�SCHOOL FINANCE AND THE STATE BUDGET

Durango, CO

May 2026

Tracie Rainey

SCHOOL FINANCE TRAINING

Welcome to our new school finance training!

​

• As school finance grows more complex, task-driven and deadline-focused approaches are no longer sufficient. This two-day training is designed to help Colorado school districts, schools, and BOCES strengthen their financial practices by moving toward a more strategic, aligned, and sustainable approach in support of district goals and student outcomes.

​

THE TEAM

Colorado Department of Education

• Glenn Gustafson
• Bill Parsley
• Katherine Proctor

​

Colorado School Finance Project

• Tracie Rainey

AGENDA

Day 1:

• Welcome & overview
• School Finance Act and State Budget
• Performance Excellence & Key Performance Indicators
• Revenue Optimization
• Grants Managements

​

Day 2:

• Optional workshop time
• Expenditure Optimization
• Fund Balance

​

Who Is CSFP?

• Non-profit, non-partisan
• Supported by school district contributions
• School finance analysis for local and state policy makers since 1995
• Governed by a board comprised of national and state experts on school finance

​

Our Mission: To compile, collect and distribute research-based, non-partisan information and data on topics related to school finance for state and local policymakers. CSFP also supports school districts by providing expertise, technical assistance and capacity building related to best practices in school finance.

​

5

Federal Funding

Federal Funding for Consideration

• Funding maybe impacted with changes to Medicaid and SNAP
• These changes may impact your FRL count
• With the layoff of Federal Employees, this may impact operations and timing.
• The initial proposal for the Federal Budget continues to target cuts in programs
• Implementation of a national voucher program to be determined at the state level – states must opt in annually
• Uncertainty over dismantling of Department of Education

​

​

​

7

May 2026

March 2026 Forecast

March Forecast

• A very slow growing economy
• High tariffs to continue through 2026
• No TABOR Surplus in 2025-26
• Uncertainty due to international conflicts
• Inflation – Inflation will be 2.3% per OSPB budget
• This will be updated quarterly
• The economy has many uncertainties, partly due timing of information
• The risk of recission remains high, unemployment claims increasing
• Enrollment in Colorado decreased statewide by 12,477 or 1.5%
• General Fund contribution reduced with lower enrollment and increase in local property taxes.

9

May 2026

Budget Balancing

• Balanced the budget using 2024-25 TABOR surplus dollars of about $300 million
• Lowered the state's reserve by 2% giving them around $300 million
• The balance of cuts came from Medicaid, Higher Ed, Dept of Corrections and state grant programs. 
• Balanced the majority of the budget on one-time dollars
• The 2026-27 Budget is already facing a $1billion shortfall

​

10

May 2026

11

May 2026

12

May 2026

13

May 2026

14

May 2026

15

May 2026

16

May 2026

Property Tax

• Residential assessment rate at 7.05%
• In 2025, residential assessed value growth was due in part to an increase in the assessment rate from a temporarily lower 6.7% to 7.05%
• Non-residential assessment rate to step down until 2027 from 27% to 25%
• The lowering of assessment rates puts more pressure on the General Fund

​

17

May 2026

Legislation

18

HB25-1320 – Current Funding

• Caps cost of living to 23%
• At-risk factor .25 weight
• Ell factor .25 weight
• Special Ed .25 weight
• Implements at 15% and 4-year averaging – your total program dollars may be no lower than the 2024-25 funding level
• Discussing funding to charter schools to be reflective of their students not the districts average.
• This is funding the statute, not fully funding the formula or adequate funding.

19

May 2026

Items to Consider

• NCES Locale Factor data – NCES has been dismantled
• Should there be a different Colorado data locale factor designed?
• Consider the sharp cliffs currently in the formula impacting districts financially.
• BEST – funding has been capped

​

​

20

May 2026

School Finance Act (SB26-023)

• Bill was introduced at the beginning of session
• 30% implementation, 3-year averaging
• This means your total program could be reduced from prior year
• You getting the funding required under law – it is not mean fully funding or meeting adequacy.
• SOT no longer being considered
• Unknowns:
• Changes to Locale Factor

​

​

21

May 2026

School Finance Act (SB26-023)

Cost of living Factor

• For FY 2026-27 only, the bill requires that total program is calculated using the same school district cost of living factors as were used in FY 2025-26. It also modifies the deadlines for the biennial cost of living study.
• Beginning in 2027 and every two years thereafter, the study must be completed by Legislative Council Staff (LCS) by January 1, and LCS must certify new cost of living factors by January 31.
• In addition, the Colorado Department of Education (CDE) must send the new factors to school districts within 14 days of receiving the certified factors from LCS.

