Final
STAFF SUMMARY OF MEETING

SCHOOL FINANCE SYSTEM
Date:07/21/2005
ATTENDANCE
Time:09:11 AM to 04:20 PM
Anderson
X
Bacon
X
Place:HCR 0112
Benefield
X
King
X
This Meeting was called to order by
Penry
X
Senator Windels
Pommer
X
Spence
E
This Report was prepared by
Tupa
X
Cathy Eslinger
Merrifield
X
Windels
X
X = Present, E = Excused, A = Absent, * = Present after roll call
Bills Addressed: Action Taken:
Call to Order and Introductions
Overview of School Finance
Integrating Universal Proficiency
School Finance Litigation and Guidance
Committee Discussion		-
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09:16 AM -- Call to Order

The meeting was called to order by the chair, Senator Windels. Senator Windels asked committee members and task forces member to introduce themselves. Committee members present were: Senators Anderson, Bacon, and Tupa, and Representatives Benefield King, Merrifield, Penry, and Pommer. Task force members present were: Mr. Augenblick, Mr. Freeman, Mr. Gustafson, Ms. Herrmann, Mr. Jagel, Ms. Lopez, Ms. Middleton, Mr. Murphy, Ms. Newell, Ms. Rainey, Mr. Salazar, Ms. Urschel, Mr. Van Sant, and Mr. Weigel. Senator Windels thanked members of the committee and task force for their service. She indicated that the committee needs to consider issues of equity and to study the shift from universal access to universal proficiency. She said that the committee will look at the various mandates that impact Colorado's school funding, such as school choice provisions and on-line schools. The needs present in the schools and in the learning environment will also be discussed.

Senator Windels walked through the day's agenda, indicating that Mr. Augenblick would start the agenda by providing a national perspective on school finance issues. She said that during the course of the meeting, stakeholder groups will have an opportunity to discuss areas that they think are appropriate for committee consideration. Senator Windels again expressed her appreciation for the members' attendance at the meeting. She said that during the course of the committee's work, she expects that the task force will be able to provide expertise and technical guidance.


09:21 AM -- Overview of School Finance

John Augenblick, Augenblick, Palaich, and Associates, Inc., a task force member, began his presentation on school finance by providing information about his professional background and his experience in evaluating the equity and adequacy of school finance systems in many states. His PowerPoint presentation was distributed as a hand-out (Attachment B). Mr. Augenblick indicated that he has worked both with plaintiffs and defendants in school finance litigation. He also was involved in the work done developing recommendations for the Public School Finance Act of 1994 in Colorado.


09:26 AM

Mr. Augenblick said he wanted to emphasize that other states are looking at many of the same issues as Colorado. He described his thoughts about what school finance is and said that in his experience, questions are philosophical, technical, or political. He said that in most states, the greatest attention is given to the political or technical issues, and that less may be given to the philosophical issues involved in school finance. He described a particular law passed in Missouri in the 1970s regarding geographic cost differences as an illustration of the political factors involved in school finance. His discussion of the history of school finance began with points regarding the organization of grammar schools in the early days of the country. He indicated that some school districts across the country may be fiscally dependent or they may be independent, with their own taxing authority. Starting with Massachusetts in 1852, states began requiring free, universal education. He reminded the committee that the U.S. Constitution does not mention education. Responsibility for educating students has rested with the states, which have given specific responsibilities to school districts.


9:36 AM

In contrast to the over 100,000 school districts in existence in 1900, today there are about 14,000 school districts. According to Mr. Augenblick, states began to recognize around 1900 that there was a wide variation in the spending and wealth in their communities. As departments of education were organized, states started to set standards for schools and states started to provide funding in the form of flat grants. States began to move to different ways of funding, using a foundation formula, which is still used by states today. This is very different than a flat grant. Then, there began to be decisions that funding needed to be equalized.


09:40 AM

Mr. Augenblick noted that in the 1960s, taxpayers and parents began suing over equity of their state systems of school finance. The federal government began providing money for special needs, and states began to modify their systems to address the fact that some school districts may have special circumstances, such as special needs or low-income students. In the 1970s, states began dealing with tax and spending limitations, beginning in California. There was a feeling that there needed to be some control over property taxes, and the California situation spread. Now, most states have some type of tax or spending limitations that affect school finance.


09:45 AM

In the modern era, Kentucky was the first state to look at standards-based reform in response to a school finance lawsuit. Other states began implementing similar reforms. Standards-based reform changed the role of the state and set expectations for student performance and accountability. The "No Child Left Behind Act" in 2001 strengthened this movement. States were saying that they wanted to equalize, but that they had expectations and would be holding school districts accountable. Now, lawsuits are being filed on the basis of adequacy: Is there enough funding to adequately fund the expectations and mandates set forth by the state and federal government?



09:49 AM

Mr. Augenblick said that in the first cases in the 1960s, school districts were saying that they didn't have the capacity to raise the money to serve special needs students. Originally, lawsuits were filed on the basis of federal constitutional provisions. By the 1970s, plaintiffs started developing new theories concerning violations based in state constitutional provisions for education. Discussions of the variations seen in school district funding could be seen as violations of provisions such as Colorado's "thorough and uniform" language. Policymakers could not decide whether this litigation meant that the same amount needed to be spent on every child or whether property taxes could be used in school finance funding. Mr. Augenblick noted that states may have to be careful about how they use property taxes to fund schools. Mr. Augenblick noted that in the recent string of litigation, plaintiffs have prevailed in some cases, but in other cases, the states have won lawsuits. He said that currently, most school finance systems attempt to be sensitive to the needs of the school districts and the differing capacities of school districts.

