Colorado Legislative Council Staff

STATE and LOCAL

REVISED FISCAL IMPACT

(replaces fiscal impact dated February 16, 1999)

TITLE:            CONCERNING THE FINANCING OF PUBLIC SCHOOLS.

Summary of Legislation

            School Finance Act funding. As amended by the Senate Education Committee, the bill amends the School Finance Act by increasing per pupil funding by 2.5 percent. The increase in per pupil funding is accomplished by increasing the statewide base per pupil funding amount by $95. The base would increase from $3,783 in the current budget year to $3,878 in FY 1999-00. The bill also establishes a minimum per pupil funding level of $4,675, which would increase each year by the same percentage increase in the statewide base per pupil funding amount. The number of preschool slots authorized under the Colorado Preschool Program, but funded under the School Finance Act, is increased by 200 for FY 1999-00 and thereafter.

            Categorical programs. The bill includes the following changes in categorical programs:

            •    English Language Proficiency Act (ELPA): the distribution formula for the ELPA program is modified so that any increase in the appropriation is distributed to students with the most limited English skills (A/B students). The General Fund appropriation is increased $500,000;

            •    Gifted and Talented/Children with Disabilities: The requirement that appropriations for gifted and talented programs be in a separate line item in the Long Bill is repealed. The FY 1999-00 appropriation for gifted and talented programs is transferred to the special education line;

            •    Small Attendance Centers: The General Fund appropriation is increased $28,961, which fully funds the distribution formula.

            Instructional supplies and materials. The bill allows school districts to use up to 10 percent of the amount required to be budgeted for instructional supplies and materials for staff development that is directly related to instruction.

            Capital reserve. The bill allows school districts to reduce or eliminate the required transfer for capital reserve/risk management when the balance of the capital reserve fund is at least equal to five times the required annual transfer.

            School district audits and budgets. The bill also modifies the requirement that all school districts include a calculation of TABOR fiscal year spending in their annual audits. Under the bill, any school district that has received voter approval to retain revenues in excess of the TABOR spending limit must continue to include a TABOR fiscal year spending calculation for one fiscal year following the election. Thereafter, the district is not required to include the TABOR calculation in its audit. Districts that have not "de-bruced" (voter approval to retain revenues in excess of their spending limits) must continue to include their TABOR spending limit calculation in their annual audit. The bill also makes two changes relating to school district budgets. First, it repeals the requirement that school districts file a copy of their budget with the Department of Education. Second, it changes the deadline for making changes to budgets from September 30 to October 15.

State Expenditures

            Current law. Under current law, the General Fund appropriation for school finance for FY 1999-00 would increase to accommodate enrollment growth, the change in the size factor, and an anticipated reduction in cash funds. After accounting for the projected increase in the local share (property and specific ownership tax revenues), the increase in the General Fund appropriation for current law is estimated to be $34,138,078. This figure assumes that the reduction in the current year's appropriation is taken from the General Fund line.

            House Bill 99-1209. The $95 increase in the statewide base per pupil funding amount increases state General Fund expenditures for school finance by $82,255,430 in FY 1999-00. The inclusion of the minimum per pupil funding amount of $4,675 increases General Fund expenditures $308,776, and the increase of 200 preschool slots increases expenditures $499,500. These three school finance changes increase General Fund expenditures by $83,063,706. House Bill 99-1209 also changes General Fund appropriations for categorical programs. These changes are indicated in Table 1. Table 1 assumes that sum of the General Fund and cash fund appropriations in the Long Bill for FY 1999-00 is the same as for FY 1998-99.

Table 1: House Bill 99-1209 General Fund Appropriations

for Categorical Programs

            The total increase in General Fund expenditures for education in House Bill 99-1209 is $83,092,667 (the sum of the amounts for inflation, the increase in minimum per pupil funding, and the Colorado Preschool Program and categorical programs).

            Total education increase. The total General Fund increase in education funding is a combination of expenditures required under current law and those required by House Bill 99-1209. The sum of these two expenditure items results in a General Fund increase for education of $117,230,745.

School District Impact

             The provisions of House Bill 99-1209 as amended by the Senate Education Committee would increase total funding to school districts by $84,193,348, of which $83,092,667 would be from state aid and $1,100,681 would be from local sources. The bill would also reduce the number of school districts that are required by law to include their TABOR spending limit calculation in their annual audit. According to the Department of Education, 39 of the 176 school districts have not "de-bruced." Therefore, after one year, the audit requirement would be eliminated for 137 school districts.

            House Bill 99-1209 would also affect the minimum amount of the capital reserve/risk management and instructional supplies and materials transfers for school districts. Under current law, these transfers are required to increase by the same percentage as the increase in the statewide base per pupil funding amount. The increase of 2.5 percent in the statewide base contained in House Bill 99-1209 would increase the minimum transfer to capital reserve/risk management from $223 per pupil in FY 1998-99 to $229 per pupil in FY 1999-00. The minimum transfer for instructional supplies and materials would increase from $138 per pupil in FY 1998-99 to $141 per pupil in FY 1999-00.

            The bill allows certain school districts to reduce or eliminate the minimum transfer for capital reserve/risk management. We do not know the number of school districts this provision could affect in FY 1999-00. In FY 1996-97, the most recent year for which data is available, 16 districts, representing one percent of the pupil count statewide, had a balance in the capital reserve fund that exceeded five years of the minimum capital reserve/risk management transfer. Districts in this position in FY 1999-00 would be able to use the minimum amount required to be transferred for other purposes.

State Appropriations

            The fiscal note implies that the General Fund appropriation for the Department of Education, Public School Finance, Total Program, would increase by $83,092,667 in FY 1999-00. As noted above, the bill also contains appropriations clauses with a net total General Fund increase of $28,561 for categorical programs.

Departments Contacted

            Legislative Council Staff        Education