SB 213: Colorados Commitment Building a World-Class Education System

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Because of the incredible feedback we received from stakeholders, we made several changes to the bill draft over the last few weeks. This document outlines the largest, most substantive changes to the bill draft, although this list is not exhaustive. As always, feel free to contact us if you have any clarifying questions. Thank you for all of your help and guidance! Damion LeeNatali, dleenatali@mikejohnston.org I. School Finance Structures a. Legislative Declaration Statutory Citation(s) 22-54.5-102 Bill Page #(s) 11-16 Will Gohl, wgohl@mikejohnston.org

Because the current General Assembly cannot bind a future General Assembly to future appropriations, we have placed the intended appropriations in the legislative declaration. Specifically, we intend to appropriate: (1) $100 million to the Innovation Fund; (2) $80 million of Special Education Tier B funding; (3) $6 million for a statewide program to provide additional opportunities for highly effective educators; (4) $5 million for Gifted and Talented categorical funding; (5) $5 million for implementation of the new Average Daily Membership data system and financial transparency system; and (6) $1.3 million for Board of Cooperative Education Services regional services (7) $1 million for mill levy election support b. Cost Study & ROI Statutory Citation(s) 22-54.5-105 Bill Page #(s) 29-34

As evidenced by the Lobato trial court decision, Colorados current school finance system has no demonstrable rational relationship between the outcomes students are expected to achieve and the funding the state provides. To create a rational school finance system, we propose a two-pronged approach: First, the General Assembly will commission and review a cost study to determine the funding shortfalls across the entire K-12 education system. Importantly, the cost study will be conducted every four years

in conjunction with our second prong a return on investment analysis. The return on investment analysis will analyze the extent to which increased funding investments produced the intended results. Together, these two analyses will create a continuous feedback loop to examine existing funding shortfalls and the efficacy of existing investments. Over time, the aim is to phase out ineffective investments, funnel them toward areas where there are funding shortfalls, and continue to work toward the goal of attaining an adequate education system. II. Student Count Bill Page #(s) 110-114

Statutory Citation(s) 22-54.5-405

Two primary changes have been made to the count structure from the previous draft. The first recognizes that new and growing charter schools will experience growth in enrollment that places them at a disadvantage under a count structure that uses prior years membership numbers as static for budgeting purposes. Accordingly, in the first and second years of operation for district charters and CSIs, funding is based on the projected membership for the first half of the first year of operation. For charters that are building out one grade level at a time, funding can be recalculated mid-year to recognize this growth in enrollment, with the state paying any increase in a charters funding as a result of this mid-year adjustment. Second, for the purpose of counting at-risk students, students must only be identified as qualifying for free or reduced lunch one time in a school year for them to maintain their at-risk identification throughout the school year. This is intended to reduce the burden on districts if they continually had to re-verify a students free or reduced lunch status. III. Base & Weights a. Size Factor Smoothing Statutory Citation(s) 22-54.5-201(3)(c) Bill Page #(s) 36-37

The size factor serves an incredibly important purpose in helping small and rural schools achieve economies of scale. Under our current bill draft, the size factor is no longer available for districts larger than 4,023 students. In doing so, we inadvertently created a cliff for any district that grows from 4,023 to 4,024 students. To smooth out this cliff, we tapered the size factor from 1.0297 to 1.0 for districts between 4,023 students and 4,300 students. b. Base & Weight Multiplication Statutory Citation(s) 22-54.5-201(3)(b) & (c) Bill Page #(s) 35

Under current law, weights are multiplied by the base after the base has been multiplied by the size factor. Because of the order of multiplication, the size factor has the effect of creating different types of weighting than the weighting received by districts that do not benefit from the size factor. To create a uniform system of weights across the state, we have changed the order of multiplication so that all weights are multiplied by base, regardless of whether a district receives a size factor. IV. State Share Formula a. 25-Mill Cap Statutory Citation(s) 22-54.5-203(3)(b)(I) Bill Page #(s) 49

