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I_SFinance_2017A 12/15/2017 09:13:05 AM Committee Summary

Final

STAFF SUMMARY OF MEETING



LEGISLATIVE INTERIM COMMITTEE ON SCHOOL FINANCE

Date: 12/15/2017
ATTENDANCE
Time: 09:13 AM to 02:46 PM
Buckner
X
Gardner
X
Place: LSB A
Hamner
X
Leonard
X
This Meeting was called to order by
Lundeen
X
Representative Garnett
Merrifield
X
Sonnenberg
E
This Report was prepared by
Zenzinger
X
Josh Abram
Hill
X
Garnett
X
X = Present, E = Excused, A = Absent, * = Present after roll call, R = Remote Participation
Bills Addressed: Action Taken:
Opening Remarks from the Chair

Framing Remarks from Consultants

State and Local Revenue Generation

Colorado's Current Finance and Funding System: At-risk, Categorical, Student

LUNCH

Colorado's Current Finance and Funding System: At-risk, Categorical, Student

Committee Discussion: subcommittees, stakeholder engagement, field trips
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09:14 AM -- Opening Remarks from the Chair



Opening remarks from chair and vice chair.





09:16 AM -- Framing Remarks from Consultants



Rich Seder and Mike Goetz made opening remarks to frame the discussion for today's meeting.









09:22 AM -- State and Local Revenue Generation



Consultants discussed constitutional provisions affecting school finance, beginning with a discussion of Amendment 23. (Attachment A) Consultants then moved to a discussion of TABOR and TABOR revenue limitations. Next was a discussion of the ratchet down of mill levies as a result of TABOR and other interacting constitutional provisions. Members discussed having the consultants create some cheat sheets to help understand these issues. Consultants continued with discussion of other revenue limitations in TABOR including the need for voter approval of new taxes and retaining new revenue. Senator Zenzinger asked for an explanation of the way mill levies historically used to float up or down, and asked if that dynamic can be explained more fully in materials prepared by consultants.



Attachment A.pdfAttachment A.pdf





09:34 AM



Discussion moved to Gallagher Amendment and impact on the assessment rate for residential and non-residential property. Consultants highlighted that maintaining a balance of assessed property value means that only the residential assessment rate will vary and can only be driven down by the formula. Increases require a vote. Senator Zenzinger asked about the disparity this causes in communities with relative mixes of residential and non-residential development. The members had some questions about how this works for the local mill levy for school finance. Craig Harper from the Joint Budget Committee clarified how Gallagher impacts the mill levy for school finance and the state's budget for equalizing the local share of school fiance. Members had a discussion concerning decreasing assessment rates over time and the range of state and local revenue impacts across school districts as a result.





09:54 AM



Discussion moved on to further consider the interaction of Gallagher & TABOR & Amendment 23 and the pressure these create on state funding for school finance. As a result of the constitutional provisions, we have a predominantly state funded school finance system when design was originally intended to place largest burden on local sources. This is somewhat unique to Colorado. Other states don't typically have this level of disparity between their state and local share. Representative Garnet asked if Larson Silbaugh, Legislative Council Staff, could clarify some of the issues raised by Representative Leonard, who links the disparity more to normal business cycle inflationary increases and less on these constitutional interactions.





10:11 AM



Larson Silbaugh, Economist with Legislative Council Staff, made some clarifying remarks about Gallagher. Senator Hill asked for some graphing of actual revenue for school finance in addition to the percentage graph prepared to compare state and local shares. Representative Hamner asked if Gallagher would have had same impact without interaction of TABOR? Larson Silbaugh explained that it is the interaction between these two provisions that prevents the mill levy from floating up or down to maintain Gallagher's proportional requirements. Mill levies would have floated without TABOR, allowing some to increase and some to decrease; Following TABOR, mill levies can only increase with a vote. Senator Zenzinger made the point that raising taxes for school districts by vote can compete with other property tax districts asking for mill levy increases.









10:23 AM



Representative Hamner discussed the proposal to set a statewide minimum mill levy for school finance as considered by the JBC staff. Craig Harper addressed the committee to continue discussing the interaction of constitutional provisions and the proposal considered in 2017 (but not introduced) to set a statewide minimum mill levy. Committee had a broad discussion on overall tax policy and tax equity across school districts and across state and local sources of school finance.





10:53 AM



Consultants continued with their presentation. Their discussion moved to the ways that school districts respond to funding issues with mill levy over-rides.





11:00 AM



Mike Goetz discussed revenue per pupil as a way to frame some of the impacts of state law, and compared this across the local and state shares of revenue, demonstrating the variation in state funding across districts. Some variation is expected and predictable but not all. When this is compared with over ride revenue, variation is further highlighted. Large difference between the over ride mill and the amount of revenue that can be generated.





