Final
Adequacy and Equity Presentations

SCHOOL FINANCE SYSTEM

Votes:
Action Taken:
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09:16 AM -- Adequacy and Equity Issues Raised by Colorado's Current School Finance System

Kathy Gebhardt, Executive Director, Children's Voices, introduced herself to the committee. In providing information on her background, she said that she feels that everyone is gathered with a shared interest and value in how we care for children and how we provide for their education. She said that the questions to be addressed concerned how to provide a high-quality education for Colorado's children.

Ms. Gebhardt discussed the recent lawsuit that she had filed, Lobato v. the State of Colorado,and noted that the lawsuit does not ask the state to fashion a new school finance system. Because of separation of powers issues, she said that the request of the court is for it to look at the current system and to rule on the constitutionality of the current system. and if it is found to be unconstitutional, it will be up to the General Assembly to fix it. Ms. Gebhardt further noted that the Lujan case ruled on the constitutionality of the school finance system at that time, but did not offer other guidance. She outlined the power of courts to rule on issues of constitutionality and discussed the separation of powers issues involved. She stated that the filing of the Lobato case is consistent with the ruling in Lujancase.


09:22 AM

Ms. Gebhardt discussed her representation of parents in seven school districts and all 14 school districts in the San Luis Valley. She noted that she wanted to speak to the reasons that the lawsuit was filed at this time and discussed not only the constitutional language for a "thorough and uniform" system of public schools, but also the new mandates that have been encumbered on the state with corresponding financing. She stated than an increasing number of children are not receiving the educational opportunity that the constitution demands. She feels that the current tax structure has deteriorated and is unconstitutional. She said that Amendment 23 is now interpreted and considered to be a ceiling, rather than a minimum level of funding. As she continued, she discussed the capital construction needs in K-12 education, and reminded the committee that the State Auditor's Office estimated the need at $4.7 billion.

Ms. Gebhardt continued by discussing the achievement gap in Colorado, and the priority given the issue by the State Board of Education. Ms. Gebhardt said that a recent outside special education funding analysis has found that the state should take remedies to address shortfalls in this funding. The result of the current system, she said, is the choices that have to be made by school districts in regard to funding for critical programs, which may "pit program against program." She provided information on special education reimbursement levels in nearby states, including Wyoming and Nebraska, where reimbursement is 100 percent. She also discussed the existing need to provide programs for English language learners. She acknowledged the recent recession in the state, but said that she feels now is an appropriate time for the lawsuit to go forward. She clarified that she is not arguing for equalized expenditures for all children, but rather the state provide an adequate base for all children to learn. She said that local control looked very different at the time of Lujan, and that there were not the variety of constraints that exist today. These include state content and accountability standards, as well as mandates under the No Child Left Behind Act (NCLB).


09:30 AM

Ms. Gebhardt said that history and politics are the primary factors in determining school funding currently. She said that there has not been an assessment of need and that this is important in addressing school finance for K-12 education. Ms. Gebhardt quoted legislative language in various sections of statute that reflect state obligations for K-12 education. She discussed the discrepancy in special education and English Language Proficiency Act (ELPA) funding at current reimbursement levels and highlighted transportation finance issues for school districts. Ms. Gebhardt noted that the Lobato case includes a claim in regard to the Taxpayer's Bill of Rights (TABOR) amendment. She said that whereas the 1990s were a prosperous time for state, education funding began to fall behind during this period. She said that TABOR restricts the ability of school districts to opt out of mandates. She said that Colorado is a wealthy state, but is stingy in the way it allocates resources for education. She said that Referenda C and D are good steps forward, but do not address the systemic problems inherent in the K-12 school funding.


09:37 AM

Ms. Gebhardt continued her presentation by discussing the status of Giardinolawsuit and said that the state is currently out of compliance and disregarding the court order. She discussed the fact that the state has not done a needs assessment for capital construction. She said that even fully funding the Giardino lawsuit would not meet the capital construction needs present in school districts. In regard to other states, Ms. Gebhardt said in states in which the courts and legislature have worked well together, the systems have worked well. She said that states where the legislative branches have failed to comply with court orders are the states that have been faced with lengthy litigation. In concluding, Ms. Gebhardt quoted a former North Carolina Supreme Court Justice and said that she hoped that everyone could work together to accomplish shared goals.



