Colorado Legislative Council Staff

STATE and LOCAL

REVISED FISCAL NOTE

(replaces Fiscal Note dated February 20,1998)

State General Fund Expenditure Impact

Local Revenue Impact


Drafting Number:

Prime Sponsor(s):

LLS 98-136

Rep. Allen

Sen. Wells

Date:

Bill Status:

Fiscal Analyst:

March 4, 1998

Senate Education

Harry Zeid (866-4753)

 

TITLE:            CONCERNING THE FINANCING OF PUBLIC SCHOOLS, AND MAKING AN APPROPRIATION IN CONNECTION THEREWITH.



Summary of Legislation


STATE FISCAL IMPACT SUMMARY

FY 1998/99

FY 1999/2000

State Revenues

General Fund

Other Fund



 



 

State Expenditures

General Fund*

Other Fund


$109,940,715


 

FTE Position Change

None

None

Local Government ImpactRevenue to school districts will increase. The bond cap in some school districts will also increase.

             *Unlike the original fiscal note, the General Fund expenditures in the table show the total appropriation increase required in FY 1998-99, including enrollment increases, current law, and House Bill 98-1234.


            The reengrossed bill amends the Public School Finance Act of 1994 by providing a $110 increase in the statewide base per pupil funding amount. The $110, which is an increase of three percent, would increase the statewide base to $3,777. The reengrossed bill also addresses a limitation in current law that prohibits changes in district total program greater than the district's TABOR spending limit percentage. Under the reengrossed bill, a district could receive money above the cap -- up to the full amount of its school finance allocation -- upon certification to the Department of Education that the money can be accepted within the district's TABOR spending limit. The reengrossed bill makes technical changes to the calculation of district cost-of-living factors and creates a hold harmless for districts in which the cost of living decreased.


            With regard to the debt cap for increasing enrollment districts, the reengrossed bill allows the use of the current higher cap of 25 percent of assessed value through July 1, 2005 (rather than July 1, 2000) and reduces the enrollment growth needed to qualify for the higher cap from 3 percent to 2.5 percent. It prohibits schools, school districts, and administrative units that receive school finance moneys from appointing a surrogate parent to make decisions regarding special education services for a child whose parent is unknown, unavailable, or fails to respond after reasonable efforts have been made to contact the parent. Finally, the reengrossed bill removes a provision in current law that permits the Department of Education to pay for assessments out of the school finance line item in the long bill. A current law provision that allows the department to reduce school district funding if the amount appropriated in the long bill is not enough to fund both the school finance act and assessments is also eliminated. Beginning with FY 1998-99, the appropriation for assessments would be contained in a separate line item in the long bill. The bill is assessed as having state and school district fiscal impact. The bill would become effective upon signature of the Governor.



 State Expenditures


            Current law. Current law drives a total increase in state aid of $26.2 million in FY 1998-99. Of this amount, state expenditures for school finance will increase $19.4 million to fund an estimated enrollment increase of 12,300 students. This increase in state expenditures is attributable to current law because it is assumed that this increase would occur regardless of House Bill 98-1234. Current law also requires that a new cost-of-living study be implemented in FY 1998-99. The estimated increase in state aid as a result of this study is $5.9 million. State aid is estimated to increase an additional $0.3 million to pay for an increase in minimum state aid from $55.99 per pupil to $91.73. Finally, under current law, FY 1998-99 will be the third year of the Colorado student assessment program. According to the fiscal note on House Bill 97-1337, the cost for the program in FY 1998-99 is $2,450,000, an increase of $650,000 over the FY 1997-98 amount of $1,800,000. An appropriation is included in the reengrossed bill for the increased costs of the program.


