Funding FAQs

Does more money mean better education?

Yes. Why is that?

Research consistently shows that well-targeted investments in education result in lasting benefits for students. For instance:

  • A study published in 2015 showed that a 10% increase in school funding for low-income students resulted in a 9.5% increase in their earnings as adults.

Providing our kids with the best education possible requires more than increasing money for schools. Increased funding is necessary for making meaningful improvements in our education system—but alone, it is not sufficient.

There is broad agreement that increased individual attention by skilled, well-prepared, and experienced teachers is key to academic success. And, of course, education is about more than academics. We need our schools to provide children with a well-rounded education, which means relevant vocational education, arts, civics, and physical education. Finally, children deserve to attend—at a minimum—facilities that are free of health and safety hazards, that are not overcrowded or detrimentally outdated and that provide access to the science and computer technology that is at the core of the economy our children will enter.

In Colorado, where school districts have endured years of budget cuts, achieving these goals requires a significant increase in funding.

Will fixing our school funding crisis require action at the ballot?

Yes. 

After almost three decades of tax cuts and TABOR, Colorado’s state budget simply is no longer large enough to fund public schools, colleges, and universities adequately, while making appropriate investments in other parts of the budget: health care, public health, transportation, and other critical state services. 

Because TABOR requires voter approval before any tax increase can be implemented, there can be no solution to our budget crisis without a vote of the people. 

Great Education Colorado has been leading the charge to pass a comprehensive funding initiative. In 2018, as part of  the Great Schools, Thriving Communities coalition, Great Ed introduced Amendment 73, which would have raised funding for schools through a tax on the wealthy. Although Amendment 73 was defeated, it came closer to passing than any previous school funding revenue initiative and reinvigorated a statewide conversation about achieving a lasting solution to the funding crisis.

In 2020, in partnership with Fair Tax Colorado, Great Ed helped write and collect signatures for Initiative 271 -- an even more comprehensive funding measure. Unfortunately, difficulties with safely organizing and signature gathering because of the COVID-19 pandemic made it impossible to place 271 on the ballot. 

Despite these setbacks, there is ample reason to believe a future effort will be successful. Two separate polls conducted in 2020 reveal a majority of ALL Coloradans - Democrats, Republicans, and unaffiliated voters - support a ballot initiative to increase education funding by taxing the ultra-wealthy. 

We realize that a solution will require agreement among a diversity of stakeholders across the state. Great Ed will continue to facilitate discussions between state leaders, advocacy groups, foundations, and other interested parties about how to raise revenues and what initiatives should be put before Colorado voters. 

Legislators often say that their hands are tied. What can they do?

Legislators have a number of tools at their disposal. Of course, as it has for the last 30 years, the legislature has the authority to refer a fiscal measure to the voters, as it did with Proposition CC (removing Colorado’s revenue cap) in 2019 and Amendment B (reforming the Gallagher Amendment) in 2020.

Additionally, the Supreme Court has made clear that it is also within the General Assembly’s authority to make “tax policy changes” such as closing tax loopholes and ending tax credits, as long as those changes don’t result in revenue exceeding Colorado’s TABOR limit. As much as $1 billion is available to the legislature under this authority.

In addition, the legislature has some tools available to help reverse the inequitable erosion of local property tax support for schools that has occurred over the past two decades.

With all that said, the General Assembly’s options come back to: be creative and curious; make the effort to learn about the history and intricacies of Colorado’s revenue challenges; ask questions and listen; and don’t give up just because the task is difficult, especially if it’s the right thing to do.

How are public schools funded in Colorado?

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, but after years of automatic, deep and inequitable cuts in property taxes, the bulk of funding comes from the state.  Tragically, because of strict revenue and spending limits in our constitution (TABOR), the funding the state provides has fallen billions and billions of dollars further behind while student enrollment and inflation increase.

You can learn more about the nuts and bolts of public education funding through our School Finance 101 presentation.

 

 

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 textbook purchases, letting teachers and/or paraprofessionals go, and freezing their pay.

How did Colorado education funding fall so far below the national average in the first place?

The falling red line on this graph documents how Colorado’s per pupil funding compared to the national average from 1972-2007. In the 70s and early 80s, Colorado invested more per student than the national average.