09:55 AM

Litigation has moved from simple student equity to more complex taxpayer and student equity effort, and finally to the question of adequacy. Adequacy cases have been successful in challenging whether school districts have enough revenue to provide required "inputs" or to achieve expected outcomes. Mr. Augenblick responded to questions about litigation in other states, and whether courts have explicitly required extra funding. He responded that in most states, the courts have specified levels of funding that have to be provided. New Jersey is a state that illustrates examples of how litigation has evolved. And Kansas is a current example of where the courts have said that the state must provide a certain level of additional funding. Senator Tupa commented on what Colorado would face if the state were ordered to pay a specific, higher level of education funding as a "cure." Senator Tupa asked about states that have appealed court orders, and Senator Anderson responded that once a state supreme court has ruled on a school finance system, there is not another avenue for appeal.


10:04 AM

Mr. Augenblick responded to further questions about how adequacy cases are evolving. He said that states are trying to respond to issues of adequacy and in particular, are investigating the costs of serving students with special needs, such as special education or "at-risk" students. For example, how much extra does it cost to adequately educate these students? How much do states need to provide? States are not uniform in the ways they are reforming. States are also identifying other cost factors, such as district size, enrollment changes, or regional cost differences. States are asking how much these factors matter in funding and in meeting requirements for adequate services. Representative Pommer raised questions about the relationship between standards that have been passed and the adequacy litigation. He asked whether Mr. Augenblick thought courts would look at limitations regarding how much mandates can impact the cost to states.


10:12 AM

Mr. Augenblick said states have become interested in how one can measure a school district's fiscal capacity. He also noted that in measuring the wealth of individual school districts, some states include measures of income in their measures of fiscal capacity. Concern about funding charter schools, transportation costs, and capital construction expenditures are also critical issues in states. States are also thinking about how to identify "at-risk" students, specifically as it relates to measures of performance, socioeconomic background, and program eligibility. Other issues currently facing states include the costs of complying with the "No Child Left Behind Act," the costs of virtual schools, and the costs of providing before and after-school programs, which may be important in reaching standards. Additionally, some states are looking at the importance of supporting early childhood education, and several states are studying new revenue sources for school funding, such as gambling or sales taxes.

10:15 AM

Mr. Augenblick concluded his presentation with several final points, including the fact that Colorado is not alone in facing school funding issues and litigation. He said that there is a lot of work to do in terms of studying the issues that are being raised, and reminded the members that some guidance is available from other states. He opined that Colorado should take some time to evaluate where we are and what is and what is not working. He said that it may make sense to progress from the philosophical stage to the technical issues, and later to the political context.


10:17 AM

Senator Tupa shared that when he moved to Colorado from Texas, he had heard that Colorado was progressive in regard to its school finance system. He asked whether only small changes to Colorado's system might be needed, or whether Colorado needs to be looking more comprehensively, relative to what is happening in other states. Mr. Augenblick said that in 1994, policymakers thought that Colorado was putting a pretty good system in place, but that tax and spending limitations and standards-based reform are changing the context in which Colorado's school finance system operates. Problems with the system may exist now, that really did not exist in 1994. Representative King asked how other states are looking at at-risk students. Mr. Augenblick said that Ohio, Maryland, and Wyoming, in particular, have looked at those issues. In Ohio and Wyoming, he said that much has been based on analysis the court has required, though Maryland studied the issue on its own initiative. The relative cost of serving these students, states are finding, runs between 50-100 percent more than a student with no special needs. This is often due to the cost of extra programs, before and after school, the smaller class sizes required, and materials that cost additional money.

10:23 AM

The committee took a recess.


10:42 AM

The committee came back to order.


10:43 AM

Deb Godshall, Assistant Director for Research, Legislative Council Staff, introduced herself and said that she had provided technical assistance in the development of Colorado's 1988 and 1994 school finance acts. Her PowerPoint presentation was distributed as a hand-out (Attachment C). Ms. Godshall noted that she would provide background on the evolution of school finance in Colorado and began her presentation by discussing the importance of school finance.

As noted in her presentation, basic facts of importance include: school finance consumes 41 percent of state taxes and about 31 percent of property taxes statewide; state funding accounts for 72 percent of money received by districts, on average; and last year, the school finance act totaled $4.43 billion in state and local funds. Ms. Godshall reviewed the three school finance acts in the modern, or post-1970 era, and said that each act was part of an evolutionary process in response to changing factors at the time. Over time, more data has become available to analyze factors impacting school funding. The first act in 1973, was a bridge of fiscal equity issues. There were property tax issues raised at the time, including a ballot measure that would have severely restricted the property tax revenue available for schools. An interim committee conducted a two-year study of state and local finance. The resulting act included an equalization formula, guaranteed the revenue-raising capability of a mill, increased funding for lower spending districts at a higher rate, and capped increases in per pupil funding without voter approval. She noted that the 1973 act endured for a relatively long period of time and was upheld by the courts in 1982.