09:43 AM

Ms. Gebhardt responded to questions regarding the Lobatolawsuit. Senator Anderson asked Ms. Gebhardt her reasons for filing the current lawsuit when she is aware of the existing constitutional constraints. Ms. Gebhardt said that her argument is that "thorough and uniform" has a qualitative component, and that the legislature has not met the financial commitment to that component. By setting forth standards and accountability measures, she feels that the legislature has set forth what a "thorough and uniform" system of schools means. Ms. Gebhardt said that she feels that the state does have the necessary resources, but has chosen to allocate resources in other ways, including tax refunds. She said that she appreciates the constraints under which the legislature operates and stated that these constraints are the reason she included a TABOR claim in the lawsuit.



09:47 AM

Representative Pommer asked about the Supreme Court ruling in Lujan that education is not a "fundamental right." Ms. Gebhardt said that the Lujanruling means that the state's actions are subject to a lower level of scrutiny. Representative Penry commented on the funding increases that have taken place in recent years. He also asked Ms. Gebhardt about the Lujan ruling and said that arguments were much narrower in that case and asked for her to comment on the timing of the filing of the Lobatolawsuit and on her assessment of the case's chances in light of the Lujanruling. Ms. Gebhardt responded by discussing the differences in the educational context between the time that Lujan was filed and the current day. She said that there is outstanding documented need and discussed the discrepancies in school districts' property tax base. Representative Penry continued his questions by asking her how the state should face the costs of funding of programs if the lawsuit were successful. Ms. Gebhardt said that the state needs to look at its overall tax structure, as well as property tax issues.


09:55 AM

Senator Anderson responded to Ms. Gebhardt's comments and discussed the failure of the ballot proposal in 2003 that addressed the residential assessment rate. Representative King asked Ms. Gebhardt what she considered the appropriate ways to make changes to the school finance system. She said that categorical funding needs to be addressed, as does the manner in which capital construction is funded. Additionally, she stated that the way that special education is funded is not related to student need, and that the state is most vulnerable in regard to categorical funding and the providing for its students with greatest need. Representative King asked her for specific examples of what is unconstitutional and asked whether a measure of student academic growth should be considered in funding. He also commented on whether the current lawsuit would have been filed, even if TABOR were not in the constitution. He said that the committee should look at how school districts are able to meet the needs of students and raised the issue of an insurance pool for school districts with special education students.


10:02 AM

Ms. Gebhardt said she is unsure what the situation would be if TABOR were not in place, and while she feels the state would be in better shape if it were not in the constitution, she would not want to speculate further. In regard to at-risk funding, she said that looking at the definition of at-risk in charter school law and in other areas of law could provide broader thinking about at-risk students, and that the state no longer has the luxury of saying that at-risk is only a socioeconomic factor. In regard to categorical funding, she said that whenever anything is outside of the school finance formula, it tends to be disregarded. She argued that the formula should be more encompassing, including a possible weight for each need or categorical.


10:06 AM

Representative King continued his comments about how a student-driven formula may have merit and would allow the state to look at whether the state is meeting the needs of individual students. Representative Pommer said that the legislature has been guilty of passing new programs and not worrying how much it costs to implement them. He also discussed the conflict that was inherent once Amendment 23 was passed and noted that a resolution of the constitutional constraints of TABOR is inevitable. Representative Pommer also noted that he knows the long history behind the filing of the Lobato lawsuit.


10:08 AM

Ms. Gebhardt commented further on property taxation and said that highlighting the property tax system before citizens is important. She said that the 2003 ballot issue may have been an issue before its time, in regard to voter education. Representative Merrifield asked about the history of other state lawsuit and suits filed under federal constitutional rights and more recent suits on adequacy. She said that 45 or 46 states have experienced litigation, but not all have been adequacy lawsuits. She said that she estimated adequacy lawsuits at 25-30, the majority of which have been successful.

Senator Tupa commented on the possibility of Referenda C and D passing and whether the litigation would go forward. Ms. Gebhardt said that the lawsuit would go forward. He also asked what might happen if C and D fail and the state loses the lawsuit. Senator Anderson said that TABOR has a clause that authorizes payment of "damages." Senator Anderson discussed the cuts that would be necessary if C and D do not pass. Senator Tupa asked for further clarification how much would go for K-12 education under Referendum C. This amount would average $180 million a year, according to Senator Anderson. He asked for further clarification regarding what would be allowed under TABOR if the state loses the Lobato lawsuit.