May 2026

22

School Finance Act (SB26-023)

Smoothing Factor

• For the purposes of calculating a district’s funded pupil count, the bill replaces student count averaging in the new school finance formula with a smoothing approach. With this approach, district enrollment is the greater of:
• current year enrollment;
• 97 percent of the prior year enrollment; or
• a weighted average in which current year enrollment is weighted 50 percent, prior year enrollment at 30 percent, enrollment from two years prior at 20 percent.
• Smoothing begins in a year when the new school finance formula is implemented at least 45 percent, and districts are held harmless to the old formula plus one percent.
• The approach is also applied to charter schools authorized by the Charter School Institute (CSI).

​

May 2026

23

Additional Amendments

• Charter Schools:Charter schools will be funded based on their demographic enrollment based on populations of Ell, At-risk and special education.
• Pencil and Paper Assessments: Beginning in FY 2026-27, an LEP may request that CDE approve the use of pencil and paper to complete any portion of state assessments administered in third and fourth grades. CDE must establish a schedule for pencil and paper assessments to be completed for FY 2026-27, and a deadline for requests to be submitted for FY 2027-28. An LEP is responsible for the costs associated with administration of pencil and paper assessments
• PERA After Service Employment: Under current law, PERA retirees may work up to 110 calendar days without experiencing a reduction in retirement benefits. Under SB 26-023 Page 6 May 11, 2026 shortage retiree program, retired teachers, school bus drivers, cooks, school nurses, superintendents, principals, and paraprofessionals employed by rural school districts, charter schools within those districts, and Boards of Cooperative Educational Services, may work after retirement for more than 110 days without a reduction in their retirement benefits. The bill adds assistant superintendents, vice principals, and assistant principals to the list.

​

24

May 2026

Additional Amendments

Part-Time Programs for Homeschool Students

• Under the bill, a local education provider (LEP; including school districts, charter schools, and BOCES) may offer part-time programs for homeschool students if the programs comply with rules adopted by the State Board of Education (SBE), certain state laws, and all legal requirements for the authorizing LEP.
• A part-time program for homeschool students must:
• not enroll students who satisfy school attendance requirements through an independent or parochial school;
• not directly or indirectly fund, reimburse, or subsidize a private activity or purchase for a student or their parent or guardian; and
• verify the student’s eligibility and make the verification available to CDE upon request.

25

May 2026

Additional Amendments cont’d

Part-Time Programs for Homeschool Students: Program Authorization

• LEPs may not operate part-time homeschool programs for students outside their geographic boundaries, except if approved through one of the following mechanisms: • Beginning in FY 2027-28, the SBE may certify such programs to operate if they meet quality standards, and accountability, transparency, and reporting requirements determined in rule. Certifications are valid for two years and may be renewed. • A local board of education may authorize a LEP to operate a part-time home school program within their geographic boundaries. This authorization must be obtained from all districts where a part-time program operates, and must utilize a form provided by CDE to certify that the program meets certain requirements.

26

May 2026

Education Bills

• SB26-103: At-Risk Public School Program & Public School Accountability
• Passed Seconds in the House
• SB26-126: Licensure for Experienced Out-of-State Teachers
• Signed by the Governor
• SB26-170: Task Force to Expand Effective Public Schools
• Passed House Committee

​

27

May 2026

SB26-135 – Referred Measure

• This is subject to voter approval in November!
• This will change the TABOR cap
• There will be an annual calculation of 2% of revenue K-12 received from the general fund and categoricals – this total is what education would get for the positive factor. If this calculation is less than half of the amount above the TABOR cap then K-12 will receive 50% of the revenue.
• The Homestead exemption will come before K-12.
• Annually legislative council will calculate the amount and this will determine the revenue for the positive factor. This revenue is deposited in the Kids Fund and will be distributed to districts through the current formula.
• Expected revenue in FY26-27 $107M and $219M in FY27-28

28

May 2026

SB26-135 – Referred Measure cont’d

Retain and Spend Additional Revenue

• Any additional revenue that is retained under this bill must be spent as follows
• first, to reimburse local governments for their lost revenue due to the homestead property tax exemption;
• then, on a newly established “positive factor” for K-12 education (described below);
• if the positive factor is less than half of the amount credited to the account, the difference between the positive factor and half of the amount credited to the account must be spent on K-12 education for school services, disability services, and increasing annual contact hours; and
• the remaining revenue must be spent on programs that support children, prioritizing child care, full-day preschool, and other programs that help children be successful in school.