10:51 AM

By 1988, another lawsuit, the Hafer lawsuit, had been filed and an interim committee was established to respond and study the viability of the 1973 Act. The 1988 Act was passed, with the provisions that categorized districts for funding and that treated similar districts the same, regardless of property wealth. The Act was based on classroom units, and a uniform mill levy was introduced. One of the issues that arose was how entitlement funding was calculated.

10:55 AM

The 1988 Act was utilized for the shortest period of time. Questions were raised regarding the validity of assigning school districts to the different categories. A school district could go through a process to change categories, and bills were drafted to help school districts move categories, Ms. Godshall said. There was pressure on state aid during this time due to enrollment increases, with increases in aid going primarily to fund enrollment, rather than to increase per pupil funding. Ms. Godshall stated that another factor during this time was redistricting and reapportionment. The state was buying databases, and data about the "setting categories" became be more available. The legislature passed a bill asking the Legislative Council Staff to look at the setting categories using census data. The study found that the setting categories could not be validated. Subsequently, a new interim committee was created to look at school finance.

11:00 AM

Ms. Godshall reviewed the interim committee recommendations made in 1994 and how they shaped today's law. The premise of the act is that all school districts start with the same base per pupil funding amount, but that then there would be recognition of cost differentials and differences in economies of scale. There was broader recognition, Ms. Godshall said, of costs associated with at-risk pupils. There also was a focus on costs that cannot be controlled by school districts. She reviewed the foundation, starting with base funding, set by the General Assembly each year. This is the number that Amendment 23 regulates. It is currently $4,718 per pupil, and accounts for 77 percent of the money distributed through the school finance act. The biggest adjustment made to the base is the cost of living factor. It is competitive compensation and accommodates community costs. This factor uses a consistent market basket of goods and services. The cost of living adjustment currently ranges from 0.9 percent to 64 percent and recognizes differences in fixed costs. It accounts for 15 percent of the money distributed through the act. It is not necessarily meant to look at how the cost of living changes annually, but rather how schools districts rank relative to each other. It has changed over time and is meant to address the salary component of school district expenditures, so it is only applied to a portion of the base.


11:06 AM

Ms. Godshall continued her discussion and responded to questions from Representative King about the fluctuations in funding the cost-of-living factor. She said that the issue probably concerns changes in methodology in calculating the factor. In recent years, legislative changes have resulted in less funding devoted to the cost-of-living factor. Ms. Godshall indicated that it also has been changed to make it more logical. Representative Pommer asked further questions about having the factor based on the "lowest" district. Ms. Godshall referred to a map indicating how the factor impacts rural and urban school districts, with urban and wealthy districts having the highest factor.


11:12 AM

The size factor is another component of the current act. She said that this factor looks at fixed costs and provoked concern from school districts in the mid-enrollment range. Small districts got increasing amounts of money, as did some of the largest school districts. This "J curve," as it was known, no longer exists. The current adjustment ranges from almost 3 percent to 136 percent. It accounts for 3.6 percent of funding under the school finance act. The next adjustment discussed was the at-risk factor, which attempts to measure a student's potential to perform poorly or to drop out of school. Census data was the basis for developing an at-risk index including measures of children living in poverty, education attainment of adults, and proficiency in English. There was no consistent data available on achievement. It was decided that children who qualify for free lunch would be used as a proxy. This factor provides increased funding based on concentrations of at-risk students. Denver receives an additional bump in funding. Small school districts are not eligible to receive concentration funding.


11:20 AM

Ms. Godshall discussed the special provisions for minimum funding and on-line pupils. The manner in which Colorado pupils are counted was also discussed. Pupils are counted on October 1 within the budget year. The pupil count raises funding issues for declining enrollment districts, and school districts can use four-year averaging in counting pupils. Statewide averages, she said, will always be driven by where enrollment exists: the I-25 corridor. Colorado does not have a long history of directing how school districts spend money; however, earmarking provisions exist for instructional supplies, capital reserve and risk management funds, at-risk funding, and preschool funding.


11:25 AM

There are provisions specifying how Colorado school districts can raise additional money. Voter approval of mill levy overrides is required, and the amount is limited by state statute. Ms. Godshall then provided several wrap-up facts:

11:27 AM

Ms. Godshall responded to questions regarding bonded debt and state restrictions on debt limits. There are some school districts where debt limits severely limit the ability of school districts to respond to capital needs. For operating purposes, school districts use mill levy overrides, and more specifically, may request a 20 percent override. Representative Pommer and Representative King asked questions about the impact of assessed values in school districts and the variations across school districts.
Ms. Godshall was asked about the 20 percent bonded debt limit and provisions in the Taxpayer's Bill of Rights (TABOR). She indicated that over time it has increased from 5 to 20 percent. She said that the debt limit of 6 percent of actual value recognizes the impact of declining rates of total residential assessed values due to the Gallagher Amendment.
11:35 AM -- Integrating Universal Proficiency with a School Finance System: Stakeholder Discussion

Jane Urschel, Associate Executive Director, Colorado Association of School Boards (CASB), indicated that CASB has established a working committee to follow the progress of the school finance interim committee. Ms. Urschel provided background on CASB and said every school district except one is represented by CASB. Ms. Urschel said that school districts have been impacted by "a perfect storm" and that school finance is the "beachhead" where three of Colorado's constitutional provisions collide: the Gallagher Amendment, the Taxpayer's Bill of Rights (TABOR), and Amendment 23. In discussing the impact of these provisions, Ms. Urschel said that CASB does not believe that a new school finance system needs to be built from the ground up, but rather believes that the impacts of the constitutional amendments and the pressure points need to be addressed. Ms. Urschel said that in the 1970s and 1980s, the school finance factors centered largely on issues of equity. In 1994, the new school finance act created new pressure points.