10:16 AM

Representative Penry asked Ms. Gebhardt which constitutional measures she feels are unconstitutional and whether it includes the Gallagher Amendment. Ms. Gebhardt said that the results of the interplay of the Gallagher Amendment and the TABOR Amendment are constitutional. He asked if there were a dollar figure that would cause the litigation to end. She said that this concept was not "a bottomless pit," but that she did not have a dollar figure. She reiterated that a state analysis of need should be done. Representative Penry said that he does not feel that the issues in Lobato are issues for the judiciary to decide. Rather, he feels it is a legislative prerogative. Ms. Gebhardt reiterated that the system of separation of powers allows the judiciary to rule on the constitutionality of state laws.

Representative King asked whether she agrees with measures for standards and accountability. Ms. Gebhardt responded that she feels that CSAP measures are too narrow, and the state needs to broaden its assessment of what "proficiency" is. Representative King commented further that if Referenda C and D do not pass, he feels that the legislature should come back and look at a longer-term, more comprehensive answer to the state's budget problems. He advocated coming back during the 2006 legislative session to try to resolve the constitutional conflicts that exist in the state more comprehensively.


10:27 AM

Senator Tupa asked about Ms. Gebhardt's discussion of a needs assessment and whether she had ever considered a legislative response. Ms. Gebhardt said that based on prior experience with capital construction, she did not feel that the legislature would be receptive to requiring a state assessment of need on the operational side. Senator Windels said that she hopes to look at discrepancies in categorical funding and in capital needs at the committee's next meeting on August 30. Committee members continued to discuss an assessment of the state's needs. Representative Pommer commented on the cost factor involved in a comprehensive needs assessment. He compared education and transportation funding and said that current transportation planning gives the state an idea of what the need is. He said that he feels the state should have a number from which to assess its need. Senator Windels commented that she feels that the state needs to make the State Education Fund healthy again. In concluding, Ms. Gebhardt invited anyone to call with any questions or concerns regarding the Lobato lawsuit.


10:32 AM -- "Stepping Up or Bottoming Out" — Funding Colorado's Schools

Dr. Paul Teske, Graduate School of Public Affairs, University of Colorado at Denver and Health Sciences Center, introduced himself to the committee. His presentation was based on a 2004 report he authored called "Stepping Up or Bottoming Out" — Funding Colorado's Schools. The report and an executive summary were distributed to committee members (Attachments A and B). Dr. Teske noted that the while the report was funded by the Donnell Kay Foundation, the conclusions in the report were his. He said that the purpose of the report was to see how Colorado education funding compares to other states and to earlier eras in Colorado. He said that the report presents these two types of benchmarks throughout. He said that Colorado is considered a wealthy state as measured by per capita income and acknowledged that adequacy issues raise difficult questions. He said that another way to benchmark Colorado's current system is to look at what other states are doing. He discussed the fact that Colorado usually ranks around 40th on straight spending for K-12 education and noted that during the early 1980s, Colorado would rank much higher. The state's relative ranking declined during the 1990s. He continued by discussing where Colorado ranks in terms of per capita effort for education. He said that there has been a large drop in the percentage of tax income devoted to education. He noted provisions for local control in Colorado and the relatively low level of resources devoted to issues through its state department provide other factors to consider.


10:40 AM

Dr. Teske discussed a variety of other measures, including special education funding. He said he looked at equity issues, which are more difficult and that the state may be doing better compared to 10 or 20 years ago. Dr. Teske noted that some of the factors in the current formula appear to be working. Equity issues within schools districts are receiving greater attention, according to Dr. Teske. He noted that looking at differentials regarding what individual schools are receiving within school districts provides interesting analysis. He said that the issue of a weighted student formula has raised interest at the district level and would change what some schools receive. He also looked at private funding for public schools, and found that Colorado ranks relatively high in this effort. Private funding accounts for approximately 4.4 percent of moneys for K-12 education in Colorado, compared to a national average of 2.5 percent. He discussed the private support that is done in a variety of ways. He said it suggests to him is that there is too little money in the system. In addition, he said an increasing number of school districts are attempting to pass mill levy overrides and more school districts are passing bond acts.


