When Glenn Gustafson visits his sister in Falcon, the rows of toy-cluttered lawns remind him of the steady stream of children who enroll in District 49 schools every year.
As chief financial officer for neighboring School District 11, Gustafson says the growth in student numbers requires more per-pupil funding from the state — but the public education system is facing a perfect storm of restrictive constitutional amendments combined with ongoing funding shortages.
Gustafson said districts throughout the state still are reeling from the effects of the most recent recession. Less local revenue, along with reduced funding, could mean catastrophic cuts to public education within the next five years, he said.
‘The perfect storm’
Jennifer Okes, school finance director for the Colorado Department of Education, says many school districts throughout the state are discussing finances in crisis terms.
“It is the perfect storm of the [Taxpayer’s Bill of Rights] that limits how much revenue comes to the state,” she said. “Even in good times with more tax revenue, it’s still limited. Also, the Gallagher Amendment that was passed in 1982 predated TABOR by about a decade. It’s lowered property taxes that majorly contributed to school funding.”
The Gallagher Amendment was “designed to maintain a constant ratio between the property tax revenue that comes from residential property and from business property,” according to the advocacy group Great Education Colorado. “As a result of the Gallagher Amendment, the assessment rate for residential property has declined by more than two-thirds over the years because of Colorado’s population growth and because of increases in residential real estate values.”
Okes said the Gallagher Amendment has shifted the majority of educational spending to the state, with a small amount of federal funding.
“Back in the day, the ratio used to be about 56 percent local to 44 percent state,” she said. “Now it’s 35 percent local and 65 percent state.”
Adding insult to injury, Amendment 23 passed in 2000 and requires base per-pupil funding to increase by inflation and enrollment every year, but is limited by TABOR and Gallagher.
The negative factor
Academy School District 20 Chief Financial Officer Tom Gregory said his district began using the word “crisis” when the state introduced a negative factor upon Amendment 23’s passage six years ago.
To determine how much each district will receive under the School Finance Act, the base per-pupil funding of about $6,300 is run through a formula that considers variables including student population, local cost of living and the number of at-risk students.
“These variables are called ‘factors’ and they substantially increase average per-pupil funding received by school districts to reflect the very different costs districts experience,” according to Great Education Colorado. “The factors exist to address the increased per-pupil costs that result when, for instance, a high percentage of pupils are from at-risk populations or when the necessary costs of running a school and hiring staff are divided among a small student population in a rural district.”
Gustafson said the state theoretically could reach base funding by the 2019-2020 school year, where every district receives the same $6,300 per pupil — no matter the district’s circumstances. But that would be unconstitutional, he says.
Limiting funding to the base level would equate to a loss of $25 million for District 11 each year. District 20 would lose more than $14 million.
And it could happen in districts still struggling to overcome losses during the recession. Gustafson said state revenue dropped significantly as employment dropped.
“As a result, revenue streams to the state went down significantly,” he said, adding that District 11 has been treading water since.
“Now we can’t add back programs we’ve cut.”
Gustafson said that the expansion of Medicaid has had the most significant impact on the state’s general fund.
“That’s really squeezing the expenditure side of the ledger,” he said. “And the biggest challenge for Medicaid hasn’t been the Baby Boomers, but kids. The ratio of kids on Medicaid has increased to about one in five today.”
He added that the number of District 11 students eligible for free and reduced-cost lunches has risen by about 25 percent from 20 years ago to around 60 percent today.
Other state programs — transportation, corrections and higher education — all vie for a piece of the shrinking financial pie, he said.
“K-through-12 used to be about 50 percent of the state budget,” he said. “Now it’s down to about 43 [percent].”
And his biggest concern?
“We don’t have a way to fix it,” he said. “We continue to squeeze the state budget but, long story short, don’t know what we’ll do with K through 12. We’re perplexed. We hear from legislators they can’t solve the problem; they’re not experts; they’re term-limited.”
Many D-20 parents supported the legalization of recreational marijuana because it was touted as a revenue generator for public education, Gregory said.
“We’ve heard from parents in the community that some of those who supported [Amendment 64] did so on the basis that money would go to schools. Well, that’s not completely false,” he said.
Colorado recreational and medical marijuana dispensaries sold about $1 billion in cannabis last year. However, only recreational marijuana taxes can be used for education, and the money can only be spent on capital construction projects in rural districts. About $40 million was earmarked for those projects. All the money went to the state’s neediest schools and was used to make safety improvements.
Gustafson added one heavily weighed criterion in marijuana tax funding to districts is asset valuation.
“We score almost at the bottom of that criteria,” he said. “We’ll never see a penny. Academy [District 20] won’t. Cheyenne Mountain [School District 12] won’t. It’s all going to the San Luis Valley and the Western Slope — high-poverty, low-value areas.”
Education is key
District 11 already has begun an internal campaign to inform district employees of its looming financial doomsday and will educate the public about the problem as well, Gustafson said.
“We started with an internal audience to include staff meetings, [Parent-Teacher Association] meetings and booster clubs,” he said. “We started with them last year and hit every school. Our theory is, they are the most connected with the district. They’re ambassadors who can spread the word.”
The coming years will require not only austerity by schools, but also tough decisions by the residents of Colorado, Gregory said.
“This will take some serious rolling up of sleeves by our state legislators and confronting constitutional pieces that folks in Colorado don’t want to confront,” he said.
Creating an enterprise fund for the hospital provider fee, which expanded Medicaid services and counts against the state’s TABOR revenue limits, could make an impact, the two said. The first attempt at such a bill, however, was killed this week by the state Senate.
“We’d need several of those components,” Gregory said. “It basically comes down to priorities. What are the priorities of this state? Regardless of political affiliation, rural or urban, what are your priorities?”
Both Gregory and Gustafson said dozens of non-classroom positions have been cut from both districts since 2001, but cuts will eventually affect student programs, transportation — and teachers.
“We can eliminate paper clips and staples and unnecessary printing,” Gregory said. “That might save a few thousand dollars. There’s always a place you can reduce expenses, but not to the tune of $22 million. That’s insane.”
Gustafson added that all districts are facing the same fiscal future.
“This is not just a District 11 problem,” he said. “It’s a state problem. Harrison [School District 2] is worried. D-20 is worried. We’re all worried about the long-term nature of this.”