Eagle County Schools battles flawed funding system to get the district the money it needs

Each year, when Colorado legislators start the legislative session, one of the items on their to-do list is amending the School Finance Act and school funding formula. This year, the start of the session also brought with it talk that this could be the year that the state fully funded its notoriously underfunded education system.

“There was a lot of talk among the governor and legislators that this may be the year that K-12 was ‘fully funded;’ in other words, there would be no negative factor, or ‘budget stabilization’ factor,” said Eagle County School District Superintendent Philip Qualman.

While this talk garnered some hope and optimism in the education community, it still wouldn’t have been enough to solve all of the education funding challenges in Colorado.

“Buying down the negative factor isn’t enough. If the purported optimism was based primarily around removing the negative factor, then we would still have a problem,” Qualman said.

While per-pupil funding for the local district did increase 6% this year — with other increases made to special education and at-risk funding factors — inflation and a possible ballot measure that could stifle property tax revenue growth led lawmakers to hold off on fully funding K-12 education for another year.

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“There wasn’t much to celebrate at the end of the session,” Qualman said.

Budget stabilization factor

The budget stabilization factor, or negative factor, was introduced in 2010 as a way for Colorado lawmakers to legally cut the education funding required by Amendment 23. Amendment 23 is a measure that, among other things, requires the state to increase per-pupil school funding by at least the rate of inflation each year.

Since 2010, this factor has meant that the local school district has lost out on $82 million in funding. For the upcoming 2022-23 school year, the factor will be responsible for a lost $2.6 million in funding for the district.

“It’s a significant amount of money. It has made it difficult to be able to support and pay our staffing the compensation levels that they expect.” said Sandy Farrell, the school district’s chief operating officer, at the May 11 board meeting.

Still, while a large sum lost, eliminating the factor would still be insufficient in solving the district’s funding challenges.

“Even if this was fully funded, the state of Colorado is not adequately funded for K-12 — depending on which report you look at, we generally range anywhere from the 46th to the 48th state in lowest per pupil funding,” Farrell said.

Next year’s budget

On May 11, Farrell presented the local Board of Education with the proposed budget for the upcoming school year. During the presentation, the 2022 School Finance Act was still in the process of being finalized. However, Farrell said that the revenue and expenditure assumptions presented at the meeting were unlikely to change once the bill was finalized — which it was at the end of the legislative session on the night of May 11.

The majority — typically around 70% — of the revenue available to the district comes from the School Finance Act. This revenue is allocated on a per-pupil basis and determined via a formula that takes into account local property taxes, state-equalized specific ownership taxes and state funds.

Based on the 2022 School Finance Act, the district will receive a 6% increase in per-pupil funding — resulting in funding of $10,029.39 per pupil, a $732.25 increase from the previous year. Other revenue assumptions are based on projected enrollment and staffing as a result of the enrollment.

Part of the budget from the state includes allocations for certain categories including gifted and talented, career and technical education, English language proficiency and more. At the time of the presentation, only the special education had been released, Farrell said. This year, the state increased its funding allocation for special education, which will result in an additional $600,000 for the district, on top of allocations from the School Finance Act.

The proposed budget also included several projected increases in expenditures for the district’s general fund for the upcoming school year.

This includes salary adjustments for staff on its certified salary schedule, which would raise the base salary to $47,160 with four additional contract days. This salary increase still requires approval of the Board of Education and Eagle County Education Association membership before it is ratified.

The budget also includes a 3.5% cost of living increase, a projected 10% increase in health insurance costs and a $130,000 increase in the district’s workers compensation policy. According to Farrell, over 80% of the district’s budget is tied to staff salary and benefits.

Plus, for the upcoming school year, the district increased its contribution to the Hope Center to $250,000 annually as well as a dedicated $75,000 to have a shared school resource officer with the town of Eagle. And, the district has new funds to supply international hires — which have been increasing in the district in recent years — with relocation stipends to help with moving costs.