Under the first draft of the state share formula, we retained the 27-mill cap from the mill levy stabilization of 2007. In the introduced version of the bill, this cap will be 25 mills, meaning that any district above 25 mills will not have to increase their mill levies. Any district that is currently above 25 mills will not be permitted to drop their mill levies. V. Additional State Supports a. Teacher & Leader Investment Statutory Citation(s) 22-54.5-301(1)(b) Bill Page #(s) 76

Formerly known as the State Education Investment, the Teacher & Leader Investment amount has been indexed to the economy to allow for growth. In the first year, TLI will be $600. Every year thereafter, the TLI will comprise 50% of the revenues from the new tax increase. As such, the TLI will increase over time as tax receipts increase, although TLI could also go flat or decrease in the event of a recession. b. Hold Harmless Districts Statutory Citation(s) 22-54.5-302 Bill Page #(s) 77

In the previous draft, any district that could potentially see a decrease in funding would be held harmless to their amount of 14-15 total program. Under the current draft, any district that could potentially receive less state funding would be held positive, meaning that they would receive additional funding above their 14-15 total program. VI. Mill Levy Overrides Bill Page #(s) 50 65-66

Statutory Citation(s) 22-54.5-203 22-54.5-208

The prior draft placed no limit on the newly created override for cost of living expenses. Feedback indicated this lack of a cap might be exploited, resulting in significant funding inequity between school districts in which these override dollars could be obtained and districts in which such an override would be difficult or impossible to acquire. Accordingly, the introduced bill limits the dollar amount that can be raised through the cost of living override to the portion of a districts total program generated by a districts cost of living factor in the current finance formula, prior to application of the negative factor, for the 14-15 budget year. Note that the cost of living override still does not apply to the cap on general operating mill levy overrides. In addition, for a very small number of districts whose current total program mill levy must be reduced under the proposed legislation so that the amount levied does not exceed total program, the reduced levy amount is transferred over to the cost of living override, allowing the district to continue to assess the excess mills through the override for cost of living expenses. In a previous draft, excess mills had been transferred over as general operating mills and counted toward the 25% cap. VII. Charter School Override Provisions Bill Page #(s) 42-43 60-68

Statutory Citation(s) 22-54.5-202 22-54.5-205

Two measures have been created in the introduced bill to attempt to address the inequity in funding that can exist between district charter schools and CSIs due to unequal access mill levy override dollars. In the case of CSIs, this inequity stems from CSIs having no property tax base on which to levy an override. This results in a considerable discrepancy between CSI and district per pupil funding amounts when overrides are taken into account. The first measure in the bill creates a mill levy equalization factor for CSIs that is applied in calculating CSIs total program funding. The factor increases per pupil funding in a CSI by an amount equal to the statewide average per pupil funding generated by mill levy overrides. In many cases, district charters do receive all or part of a proportional share of their districts override dollars, but in many cases, district students are funded at a higher override amount than their district charter counterparts. There is presently no requirement that a district share mill levy overrides, current or future, with its charter schools. The introduced bill makes it a necessary condition of retaining exclusive chartering authority that a school district share future mill levy overrides with district charter schools on a proportional, pro rata basis. In the event that a district chooses not to share overrides proportionally, the state board is authorized to revoke the districts exclusive authority. This stipulation is limited, in that it does not apply to district mill levies raised for a specific program that a charter school does not offer. For example, a district assessing an override for early child education would not lose its exclusive chartering authority if it refused to share these dollars with a charter school that does not offer early child education.

VIII.

District Allocation Bill Page #(s) 130

Statutory Citation(s) 22-54.5-410

In recognition of established and effective student-based allocation and site-based budgeting practicing in school districts, the introduced bill contains a new provision that enables the state board to waive the requirement that a district allocate the state portion of at-risk and ELL dollars to the schools where these students attend and give principals of the schools the option to exercise autonomy over these dollars.