29

May 2026

30

Find your district here

May 2026

Mill Levies

Mill Levy Correction

• Ongoing discussion on Mill Levy Correction
• Was the correction done based on legal ruling or CDE interpretation?
• How will this be corrected?
• What districts are impacted?

​

32

May 2026

33

HB20-1418

Mill Levy Correction Districts

April 2026

Potentially On the Ballot

Initiative 195 – Graduated Income Tax

“Shall state taxes be increased $2.7 billion annually, in order to increase or improve levels of public services, including K-12 public school education, health care, and early child care and education services, by an amendment to the Colorado Constitution and a change to the Colorado Revised Statutes repealing existing law and creating new law to replace the uniform state income tax rate with a graduated income tax structure, and, in connection therewith, amending the Taxpayer’s Bill of Rights to eliminate the constitutional requirement for all taxable net income to be taxed at one rate with no added tax on income; establishing various income tax rates based on the amount of taxable income earned by individuals, estates, trusts, and corporations, while maintaining the current 4.4% tax on income from the sale of a principal residence, which will result in the estimated change in income taxes owed by individuals as identified in the following table; and authorizing the state to retain and spend any increased revenue from the new tax structure, as a voter-approved revenue change, to supplement current levels of funding for K-12 public school education, health care, and early child care and education programs?”

​

35

35

May 2026

Ballot Language

36

36

May 2026

37

Use this QR code to access district-specific fact sheets

�

38

Additional Fiscal Impacts

• Educational Choice for Children Act (Vouchers)
• Federal Education Department changes
• Federal Budgeting Priorities
• Worldwide conflicts impacting fuel prices, cost of living, and supply chain
• Also impacts international educators coming to the US

39

May 2026

Adequacy Studies

What is an Adequacy Study?

• An Adequacy Study works to understand the resources necessary for students, teachers, schools, districts and states to meet education standards and requirements.
• Studies have been done in well over 20 states and they have been commissioned by Governors, Legislatures, Departments of Education and advocacy groups.
• This is first time the State has commissioned this study – studies were released in January of 2025

​

​

41

May 2026

Three approaches, Two consultants

• Colorado required that two separate vendors undertake separate studies
• One vendor had to use input-based approaches (evidence-base and professional judgment approaches output-based and one vendor had to use an output-based approach (cost function)
• Both studies were required to look at all of the same parameters

​

​

42

May 2026

Adequacy studies cont’d�

• Education performance has been stagnant or decreasing for our students who need supports for Special Education, English Language Learners and At-Risk.
• Both studies highlight the need to make adjustments for district size and cost of doing business and support a wage index be implemented.

​

​

43

May 2026

Common Themes

• Colorado’s current funding is billions below what is needed to adequately serve students
• Teacher compensation is below what is needed
• Higher need districts/schools have lower performance and lower resources available
• Neither study recommends specific adjustments using the locale factor

​

​

44

May 2026

Adequacy Study Next Steps

• At the CSFP conference – educators discussed and listed their priorities for where the next dollars should go to get closer to adequate funding.
• The top priorities:
• The Base – every district has different needs – honors local control
• Special Education – the costs are increasing
• These recommendations have been shared with legislators regarding need and priority – If Initiative 195 passes this could help direct where new dollars should be distributed.

​

​

45

May 2026

How Would Additional Dollars Be Used

• At the CSFP conference – educators were asked to list what these additional dollars would be used for:
• Improving student success through – programming, smaller class sizes, mental health, proactive programs for all students.
• Teacher/Staff pay, recruitment and retention – improving the quality of educators

​

46

May 2026

47

Senate Votes:

33-2

House Votes:

54-5

HJR26-1028

Full and Fair Funding of Public Schools

Workshop Tool

49

Please open your district’s workshop tool that was sent to your email

May 2026

Questions?

• What questions do you have regarding your strategic plan, mission or vision, or UIP?

​

50

May 2026

THANKS!

Any questions?

• Tracie Rainey�t.rainey@cosfp.org�303-941-1633