            House Bill 98-1234. The reengrossed bill provides an inflation increase in per pupil funding of three percent. The increase in per pupil funding translates into an increase in state expenditures of $91.1 million in FY 1998-99. The reengrossed bill also allows school districts to bypass the current law cap on changes in total program by certifying the amount of money they can receive, up to their school finance entitlement, within their TABOR spending limit. The certification provision increases state expenditures by $2.6 million FY 1998-99. The reengrossed bill requires the General Assembly to pay for assessments in a separate line item in the long bill, and it appropriates $1.5 million in additional General Fund moneys for House Bill 98-1267. In total, the FY 1998-99 increase in state expenditures attributable to the bill is $95.2 million.


            Cash funds. School finance is funded from a combination of General Fund and cash fund moneys. The cash fund revenues come from school lands and federal mineral lease revenues. Based on current projections, $61.4 million of cash funds, including $9.7 million in reserves, is available to be appropriated for FY 1998-99. The $61.4 million for FY 1998-99 is an increase of $11.4 million over the actual FY 1997-98 appropriation of $50 million.


            Total increase. The total increase in state expenditures, including both current law and House Bill 98-1234, is $121,350,688 in FY 1998-99. Assuming that the appropriation for cash funds is increased $11,409,973, the General Fund appropriation increase is $109,940,715 in FY 1998-99.



School District Impact


            In FY 1998-99, the reengrossed version of House Bill 98-1234 will provide school districts with $94.5 million more in school finance revenue than they otherwise would have received under current law. The difference between this number and the amount identified as the state aid increase under House Bill 98-1234 relates to changes in the local share component of total program (property taxes). The three percent increase in the statewide base will also increase the amounts school districts are required to budget for capital reserve/risk management and instructional supplies and materials. Under current law, the amount that must be budgeted or transferred for these purposes automatically increases annually by the increase in the statewide base. Therefore, the capital reserve/risk management transfer increases from $216 to $222 per pupil, and the amount budgeted for instructional supplies and materials increases from $134 to $138 per pupil. The reduction in the required increase in pupils to qualify for the higher debt cap will also increase the number of districts eligible for the higher debt cap.


            The changes to the funding of the assessment program contained in the reengrossed bill means that there is no risk of school district funding being reduced to pay for assessments.



Spending Authority


            To implement the provisions of the bill requiring a separate line item in the long bill for the Colorado student assessment program, the bill appropriates $3,967,206 to the Department of Education. Of that amount, $1,800,000 comes from a reduction in the General fund appropriation for Public School Finance, Total Program. The net increase in General Fund appropriations for the assessment program is $2,167,206. The $2,167,206 will be reduced by $1,517,206 if House Bill 98-1267 is not enacted.


            The fiscal note implies that the FY 1998-99 General Fund appropriation for Public School Finance, Total Program, be increased $107,773,509 over the FY 1997-98 appropriation. The total General Fund appropriation increase required by the bill, including the Colorado student assessment Program, is $109,940,715.



Departments Contacted


            Legislative Council


FACTS AND ASSUMPTIONS


Facts

 

          The Denver-Boulder inflation rate for 1997 is 3.3 percent. (In previous fiscal notes, we had assumed that the inflation rate would be 3.4 percent. The reduction in the inflation rate affects how the cost of the 3 percent inflation increase in the bill is split between inflation and the TABOR certification amendment. The use of the official 3.3 percent Denver-Boulder inflation rate increases the amount attributable to the certification amendment and reduces the cost of the 3 percent inflation increase.)



Assumptions


 

          That the FY 1998-99 funded pupil count is 669,835.8 and the FY 1999-00 funded pupil count is 682,199.5.

 

          That the local share in FY 1998-99 is $1,412.3 million, and the local share in FY 1999-00 is $1,481.3 million.

 

          That the final appropriation for FY 1997-98 is the appropriation contained in House Bill 97-1341, and that cash funds in FY 1998-99 increase by $11,409,039 over the FY 1997-98 level.

 

          That the General Assembly sets minimum state aid at $91.73 in a footnote in the long bill.

 

          That the General Assembly intends to increase the appropriation for school finance by the increase in the cost of the assessment program under current law.