11:40 AM

As she continued her remarks, Ms. Urschel discussed whether, in studying school finance, there are three revolutions that have taken place. The first revolution could be viewed as one of quantity, resulting in universal education. The second may be seen as one of equality, resulting in provisions for a thorough and uniform system. The third and current revolution, she noted, may be seen as one of quality. Ms. Urschel continued to discuss history and said that discussions in 1993 centered on the at-risk factor. The Legislative Council Staff studied proxies and decided that free lunch students would be the most appropriate proxy and that this at-risk factor could be supported by available data. She commented on the fact that so much more data is available, and noted that, with the increased data availability, CASB wonders whether a combination of proxies for at-risk measures could be considered. She said that enrollment growth exerts another pressure point. Some school districts do not have adequate bonding capacity. Declining enrollment districts have special needs in regard to funding. Ms. Urschel said that while prior school finance acts have not looked at a quality and standards-based education, the state has continued to raise expectations and standards. She said that CASB believes that Colorado should continue to fund a system of public schools and determine how much is enough to fund a quality, standards-based education for every student and from where the funding will come. Another factor is what price citizens are willing to pay. She asked Mr. Freeman to discuss perspectives from a small school district.



11:44 AM

Mike Freeman, representing the board of education for Ault-Highland School District RE-9, stated that one of the most troublesome issues in small school districts is special education costs. These districts may have just a few severely disadvantaged students whose costs can take a very high percent of the school district's budget.
Mr. Freeman noted that the assessed valuation in small school districts limits their bonding capacity. Reporting requirements under NCLB can be burdensome for very small school districts with very limited administrative staff. Another factor for these school districts concerns transportation costs, which school districts may cover large areas of the state. He said it is difficult for small districts to be efficient in regard to the cost per student in transportation, food services, and maintenance costs. Mr. Freeman said that the state inflation factor of .1 percent does not reflect true inflation he sees across the state. He said this factor makes it difficult to keep teachers and staff.


11:48 AM

Jim Weigel, representing the board of education for Adams County District #12, provided background on his growing school district and discussed the factors he sees as crucial. He said he has categorized concerns he has heard from constituents and from other school board members. In describing his school district, he indicated that his school district has a very high mill levy relative to other districts. He discussed his personal background and interest in school finance issues as a school board member. He commented on the sufficiency of funds for services that impact the students who are behind where they should be in regard to proficiency and state standards. He shared the impact of students, such as special education and at-risk students, who are more expensive to fund and to bring up to proficiency. He said that in dealing with taxpayers and communicating with them, he has heard concerns and interest in how a school district spends its funds. Taxpayers are expecting school districts to do more with less funding. Mr. Weigel said that people tend to respond more positively to discussions of the value of the educational product. He said that some constituents feel that the value of investment in education is very important, and that measures of CSAP results and student achievement also can assist in discussing the value of education. His constituents have expressed concern about limits on the ability to pay for education. He said that those closest to the education system appear to be the most willing to pay more to support K-12 education. The greatest persuasion comes through discussion of the value of education.


11:51 AM

Mr. Weigel noted that he has heard suggestions for additional development fees. He also noted that tax rates and wealth differences in school districts have a great impact. High growth and declining enrollment school districts incur unique costs. Mr. Freeman responded to a question from Representative King about the impact of single special education student on a very small school district. He said that these costs may be as high as $40,000 or $50,000. Ms. Urschel mentioned the impact on Thompson School District of an autistic student who may cost $200,000 per year. Senator Bacon further discussed the implications of these costs for a single school district. Representative Pommer raised questions about the state inflation rate and how it is not keeping pace through Amendment 23 provisions. In responding, Mr. Freeman said he did not know what a more reasonable measure would be, but that school districts are having to provide 3 or 4 percent salary increases regardless. Representative Pommer said the difference between the CPI and an inflation index based on additional costs that are not recognized in this factor.


11:59 AM

Mr. David DuVall, Executive Director, Colorado Education Association (CEA), provided background on the organization and its representation. He said that school districts need a well-considered and consistent level of support to meet growing challenges. He said that public education remains a state responsibility and underscored that it should not matter where a student is born or lives in the state. Each child should be afforded the same opportunity for a thorough and uniform quality education. In addition, it should not matter where someone lives, they should be expected to contribute a certain level of support for public education. He said that the General Assembly must provide the resources to support its expectations for standards. Local control is a notion that may no longer exist, according to Mr. DuVall, falling victim to globalization, standards-based reform, and several state constitutional measures. He recommended a new partnership between the state and local school districts, taking a fresh look at their responsibilities and their relationship. He said that many of the problems the state is facing is not so much a problem of the school finance system, but rather of Colorado's tax system. He said that is appears that schools have historically been funded through slices of a total pie. During the standards movement, expectations are raised, but the slices of funding received by school district are not discussed in conjunction with the new programs required so that every student can be brought up to the standards. He said to run schools like a business, you must provide funding for the services required to bring students up to the standards.