While these revenue and expenditure assumptions are based primarily on the general fund, two other district funds are expected to see significant changes in the upcoming school year: nutrition services and the transportation.

With nutrition services, the federal government is ending its free national lunch program, which has been in place the past two school years. As a result, the district anticipates a revenue reduction coupled with rising supply chain costs and anticipated salary increases for food service employees that will impact the overall fund. Farrell said this was normal for districts as food services funds are “not self sufficient,” adding that it hasn’t been for a while.

Additionally, the transportation fund has also seen “big fluctuations with COVID,” Farrell said, and is projecting costs for additional drivers as well as increased fuel costs.

The budget also includes forecast budgets for the next four school years, which Farrell noted are “difficult to predict because nobody really knows where that’s going to end up.”

For the upcoming school year, Farrell noted the district is going into a “$6.8 million deficient spending into our fund balance for next year,” something that was intentional and necessary.

“We need to in an effort to support our staff with their compensation packages. Times are really tough and we’re trying to do everything we can to get that out to our employees,” Farrell said.

She added that with their best projections, “going into this is somewhat of a risk, but yet I feel confident that we’ll be able to adjust our budget as needed.”

Going forward, the only way to sustain the required $10 million ending fund balance is to “increase our revenue sources, which for the most part has to come from the state, so we need to make sure that we continue lobbying and do everything we can to get those dollars up,” Farrell said.

The final budget will be presented and voted on by the school board at its first meeting in June.

Looking for bigger changes

While there was a renewed energy around addressing education challenges in Colorado during the 2022 legislative session, only time will tell whether actual change is on the horizon.

“The Colorado K-12 funding model is broken. Of the 657 pieces of legislation proposed in the 2022 Legislative Session, 109 influenced education in one way or another,” Qualman said. “That is a lot of energy spent in the wrong direction.”

This year, many members of the Eagle County School District — from board members and educators to the superintendent himself — have lobbied and advocated for state-level change on how districts are funded in Colorado.

Qualman said he met with multiple leaders from around the state, including Sen. Kerry Donovan, Cary Kennedy, the senior policy advisor for Gov. Jared Polis, and several candidates for public office. He also met with Build a Better Colorado and a coalition of “like-minded” superintendents from around the state. At these meetings, Qualman has not only “proposed major changes to how Colorado funds K-12,” but offered insight to lawmakers on bill proposals.

The reason behind this lobbying and idea sharing goes back to the size of the problem. Colorado consistently ranks in the bottom five states for per-pupil spending as well as near the bottom in the nation for teacher wage competitiveness.

For Qualman, the solution for funding challenges in the state is threefold: overturn the Tax Payer Bill of Rights; find a supplemental revenue source for K-12 that isn’t tied to property tax; include elements in bills that will promote bipartisan support, such as more schools of choice and targeted ranges to limit operational and administrative expenditures.

“The perennial choke hold on K-12 education is the Tax Payer Bill of Rights,” Qualman said. “TABOR had a laudable goal of limiting government spending, but the unintended side effects will devastate K-12 education. We fall further and further behind the rest of the nation every year in how we fund K-12 schools.”

Even still, lobbying for statewide change could take years, and change is needed now to help districts in recruiting and retaining quality educators. For that reason, Eagle County Schools has budgeted funds for next year to initiate polling on a mill levy increase to help bring necessary funding to the district.

“The best option local districts have to improve their K-12 funding situation (mill levy override, or bond questions), make the inequities that exist in the state funding model worse,” Qualman said. “The state model relies on property tax, which is inherently unfair and inequitable because there is such a huge disparity between the assessed values of property among all the districts in the state. Every mill levy override and bond that passes makes that Gordian knot more complicated to solve.”

With all the challenges present, moving forward and seeking solutions is more necessary now than ever. And when asked whether Colorado can fix these challenges, Qualman answered simply: “We have to.”