10:46 AM

Dr. Teske said he has come to appreciate the interplay of all of the factors in Colorado, including Amendment 23, that impact school funding. He said that if Colorado continues to fund its obligations through Amendment 23, and all other states were to fund education only at the rate of inflation, Colorado's relative ranking would improve. He said he doubts that other states would be holding their funding only to the rate of inflation. He said that when one looks at trends in education spending as a percentage of income, Colorado spending is down, whereas in other states, spending is up. He said that he feels the industry that education may be most comparable to is health care, and that it makes it likely that spending on the basis of income would need to go up. He said that he concluded that there is not a lot of money in the system, and that he also feels it is unprecedented for a high-income state to disinvest in education in the way that Colorado has in the past 15 year. He said that California may be the only state that may be comparable in this regard.


10:52 AM

Dr. Teske responded to questions and said it was very difficult to place a number on what it would take to help reach measures of adequacy. He said many studies may place the number at about 20 percent higher than is currently done in Colorado. He said that comparisons to other states and to earlier eras give policymakers a sense of where Colorado stands in the present day. Senator Anderson asked for his opinion regarding what is adequate. He responded that he feels adequate is enough to fund what is needed to help students achieve. He agreed that other factors come into play. He said that a parent's socioeconomic status still remains a crucial factor in student achievement. Senator Anderson said that she struggles with how money or funding equates to what is adequate and raised the case of Utah, which she stated is a high-achieving state, but not a state that ranks high in education funding. Dr. Teske discussed the combination of factors that need to measured and considered.

10:58 AM

Representative Pommer asked about measuring and achieving adequacy and helping students of low socioeconomic status achieve. He discussed the importance of preschool and kindergarten programs and individual attention for at-risk students, all of which cost money. He asked Dr. Teske whether he had done research into early childhood programs and the long-term payoff for the investment. Dr. Teske said he has read others' work, but has not published on that issue specifically. Representative King asked specific questions about the data utilized in the report. Dr. Teske said that the methodology used in recent studies may find that some districts are funding close to a measure of adequacy using mill levy overrides and bond issues, but that they would be in the minority in the state.

Senator Bacon asked about ancillary and support issues, such as nutrition and child care, that may be taken into account in some states. Dr. Teske said that in some states, including New Jersey, the courts have gone further than others in being prescriptive. Representative Penry asked Dr. Teske about how far Colorado is from the national median or mean for education funding in real dollars. He said that Colorado would be approximately about $700 per student off the median. Representative Penry said that he agrees with Representative Pommer that looking at where the money should be targeted may be the right conversation. He said that preschool and full-day kindergarten may be the best place to put any increased funding.


11:08 AM

Senator Anderson said that if the state looks at fully funding special education, it would alleviate school district issues. Senator Windels asked Dr. Teske about categorical funding in other states. He said he has not looked at direct comparisons, but data suggests that many states do provide more for areas such as special education. He also responded to the issue of private funding and about trends that he sees. He said that he guesses it is a growing phenomenon in many places, but that it is a complex factor to study.


11:11 AM

The committee recessed.



11:27 AM

The committee came back to order.


11:28 AM -- The Study and Cost of Adequacy for Colorado Public Schools

Tracie Rainey, Director, Colorado School Finance Project, provided a brief history of the Colorado School Finance Project, including the its mission and vision. A hand-out of her Powerpoint presentation was distributed, along with three additional documents (Attachments C, D, E, and F). She said that the focus of the School Finance Project for 2005 is "to educate policymakers, business community and the education community on the concept of adequacy and to model a school finance system and test its adequacy in achieving the academic expectation established in a standards-based system." This goal pertains to how to assist policymakers beyond anecdotal information. She provided a timeline of various impacts on K-12 education, with the largest being the reform undertaken with the 1994 School Finance Act. Ms. Rainey walked through the various models, standards, and expectations that have come to impact Colorado's education system.



11:32 AM

Ms. Rainey said that it took time to find consensus on an adequacy study and provided the definition used by the School Finance Project as follows:
She discussed the approach taken in regard to the process for a study, as well as the decision to hire Augenblick, Palaich, and Associates and go forward with two approaches. She said that there was a need to establish a review committee that included legislators, state board members, and education organizations and stakeholders from across the state. The advisory committee established objectives: to oversee the process of the study; to create guiding principles for resource allocation; and to collect information from the public.


11:36 AM

Ms. Rainey said that the first model that the School Finance Project used was the "successful school approach," which is less labor intensive than other approaches considered. This model asks how success is currently defined, how resources are measured, and whether the approach accounts for community or student differences. She noted that at the time the report on this approach was issued, details about the provisions of the NCLB were still coming out. Those conducting the study looked for a group of school districts that met the definition of a successful school and studied the level of spending that it took for them to reach or meet the definition of a successful school. A drawback to this approach is that it is only a point in time and does not differentiate on the basis of student populations. Representative Pommer asked further questions about the methodology in a successful schools approach. Ms. Rainey further noted that larger school districts are having difficulties in meeting Adequate Yearly Progress (AYP), which would impact this analysis if it were done today.