K-12 per pupil funding: Colorado vs National Average

In 1982, we passed the Gallagher Amendment, which started eroding the local property tax base by continually reducing the assessment rate (the percent of the value of a home that is taxed). From 1982-1992, school districts were able to stabilize local revenues by floating mill rates up.

In 1992, voters passed TABOR, which took away the ability of districts to float their mill rates without a vote of the people and limited the state’s ability to backfill the hole left by declining property tax rates. As a result, per pupil funding didn’t even keep up with inflation during the 90s.

In 2000, Colorado voters passed Amendment 23 to reverse K-12 cuts of the 1990s. As the graph indicates, per pupil spending in 2000 was already nearly $700 per pupil below the national average.

Unfortunately, Amendment 23 became a ceiling and not the protective floor it was originally intended to be. In addition, its measure of inflation is the Consumer Price Index (CPI), which does not reflect the kinds of things that school districts must pay for, like health care, heating, cooling and fuel costs. Add to that the Great Recession and the COVID-19 downturn, and Colorado’s decline has continued for almost 40 years!

In one bright spot, in 2020, the voters of Colorado passed Amendment B, which stopped further erosion in local funding of schools by preventing any further reduction in the Residential Assessment Rate (in effect repealing the Gallagher Amendment).

What is TABOR?

“TABOR” is the so-called Taxpayer Bill of Rights, passed in 1992. TABOR prohibits any tax increase without a vote of the people. In addition, TABOR places strict limits on how much revenue the state can keep and how much it can spend. TABOR limits are the strictest revenue and spending limits in the nation. Any revenue collected in excess of TABOR’s revenue limits must be refunded to the taxpayers. 

Our friends at the Colorado Fiscal Institute provided this two-minute primer on the four major provisions of TABOR:

 

 

TABOR was popular because it forced legislators to come to the people when they wanted to raise taxes. However, most voters were not aware of the strangling effect TABOR would have on basic government services. Those detrimental effects were felt in K-12 funding, when TABOR’s limits prevented the state from providing per pupil increases that could even keep up with inflation during the 1990s. As a response, Amendment 23 was passed by the voters in 2000, in order to make up some of the ground lost during those years.

The post-9/11 recession of 2001-2003 intensified the need to address the restrictions of TABOR. This economic downturn required deep cuts to already skeletal state services. Even worse, TABOR’s so-called “ratchet effect,”—which locked in TABOR’s revenue limits at their lowest point—prevented the state from restoring cut services when the economy improved. In response to this crisis, a bipartisan coalition referred Referendum C—basically a five-year time out from the most harmful provisions of TABOR—to the ballot and the voters of Colorado approved it in 2005. After five years, however, those strict revenue limits were reinstated during what is now known as the Great Recession.

Around the same time, in response to revenue drops caused by the Great Recession, the legislature reinterpreted Amendment 23 to create the Budget Stabilization (BS) Factor.

In 2019, the General Assembly attempted again to limit the negative impact of TABOR’s revenue limits by referring Proposition CC to the ballot. Prop CC would have allowed the state to retain revenue above the spending limit for education and transportation. Had the measure passed, we’d have one less obstacle to overcome in finally securing adequate, sustainable education funding. 

What is the Gallagher Amendment?

The Gallagher Amendment, passed in 1982, was designed to maintain a constant ratio between the property tax revenue that comes from residential property and from business property. To simplify a set of complex formulas, the effect of Gallagher was to reduce the residential assessment rate (the percent of property value that is subject to taxation) whenever statewide total residential property values increased faster than business property values. 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. The net effect has been a marked decline in revenues collected from property tax, which prior to the passage of Gallagher, provided the majority of school funding.  (For more detailed information about the Gallagher Amendment, see our School Finance 101 presentation.)

Acting Together, the Gallagher and TABOR Amendments make it impossible for the combination of state and local revenues to adequately fund schools. As assessment rates drop (like they did often over the past 28 years), causing districts’ revenue to plummet, the state is required to shoulder the remaining financial burden. But because TABOR’s spending cap fixes the amount spent per year on schools at an insufficient level, the state hasn’t been able to successfully pick up the slack.

