K-12 public schools in Colorado are primarily funded through a combination of local property taxes and state revenues. Historically, local property taxes have made up the majority of funding. However, since property taxes have decreased and will continue to do so based on the impact of the constitutional Gallagher Amendment (see TABOR/Gallagher FAQs as well as the Mill Levy Stabilization FAQ), the state has been required to fill in the amount that property taxes used to cover. During the post 9/11 economic downturn, state revenues fell dramatically and the state contributed the bare minimum legally required by Amendment 23 (Colorado spends $1,397 less per pupil than the national average.). Until 2011, the amount of funding Colorado’s public schools receive is based on the formula: inflation + 1%. The intention of this formula is to allow K-12 schools to keep up with price increases (inflation) while adding the 1% to slowly bring the funding level up toward the amount we spent in 1989 (inflation-adjusted) and toward the national average. This modest formula was an integral piece of Amendment 23, approved by Colorado voters in 2000.

Annual State Funding Increases: 2005-06: 1.1% | 2006-07: 3.1% | 2007-08: 4.6% | 2008-09: 3.2%

The Consumer Price Index upon which Amendment 23 is based does not adequately take into account some of the items that are most important to school districts such as: energy costs for gasoline or electricity, pensions and health care insurance—which have experienced double-digit inflation for the last few years. Just like it is more expensive to heat our homes or pay for family health insurance, schools have to deal with these skyrocketing costs, while receiving low, single-digit increases in funding (Even these modest increases are now in jeopardy).

How do schools cope? Since they must provide transportation for kids, heat the buildings, and provide benefits to their employees, most school districts are forced to make cuts that affect the classroom: cutting programs and course offerings, increasing class sizes, deferring text book purchases, letting teachers and/or paraprofessionals go, and freezing their pay. To hear first-hand how schools are coping, explore Great Ed’s Interactive School Stories Map.

School districts can raise additional revenues through local bond (capital) and mill levy (operations) elections up until a specified level, but the economic vitality of many communities cannot support money raised through local bonds and mills. On the other end of the spectrum, wealthier school districts bump up against maximum spending caps that limit the local ability to support schools—caps that were designed to prevent massive inequities between low-income and affluent districts.

Additional funding for public schools comes from private fundraising, primarily at schools in higher income communities – functioning as an additional “tax” on these families and further heightening equity concerns. Such fundraising efforts are increasingly being outstripped by funding cuts at the state and district levels.

The State Education Fund was created by Amendment 23 in 2001 to help schools buy textbooks, reduce class sizes and retain critical staff, and to ensure that the State would be able to keep up with the mandatory Amendment 23 per pupil increases in later years. A small percentage of Colorado’s income tax (.33%) is deposited into the State Education Fund. However, the State Education Fund was raided in the post 9/11 budget crunch in order to support general operating expenses (see Amendment 23 FAQs).

Why do districts face budget cuts even though K-12 funding has been taking an increasing portion of the state budget?

As noted above, total state funding of K-12 funding will actually decrease in 2010-11. However, in past years, schools were facing budget cuts even though state K-12 funding was increasing and was taking an ever-increasing portion of the overall state budget. Here’s why:

• More students in the State. Some of the increase in state funding comes from increases in the student population. In 2008-09, an additional 15,804 children are attending Colorado schools than in 2007-08. While an increase in students results in more state dollars to a district, it also brings more costs.
• Fewer students in some districts. Much of the growth in the student population in Colorado is centered in a few districts. Many other districts—rural, urban and suburban alike—are experiencing declines in student enrollment. With each less student, the district loses in excess of $6,000, but the district’s costs don’t decline by that much. For example, a loss of five students will cost a district well over $30,000—the cost of a district teacher. That district may have to cut a teacher slot, even though the remaining kids still need that teacher just as much as they did the previous year.
• Backfilling falling local property tax revenues. Colorado schools are funded primarily by a combination of state funds and local property taxes. Because of the interplay of the TABOR and Gallagher constitutional amendments and the School Finance Act until 2007 (see related FAQs), the local share of funding has been falling steadily for about 25 years. In fact, for most of the last two decades, the local share of school finance declined automatically in two ways: mill levies were cut (until mill levy stabilization was passed in 2007) and the assessment rate (the percent of property value that is subject to property taxes) has decreased most years. As a result, each year, tens of millions of state dollars went toward replacing the support once provided by local property taxes, rather than increasing total school funding. Put another way, the state spent tens of millions more each year—not for improved schools, but for property tax relief. As a result, the relative share of local and state contributions to per pupil funding has been shifting dramatically over the past 25 years.
• As noted above, per pupil increases do not keep up with the costs incurred by districts. So, even though state expenditures are increasing, district costs (especially health care, transportation and energy) are increasing faster.

Both. The systemic defunding of schools over the past two decades has eroded both local and state support. Ultimately, our students won’t get the quality education and opportunities they need to succeed until we fix Colorado’s broken funding system at the state level. But until then, every community (and school) has to do what it can to protect students from the impact of deeper cuts.

Colorado currently funds kindergarten students at 57% of per pupil funding. Until 2008, Colorado’s School Finance Act was based on an assumption that children would attend kindergarten only for half days; kindergarten students were funded at 50% of per pupil funding to reflect the shortened day. With more and more research indicating that full-day kindergarten is critical to students’ early education and long-term academic success, the state legislature in 2008 decided to increase the percentage of per pupil funding for kindergarten gradually over time until it reached 100%. Unfortunately, shortly after beginning these funding increases, the Great Recession hit and the resulting state budget crisis have left the kindergarten funding increases stalled at 57% of full student funding. Most districts provide full-day kindergarten nonetheless, mostly through a combination of tuition on a sliding-scale basis and money moved from within the existing budget.