Negative Factor. He discussed one-time versus on-going funding options and the impact of each on General Fund commitments.

11:49 AM

Senator Johnston asked how much is in the SEF reserve fund, and about the annual contributions to the fund through income tax deposits. Mr. Herreid and Mr. Harper answered questions from the committee about the Negative Factor, past transfers from the General Fund to the SEF, the State Public School Fund, projected General Fund growth, and early literacy assessment tools.

12:04 AM

The committee adjourned.