11:25 AM -- Colorado's Current Finance and Funding System: At-risk, Categorical, Studen



Conversation shifted to other factors of the funding system. Consultants started with a discussion of At-Risk students and the use of proxy measures to determine the number of at-risk students, versus using a direct measure of student learning of at risk students, which the consultants explained can create perverse incentives. If specific student characteristics such as student academic achievement is the measure, a district might not have good incentive to move that student academically if that results in less funding. Members wondered if we can get more precise and move beyond the proxy approach as an effort to more specifically target limited funds. Representative Garnett asked what other states use as proxy. Consultants answer includes homelessness and migrant populations. Representative Lundeen commented that ultimate goal should be to identify characteristics of students, not of districts, in identifying which students are really at risk. Dr. Seder reminded committee that the reason we currently use a proxy is due to the possibility of a perverse incentive, but promised to continue to think about alternatives to bring to the committee as possible ways to modify that particular factor in the finance system. Committee had a robust conversation concerning these issues.





11:59 AM



Consultants discussed research around better proxies including some currently being considered in Michigan that look at "persistent poverty" such as continued eligibility for free or reduced lunch over consecutive years, indicating that the longer these students remain eligible is a better proxy for at risk versus identifying this eligibility only for a given academic year. That might be over identifying at risk.





12:04 PM -- LUNCH





01:10 PM -- Colorado's Current Finance and Funding System: Categorical program funding



Returning from lunch. committee next took up categorical program funding in the school finance system.







01:13 PM -- Colorado's Current Finance and Funding System: Categorical Program Funding




The consultants led committee in a discussion of categorical program funding in the school finance model. Specifics were provided on special education, gifted and talented, English language learners, transportation, career & technical education, small attendance centers, expelled and at risk student services and comprehensive health education, and the Colorado Preschool Program funding (CPP is part of the school finance formula). Senator Zenzinger asked if the amount of funding has a rational basis for calculating categorical funding. Consultants remarked that this isn't rationally based in any system, let alone in Colorado's. These conversations almost always start with "what amount to we have available? and... How will this be allocated?" but there isn't a logical or case based formula for determining the amount spent in any given category. Committee talked briefly about the Colorado Pre School program and the research link between access to high quality early learning and positive impacts in later grades.



Consultants than talked a bit about the expenditure level for each of the categorical programs.





01:37 PM Colorado's Current Finance and Funding System: per-pupil student based allocation




Mike Goetz discussed student based formulas or allocations. Colorado is similar to other states in that we base allocation on the count of various groups, for example at risk, ELL, etc. A different way to conceptualize this is with student centered allocation. Student centered allocation looks first at individual characteristics and then funds each at a given amount. This process calculates the total funding based on these student characteristics, instead of attaching weights against a base amount. This shifts the focus to how much is available for allocation. A student centered formula looks at the various per ingredient cost where "ingredients" are: base + personnel costs + at risk + ELL + SPED + etc., etc., to arrive at an allocation amount. Each ingredient has a fixed dollar amount and a given student receives that amount of funding for each ingredient that describes him or her. Using a comparison of weighting base vs setting per dollar amounts for allocation demonstrated how Colorado might change their weighted allocation method to a student centered method.





01:47 PM



The committee discussed the issue of adequacy in categorical program funding.





02:07 PM



The consultants discussed how a student based allocation system enhances transparency and also allows for better collection of data that can inform discussions of cost benefits or return on investment of the school finance system. Another reason these systems are popular is that it enhances the building principal autonomy and building based accounting; local control also dictates how the dollar is used, but this type of system can provide autonomy to principals and schools. The model may have some expectations as to how money is spent, but in local control states or systems, districts don't always spend the money in the way the formula anticipates. In Wyoming, for example, resources for block grants were provided with certain intent; however, districts chose to either increase teachers pay, reduce class size, or incur other expenditures not typically included for those purposes.





02:13 PM



California has moved to a weighted student centered funding model, however, once the school gets this money, they aren't allocating them in the same way as the system intended the money to be spent. This dynamic becomes a governance question, testing the relationship between the state and the districts. One takeaway is that autonomy and local control are political questions that must be balanced with a funding system. The way money is calculated and allocated are separate issues from autonomy and how funding is eventually spent. Those are important conversations and considerations, however, the current focus of this interim committee is only on systems for allocating funding for schools. The consultants made the point again that student centered systems elevate both transparency in how money is allocated and helps inform questions of equity and adequacy since allocations are overt, have a specific dollar amount associated (instead of weighting a base amount to determine those dollar amounts) and allows for better comparisons and better understanding of adequacy and equity across schools and districts.



    02:29 PM -- Committee Discussion: subcommittees, stakeholder engagement, field trips



    On the next agenda, the committee will set aside time after lunch to hear public testimony and for stakeholder engagement. The committee should be able to cover the final topics of capital construction and district organization quickly on January 9, and then get right to public testimony. Members discussed the efficacy of subcommittee meetings and work groups during the legislative session, which will be challenging for members and compete with other demands of the regular legislative session. Prior to the next committee, members should be thinking about subcommittee topics and organization and send that feedback to the committee chairs. Chair asked consultant to do a poll of members to determine some of these topics and organizational structures, and then bring those back as recommendations for the committee to discuss at next agenda.