11:41 AM

Ms. Rainey discussed the professional judgement approach that was used as the second component of the adequacy study. This approach utilized three levels of review and five subgroups reflecting school districts of different sizes. There was a recognition of differences in student populations, including at-risk, special education, and non-English speaking students. There was also recognition of the types of programs needed to accomplish academic expectations. Ms. Rainey detailed the process undertaken by the review panels and noted how the different levels of review covered different areas of concern. Additionally, she told the committee that the work on the adequacy study did not address transportation, capital construction, food services, how instruction should be delivered, or how districts or schools should be configured.


11:47 AM

The results of the adequacy study contain a variety of information. Ms. Rainey highlighted the results and said that two methods produced two different base amounts. While the successful schools approach measures a point in time, the professional judgement approach measures a goal at the end, which is 100 percent proficiency for students. Ms. Rainey explained the resulting base amounts and the factors that were considered important to add to the base. Ms. Rainey said that other factors continue to come into play, including new entrance requirements for higher education and more years of NCLB implementation. The review panels reviewed their work two years later, in 2003-04. She said that the adjustments were minimal; comprehensive adjustments were not done. For the 2004-05 analysis, an academic piece was added to the expectations based on the proficiency targets under NCLB. She explained that as school districts get closer get to 100 percent proficiency, the resources needed to move toward proficiency change. Representative Merrifield asked Ms. Rainey about the numbers presented in the initial analysis. She said the School Finance Project was looking at updated numbers based on modeling, which requires judgement in areas such as transportation and capital construction. She responded to additional questions about how school districts will be impacted as new requirements are implemented, including entrance requirements for higher education. Ms. Rainey discussed what may be required as the Colorado School Finance Project to update the analysis as new requirements impact the need for supplemental on-line services in rural school districts.


11:56 AM

 She provided additional findings of the study, including that the guiding principles are as important as the study itself; that the cost of choice needs to be addressed; that school district size in relation to the special populations it serves are important to its program offerings; and that capital construction needs and transportation should be considered in any new formula. She reviewed what the School Finance Projects feels needs to be included in the base amount:

12:02 PM

Ms. Rainey discussed the guiding principles at which the School Finance Project arrived:
Ms. Rainey described the principles as acting as a whole and as inclusive. She emphasized that the school finance system should build capacity for school districts.


12:05 PM

Ms. Rainey discussed the next steps that could be taken after an adequacy study and posed questions for the committee. How can the results be used in a new formula? What are the components that became important and relevant? How is it tied to academic expectations? In this discussion, Ms. Rainey said that the cost-of-living factor was considered a important inclusion and that a formula must account for academic expectations as those expectations grow. She also raised questions about the basis upon which a school finance system should be evaluated. Ms. Rainey stated that an evaluation must look at whether a system is equitable, adequate, accountable, adaptable and flexible, understandable, and supportive of local community values.



12:10 PM

Senator Bacon asked whether these principles can help the committee reach specific numbers. Ms. Rainey responded that the latest numbers that they have been able to work with are for FY 2002-03. She said that discussion of mill levy overrides has been a part of the study. She said that the School Finance Project does not advocate taking funding from other places to fund K-12 and that Amendment 23 funding does not meet the definition of adequacy. Senator Bacon commented further on how the committee must go forward. Senator Windels asked how similar or dissimilar the results from the two different approaches were. Ms. Rainey said that the successful school approach was a base amount at the time, but wouldn't account for what would be needed by FY 2013-14, when all students are expected to be proficient. She said the professional judgement approach allows questions about the differences in funding required to educate different populations of students.

12:17 PM

Representative Penry asked additional questions about how numbers were arrived at using a base year. Ms. Rainey said that adequacy results were broken down by size of school district. He questioned methodology that concludes that no school district currently meets a definition of adequacy. Representative Pommer discussed the interaction and concepts of equity and adequacy as they apply to different types of school districts. Ms. Rainey, a task force member, offered to provide further assistance as the committee's work progresses. Senator Windels noted that several task force members were present and thanked them for their attendance.

12:23 PM

The committee recessed.

01:36 PM

The meeting came back to order.