In November of 2020 Coloradans took a step toward fixing this problem by approving Amendment B, which freezes the assessment rate at 7.15% for residential properties and 29% for non-residential properties. Voters passed Amendment B in the middle of the COVID-19 economic downturn, sparing Colorado’s education system hundreds of millions in further cuts. However, the amendment raises no new dollars, leaving Colorado voters to approve any new tax increases (as mandated by TABOR).

How do TABOR and Gallagher combined affect public schools?

Schools are funded by a combination of local (property) and state revenues. The Gallagher Amendment formula has limited local revenues by cutting the residential assessment rate by two-thirds since its passage in 1982. From 1982 until 1992 districts could make up for the lower assessment rate by increasing their mill rate. In addition, the state had the flexibility to increase state spending to make up for losses in the local property tax contribution. But with the passage of TABOR in 1992, a combination of budget formulas made it increasingly difficult to fund schools: TABOR’s revenue limits automatically cut mill rates in districts across Colorado at the same time TABOR limited the state’s ability to prop up school funding with state dollars. As a result, total per pupil funding didn’t even keep up with the Consumer Price Index during the 1990s – even though Colorado’s economy was booming. Note that the combination of Gallagher and TABOR has shifted the burden of school funding from local property taxes to the State General Fund. Thus, the State’s General Fund provides more than 60% of school funding whereas it used to be less than 40%. This explains the dramatic increase in the portion of the General Fund now spent on schools.

What are Amendment 23 and the “Budget Stabilization (BS)” Factor?

The Budget Stabilization or “BS” Factor (formerly known as the “Negative” Factor) is the mechanism used by the legislature to cut school funding below the amount required by Amendment 23, a citizen’s initiative passed by Colorado voters in 2000.  The size of the BS Factor is a measure of how far school funding has fallen behind what it would have been if the state had kept up with inflation and student enrollment since before the Great Recession in 2008-09 – as required by Amendment 23.

Colorado School Finance Project graph 2009-2021

Although the legislature made slow progress in catching up to the Amendment 23 level, over the following decade, the BS Factor never shrank below $572 million ($639 per student) and ballooned to $1.18 billion ($1,310) when the COVID-19 pandemic caused a huge drop in state revenues in 2020.

As a result of 12 years of the BS Factor, over $9 billion have been withheld from Colorado’s schools.  You can see the impact on your district here.

A Deeper Dive: How did the BS Factor undermine Amendment 23?

Amendment 23 is a constitutional amendment that requires the state legislature to annually increase K-12 per pupil funding by “inflation +1 percent” through 2011 and inflation thereafter. It requires funding for specific “categorical programs” such as special education and transportation to increase by the same percent. This was designed to restore the cuts experienced by public schools in the 1990s because of Colorado’s restrictive budget laws (TABOR and Gallagher).  Had it been honored, Colorado would now finally be spending as much per child in real dollars as we did in 1989.

Unfortunately, because of the Great Recession and Colorado’s resulting budget crisis, Amendment 23 was not fully implemented.  Instead, in 2009, seeking ways to cope with falling revenues, the legislature reinterpreted Amendment 23 in a way that “allowed” them to fund schools at a level substantially below the Amendment 23 calculation.

Here’s how the BS Factor works.  The language of Amendment 23 mandates that “base” per pupil funding increase each year by the rate of inflation. To determine how much each district will receive under the School Finance Act, that “base” number is run through a complex formula that includes variables such as school district size, local cost-of-living, and the number of “at-risk” kids (eligible for free lunch) in a district.

These variables are called “factors” and they substantially increase average per pupil funding received by school districts to reflect the very different costs they experience. 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.

In 2009, the legislature reinterpreted Amendment 23 to mean that only the base amount was covered by the mandatory increases — not the factors.  Under this interpretation, the legislature could (and did) cut total spending from one year to the next and claim compliance with Amendment 23 — despite voter intent to increase funding.

Starting in 2009, in order to make across-the-board cuts from all districts, the legislature added a new “budget stabilization” or “negative factor” to the School Finance Act formula. In effect, the legislature now decides how much it wants to spend on school finance, and then adjusts the negative factor to meet that funding target

As seen in the graph below, for the 2020-21 school year, the negative factor was responsible for a $1,310 reduction in per pupil funding, which results in funding for schools that is about $1.18 billion below what Amendment 23 requires. That has resulted in larger class sizes, narrower curriculum, reduced instruction time, and less support and individual attention for students.