12:06 PM

Mr. DuVall discussed the patchwork nature of Colorado's tax system and the fact that Colorado is a relatively wealthy state. He said Colorado's low-tax status comes at a cost when you look at funding for K-12 and higher education systems. Mr. DuVall provided some per pupil spending comparisons with the states that surround Colorado. He said that the current litigation facing Colorado should come as no surprise. He discussed teacher salaries and the impact on the ability of school districts to recruit quality teachers. He said that recent trends have a long-term detrimental effect on the state and the quality of education across the state. He said that CEA supports a comprehensive look at the state and local revenue structure and funding mechanisms to ensure a thorough and uniform system. He further stated that CEA supports a state-funded pre-kindergarten, full-day kindergarten programs for every school, and guaranteed teacher-pupil ratios, especially in the primary grades. Additionally, CEA supports a minimum state teacher salary of $40,000, as well as state health insurance for school employees.


12:12 PM

Representative King asked questions about funding students who are at-risk academically, rather than just on an socioeconomic basis and about the Denver proposal, ProComp. Mr. DuVall said that the Denver Classroom Teachers' Association supports current provisions in ProComp, which incentives for staffing hard-to-teach schools. In addition, Mr. DuVall said that the committee should look at populations in the schools and fund programs that address its unique, special populations He said that CEA encourages looking at the programs necessary in the school districts to meet the special needs of its students. Ms. Urschel said that the committee may look at a quality, standards-based education, relative to funding. Under this approach, learning should be fixed, and time should be variable. She raised the issue of whether a new academic measure of at-risk help would be beneficial.


12:15 PM

Karen Middleton, representing the State Board of Education, asked about looking at education as a P-16 system, the entire spectrum of education and not just the area for which each stakeholder has responsibility. Mr. DuVall commented further on CEA's push for a minimum teacher salary, and said that there will be a need of a new generation of quality teachers. The state must determine a strategy to allow the teaching profession to be a competitive profession and to allow Colorado, as a state, to be competitive in attracting teachers. The commented on a P-16 system in light of the Colorado Commission on Higher Education (CCHE) having entrance requirements for its four-year institutions and stressed that Colorado must ensure that all Colorado students have access to the coursework necessary to meet higher education requirements. Ms. Urschel reminded the members of the instructional authority of school districts, but said that does not mean that partnerships do not need formed. She said that a state-of-an-art school finance act might look at P-16, and at networking opportunities between K-12 teachers and higher education.


12:23 PM

The committee recessed.


12:52 PM

The meeting was called back to order.


12:53 PM

Scott Murphy, representing the Colorado Association of School Executives (CASE), discussed the historical goals of equity in Colorado's school finance act, and the inherent demographic differences in school districts. He distributed a hand-out (Attachment D). Mr. Murphy noted that adequacy came into play with the at-risk factor but has not come to full realization. Mr. Murphy presented certain facts in his presentation:

Mr. Murphy said that Amendment 23 cannot meet the needs facing Colorado school districts, and that CASE would like to see fundamental change in the school finance system. He said that higher expectations have brought higher cost pressures. The costs associated with lower teacher-student ratios, early childhood education, and literacy materials, among others, must be taken into account, according to Mr. Murphy. He reiterated that the full costs of providing educational services to special education students can be very high. He said that CASE would also like a school finance system to recognize the costs incurred by school districts that support charter schools by off-setting the fixed cost obligations that the school districts and its taxpayers must absorb when these systems are put in place.


01:04 PM

Mr. Murphy said that CASE endorses a school finance system that provides sufficient resources, provides equity, allows for flexibility, creates predictability, and results in clarity. He said that any changes must be fact-supported and discussed in accordance with goals established for the committee's work.


01:06 PM

Vicki Newell, representing the Colorado Parent-Teacher-Association, gave a presentation from the perspective of parents. She provided information on her background and the constituencies she represents. Ms. Newell discussed the concerns of parents whose children are entering schools that lack sufficient resources and lack access to up-to-date technology. She discussed parental involvement in the schools, and specifically parent-supported fund-raising efforts for local schools. She showed specific examples of the types of products used in parent fund-raising efforts. She said that some fund-raising efforts have gone to buy books. She discussed the fact that budget shortfalls in one of Douglas County's newest schools required fund-raising efforts to buy books. Laptops and computer software, teacher aides, field trips, and school supplies are other resources that may be funded by parent fund-raising efforts.



01:17 PM

Ms. Newell discussed the status of the Public School Fund, as well as the impact of TABOR,Amendment 23, and the Colorado Student Assessment Program (CSAP). Ms. Newell continued her presentation by discussing the socio-economic circumstances from which some students enter school. She said that she does not want merely what is adequate for schools. Ms. Newell advocates protecting Amendment 23 and looking at a P-16 educational system. In addition, she said that special education promises must be kept, and that universal preschool and kindergarten should be available. Ms. Newell said that the state must take a look at the state constitution and the premises contained in it.


01:23 PM

Senator Windels asked further questions about local fund-raising efforts, and Ms. Newell responded that much of the money raised is now going toward necessities, not extras for school districts. Ms. Newell responded to questions about whether traditionally, the PTA only supported extras and was not expected to do fund-raising for basic needs for schools.