Per Pupil Budget Stabalization Factor 2009-2021

In 2015, in the Dwyer v. State of Colorado lawsuit, the Supreme Court ruled that the BS Factor was constitutional. It continues to be the mechanism that the legislature uses to calculate each district’s per pupil spending levels (and to reduce funding).  Nonetheless, public education supporters continue to recognize it as the debt that the state owes students, in light of the intent of voters in passing Amendment 23 – i.e., to invest in Colorado’s children in good times and bad.

Would Eliminating the BS Factor “Fully Fund” Colorado Schools?

No. A 2016 “adequacy study” by the Colorado School Finance Project found that, in order to ensure that all students meet Colorado’s standards, our schools would need an infusion of funding far beyond that required by Amendment 23.  (You can view a summary of the results of the study here.)

Amendment 23 was designed to reverse cuts imposed over a decade because of Colorado’s constitutional budget constraints – not to fund schools “adequately.”  While Amendment 23 requires “inflation” increases, the adequacy study found that the base funding levels upon which those increases are based are simply not sufficient to meet the needs of children.

  • At-Risk Students: While school finance experts estimate that it generally costs 20-58% more to bring an at-risk child to academic proficiency (as compared to a child who is not at-risk), Colorado gives districts only an additional 12% per at-risk child.
  • Special Needs Students: Although experts estimate that it costs as much as twice as much to educate a child with moderate special education needs, the State generally provides districts with less than 20% of the funds necessary to meet those needs.
  • English Language Learners: Even with Amendment 23, the State provides districts with less than $200 per year to bring non-English-speaking children to English proficiency.

School Districts have to make up the difference by diverting funding from the rest of their budgets. And with schools facing significantly greater expectations for progress and proficiency, it is simply not enough to meet Amendment 23’s goal of catching up with 1989 inflation-adjusted spending levels. 

Are there other ways school districts can raise revenues?

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.

Which is more important — supporting my local mill election or working on the state funding issue?

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.

Pending that state action, it is more than understandable that districts choose to go to their voters with Mill Levy Override (MLO) ballot questions, to add funding on top of what little the state provides through the school finance act. Every community (and school) has to do what it can to protect students from the impact of deeper cuts.

It is important to recognize, however, that different communities have differing capacities to raise meaningful funds through MLOs.  Because affluent communities benefit from larger property tax bases, it is easier for them to raise significant sums with smaller mill rate increases.  By contrast, for districts with low property wealth, even large increases in mill levy rates can’t add much to their operating budgets.  Ultimately, only a statewide solution can provide adequate and equitable funding to all Colorado students.

Which is more important: funding P-12 public schools or funding Colorado’s resource-starved system of higher education?

The quick answer: “Both.” And, as a state, we shouldn’t have to choose. Colorado’s public schools have been chronically under-funded for years—with detrimental consequences like high teacher-student and counselor-student ratios, outdated technology and textbooks, limited vocational education options and high dropout rates.

Nonetheless, K-12 funding has (at least until recently) been protected from wholesale cuts by Amendment 23’s mandatory minimum annual per pupil increases. Higher education, on the other hand, was not protected during the early years of this decade, when the post 9/11 recession forced deep cuts in funding for community colleges and state universities. These cuts left Colorado an estimated $832 million behind peer states in higher education funding. Some have blamed Amendment 23 for those cuts. Falling mill levy rates are a more direct cause. It is, to say the least, a short-sighted and ill-conceived policy to force a state to choose between funding K-12 or institutions of higher learning.

In fact, Colorado’s zero-sum budget game has placed us at a competitive disadvantage with surrounding states that have chosen to fund both more adequately than Colorado. Without a strong P-12 system, colleges and universities face tremendous remediation costs. Likewise, the state suffers if graduating high school students do not have quality higher education institutions to attend. Moreover, Colorado’s economy simply cannot thrive or compete without the kind of highly educated workforce and robust R&D institutions that attract and retain 21st century businesses. Great Education Colorado believes that “great education” requires adequate funding for educational opportunities from preschool through post-graduate degrees and everything in between. Colorado’s students and economy will continue to suffer if we fund one level of education only at the expense of another.