01:31 PM

Paula Stephenson, representing the Colorado Rural Schools Caucus and Dr. Dan Patterson, Superintendent of Fort Morgan School District, provided the next presentations. Ms. Stephenson said that she would like to discuss the plight of Colorado's rural school districts while noting that there is not a standard definition of "rural." She said that different subsets of rural school districts have similar concerns. She indicated that rural school districts feel that the school finance formula is difficult to understand, and that the cost-of-living factor does not take into account the travel and mobility necessitated in rural areas. She said that offering competitive salaries and attracting quality teachers are critical issues for their school districts. She said rural school districts still refer to the size factor as a "J" curve, with mid-sized districts penalized. Ms. Stephenson said that the school districts do not really feel a full impact of increased funding under Amendment 23, and that many rural school districts are losing federal Title I funding. She said that Gilpin School District has basically lost its Title I funding and discussed the tremendous impact of this loss. In addition, she said funding is not keeping pace with increasing state standards and federal mandates.


01:39 PM

Mr. Patterson, representing the Fort Morgan School District, the largest school district in the Rural School Caucus, relayed his experience in New Mexico as that state was undergoing changes in its school finance system. He believes that funding should go where the need is and that there needs to be consistency from year to year. He said that local school boards should make the funding decisions for the districts. Categorical funding should become part of the school finance formula and not subject to annual change. He said that you cannot educate all students with the same amount of funding, and that one severely disabled student can break a small school district. Transportation equity must be addressed, according to Mr. Patterson. He said that there are many models to consider, and that any formula should fund districts objectively, while providing for school district autonomy, without earmarking. He also feels that school districts should have latitude to spend funds according to local priorities.


01:43 PM

Representative King asked Ms. Stephenson about the impact of Title I funding on rural schools. She said that new definitions of poverty during the last census has changed the allocation of fund and adversely impacted some districts. Vody Herrmann, School Finance Unit, Colorado Department of Education (CDE), confirmed that there is a national redistribution of funding under Title I based on census data. Ms. Newell asked Ms. Stephenson to address the grant-writing capacity of rural schools. Ms. Stephenson said that it varies, and that sometimes grant applications are simply written by someone who has taken an interest in the grant, and that sometimes several districts go together to hire a grant writer. Representative King asked how many rural school districts are declining school districts. Ms. Stephenson said that not every rural school district has a declining enrollment, but that northwest Colorado and the eastern plains have declining enrollment school districts.


01:49 PM

Representative Pommer asked about the potential impact of proposals for requirements to spend 65 percent of its revenues on classroom expenditures. Mr. Patterson said that local school districts often spend a higher percentage than 65 percentage on classroom expenditures.


01:51 PM

Ray Kilmer, representing the Boards of Cooperative Educational Services (BOCES) Association as its executive director, began his presentation by introducing Don Strathman who will be assuming the position this summer. Mr. Kilmer said that for the last four years, BOCES have received only 1 percent of Read-to-Achieve funds distributed in the state. However, he noted that state grant-writing support has resulted in increased grant funding. He said that the 17 BOCES were originally recognized in 1965 and that they used to receive a standard amount for purposes of organizing. In 1996, the emphasis changed to the implementation of standards and assessments. Since 2003, direct state funding for BOCES has ceased. He said that many of the points made earlier by CASB and CASE are supported by the BOCES. He described BOCES as either single-purpose or more broad-based. They are funded from sources available to school districts, not sources directly available to the BOCES. Mr. Kilmer said that he would like the committee to consider multiple levels of support, depending on the purpose and scope of the BOCES. He said that the association supports reinstating and updating the provisions for BOCES. He said that special education, professional development, and data management are three major areas that BOCES can support and that could be funded directly. BOCES could move into support for English language learners and implementation of NCLB if supported appropriately.

02:02 PM

Mr. Kilmer said that the BOCES support a review of special education funding under the Exceptional Children's Education Act and the equity and adequacy of those dollars. He said that BOCES also support multi-year enrollment averaging and other considerations for school districts experiencing mobility, school choice, and other enrollment fluctuations.


02:05 PM

Senator Windels asked Mr. Kilmer about supplemental on-line education, who said that supplemental on-line education provisions are very important to BOCES school districts. He indicated that excess costs and oversight of instruction are factors in providing supplemental on-line services. Mr. Kilmer also indicated that BOCES are providing alternative certification avenues and professional development for teacher aides. The minimum requirements to be a special education unit should be changed and raised, according to Mr. Kilmer in response to a question from Representative King. Mr. Kilmer said that this potential provision would provide more money for instruction and less for administration.


02:08 PM

Nina Lopez, representing the Colorado League of Charter Schools, discussed the organization she represents. Approximately 36,000 students attend charter schools, according to Ms. Lopez. Ms. Lopez said that while charter schools all have site-based governance, no two charter schools are alike. She discussed the variance in charter schools. She said that the issues that have been raised throughout the day impact charter schools. She said that some of factors impacting charter schools can enhance the discussion, but do not need to drive the discussion of school finance. Ms. Lopez said that she does not have a current set of objectives and goals from the League. She said that the challenges in the current system include facilities funding for charter schools and the percentage of their budgets that charter schools must spend on facilities. The other issue is access to state and federal categorical funds that flow to school districts but that do not follow a student. Transportation issues are major issues for many charter schools, according to Ms. Lopez. Finally, proper accounting for the administrative expenses withheld by school districts can be an issue. She said at times, a charter school almost has to operate as a school district. She recommended reviewing the concept of money following a student and stated that another pressure point for choice in school districts is how resources should be allocated in a school district. Ms. Lopez noted that in regard to universal proficiency, she hopes that the committee can at least agree on what the goals and objectives should be.

02:18 PM

Ms. Lopez said that when she thinks of universal proficiency, there may be many different ideas around the table. She said that positive points to build upon may be unique student identifiers and the concept of value-added assessments. She said that the use of data to identify need can be a tool.


02:21 PM

Senator Anderson brought two major questions before the stakeholders: 1) what is would be your reaction if the state were to say it was no longer going to participate in the No Child Left Behind Act? and 2) if special education were fully funded, would the current school finance system be as onerous? Mr. Weigel said that he would support withdrawing from NCLB and that full funding of special education would relieve a lot of pressure on school districts. He said that there are advantages to complying with NCLB and that having accountability measures in place is positive. However, he said that biggest problem is that the sanctions are ineffective, and that turning failing schools into charter schools is simply a governance change. Ms. Urschel said that CASB does not have an official position on NCLB compliance, but that CASB does feel that it is a federal intrusion. She also noted, however, that it has forced the state and school districts to confront certain issues. She said that fully funding special education would change the character of school finance.


02:26 PM

Ms. Urschel continued by stating that the origination of NCLB took place without advocacy, but that advocacy may be used now to bring changes. Mr. Van Sant said that NCLB is an important issue in his district. He said that special education funding is also critical. Mr. Murphy said that he feels walking away from NCLB would be difficult. He also said that full special education support would be very helpful. In response to the same questions, Mr. DuVall said that as attractive as it sounds to walk away from NCLB, the CEA supports fixing and funding it, rather than withdrawing entirely. Mr. DuVall said that the total impact of opting out would not be worth the message that it would send. He said that fully funding special education would be a huge step forward. He said that if the federal government appropriately funded special education, the question regarding NCLB compliance and its impact would be different.


02:31 PM

Ms. Newell said that withdrawing from any unfunded mandated would be a good idea, and that she feels insurance companies need to step forward in the realm of special education. Mr. Kilmer said that he likes the option that Colorado school districts now have to opt out, but forgoing funding would be difficult, unless the state took a new role in funding hard-to-educate students. Mr. Freeman said that NCLB is resulting in school districts neglecting their high achieving students. Ms. Stephenson said the Rural Schools Caucus would support opting out of the No Child Left Behind. She said that fully funding special education would have a huge impact on rural school districts.
Mr. Patterson said that parts of NCLB are beneficial, but that he would support opting out if it did not impact their current levels of federal funding.
He said fully funding special education would have a big impact, as long as funding was not merely shifted from other areas.


02:35 PM

Ms. Middleton said that the State Board of Education has been discussing increased advocacy and requests for waivers under NCLB. She said that 75 percent of the CDE is federally funded, and that she feels the state should try advocacy and waiver requests before considering opting out of the federal law. Representative Merrifield indicated that he would support more efforts to opt out of NCLB. Representative Pommer asked questions regarding where school districts would target additional funding. Mr. Weigel said that in his district, the focus for increased funding may be different for different schools, such as early education or English language learners. Other major needs are math support at the secondary school level. Ms. Rainey, Colorado School Finance Project, said that the work that her organization has done has indicates that school districts have special categories of students and underfunded programs they would like to address. Ms. Newell said that she said a study on best practices would be useful, as would a survey of what has been cut from school budgets in the last decade . Mr. Patterson mentioned smaller class size, full day kindergarten, extending the school year, and increasing school teacher salaries and benefits as key issues. Mr. Murphy discussed different needs in school districts, such as salary and benefits in rural school districts.


02:42 PM

Mr. Gustafson, Colorado Springs School District 11, said that intervention programs for at-risk students are crucial for urban school districts. Representative Pommer said that if the committee does end up seeking increased funding, politically, requests for more funding for schools must be specific and include expected measurable outcomes.


02:50 PM

The committee recessed.
03:02 PM - The Colorado Supreme Court and School Finance: What Guidance has the Court Provided?

Christy Chase, Office of Legislative Legal Services, began her presentation with a discussion of the constitutional provisions impacting school finance, including Section 2 of Article IX, requiring the establishment and maintenance of a thorough and uniform system, and Section 15 of Article IX, providing that school district boards of education have control of instruction in their schools. The Colorado Supreme Court ruled on school finance beginning in Lujan v. Colorado State Board of Education, when it reversed a district court decision finding that the 1973 Act violated federal equal protection provisions and found the 1973 Act constitutional. While the Lujan decision described provisions for a thorough and uniform system as a mandate, the court also found that education is not a fundamental right and that wealth is not a suspect class. It said that the standard for judicial analysis will be a "rational basis" rather than "strict scrutiny." Lujan does not provide much guidance about what comprises a "thorough and uniform system of free public schools." Senator Tupa raised questions as to whether the courts will revisit these issues given the different context and circumstances today. In responding, Ms. Chase noted that the case currently facing Colorado is not an equal protection case.


03:16 PM

Ms. Chase continued with a discussion of the authority of school districts in regard to curriculum and instruction. The current environment includes state standards. However, Ms. Chase indicated that when a school finance law is challenged, a presumption exists favoring the General Assembly's determination of how to provide the system, "as long as the system bears a rational relationship to a legitimate state purpose." If the court determines that the current system is constitutional, it is unlikely to determine whether a better system could be devised. Ms. Chase continued with a review of the Hafer lawsuit in 1987, which asserted that the 1973 Act did not satisfy the educational standard required by the "thorough and uniform" provision and that the Act violated equal protection and due process requirements, as well as the uniformity of taxation clause in the state constitution. The equal protection claim was dismissed, but the court allowed the claim that the funding scheme violated the "thorough and uniform requirement" and that the taxpayers' claim to go forward. The lawsuit was voluntarily dismissed after the enactment of the Public School Finance Act of 1988.


03:22 PM


Ms. Chase reviewed the claims in the Giardino lawsuit, which was a class action suit filed in 1998. The suit stated that the state had failed to fulfill its responsibility under the "thorough and uniform" provision as it pertain to sufficient funding for capital improvements. She specified the court's rulings in that case, and Ms. Chase described the settlement of the case, which resulted in the passage of Senate Bill 00-181.



03:25 PM

Ms. Chase reviewed the provision of the Haley lawsuit filed in 2002, which was the first lawsuit filed after the passage of Amendment 23. The motion to dismiss was granted based on two arguments: there was a failure to exhaust mandatory administrative remedies available under the federal Individuals with Disabilities Education Act (IDEA); and Amendment 23 sets forth the constitutionally mandated level of state contribution to special education. Ms. Chase reviewed several other cases that may impact school finance policy. In Owens v. Colorado Congress of Parents, the court held that the Colorado Opportunity Contract Pilot Program violated constitutional provisions for local control. Ms. Chase said that the Owens ruling appears to reaffirm critical holdings of Lujan, including that education is not a fundamental right and that wealth is not a suspect class. In this case, the court also held that control over instruction is linked to control over locally-raised funds.
Ms. Chase said that there were certain key findings to keep in mind in reviewing the current school finance system:

03:33 PM

Senator Bacon asked about the impact of Amendment 23 requirements on categorical funding. Ms. Chase said that total funding for categorical funding must be increased under Amendment 23. She said that the Haley ruling held that it matters that Amendment 23 sets the floor for the state contribution to special education funding, but that it does not necessarily offer additional guidance. In response to questions raised by Representative King regarding the authority and status of the General Assembly in regard to a school finance system, Ms. Chase discussed the fact that the General Assembly has not been named as a defendant in school finance lawsuits.




03:38 PM -- Committee Discussion

Senator Windels began the discussion by noting that subsequent meetings would not be joint meetings, and that the task force would be free to work on its own.
She also noted the deadlines for requesting bill drafts for interim legislation. She announced that the committee's meeting on Tuesday, September 27 would be the deadline for requesting bill drafts. The committee will review and approve any interim legislation at its October 18 meeting.

03:43 PM

Senator Windels reviewed a tentative schedule for upcoming meetings and asked for feedback from committee and task force members. Ms. Middleton said she felt that it may be helpful to receive information on trends in federal funding. In response to Senator Windels' question, Ms. Urschel said that there may be a need to look at changing demographics in school districts, particularly any available reports on the status of parents and children. She commented that reports from the Colorado Children's Campaign may be helpful. Senator Tupa said that an update and the context of the current lawsuit would be helpful to him. He also requested information on the impact on school finance if Referenda C and D do not pass in November. Ms. Urschel commented further on the outlook if Referenda C and D do not pass. Senator Anderson requested current data on funding for preschool and kindergarten students and tracking of students to assess programs. Ms. Rainey commented on information that may be helpful. Ms. Newell requested information on K-12 funding sources. Senator Anderson discussed K-12 funding sources and the impact of school finance on the General Fund.


03:52 PM

Senator Windels discussed August 2nd agenda items. Senator Bacon said that he does not want the committee to have a narrow vision and to discuss what a first-rate education would look like and to look progressively at school finance issues. Senator Windels said that she hope to receive information from the task force in regard to these issues. Representative King expressed interest in issues surrounding the movement toward universal proficiency and the impact on the dropout rate. He raised questions as to what the fiscal impact on the state would be if the dropout rate changed significantly.


04:01 PM

Senator Windels reviewed a charge to the task force (Attachment G). She walked through the task force charge, discussing each item. She said decisions about how the task force will conduct its work will be left up to the task force members.


04:07 PM

Ms. Urschel raised issues concerning task force support, data, and research. Senator Windels said that she hoped that the task force can be drivers, as experts, and can prioritize items in the task force charge. Senator Windels expressed her appreciation to the task force. She discussed options for interim legislation or for potential legislation that would be carried by individual members. Ms. Rainey requested that information made available to the committee be made available to the task force. Senator Windels requested that the task force select a chairman as a point of contact.


04:17 PM

The task force discussed the chairmanship of the task force. Mr. Murphy was elected chairman of the task force, and Ms. Rainey was elected the vice-chair.
The task force discussed meeting dates. The task force set an organizational meeting for July 28 and tentatively discussed meeting on committee meeting dates. The meeting concluded with the task force's planning discussion.