School Finance Brochure

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School Finance Brochure





    July 2007

    Colorado Department of Education

    Public School Finance Unit

    201 East Colfax Avenue

    Room 508

    Denver, CO 80203


    Article 54 of Title 22)

    The Public School Finance Act of Colorado is a formula used to determine state and local funding amounts for the state’s 178 school districts and the Charter School Institute. Approximately $5.1

    billion is distributed annually. Total Program is a term used to describe the total amount of money each school district receives under the school finance act.


    A) Counting Pupils

    Funding is based on an annual October pupil count. Each school district counts pupils in membership as of the school day nearest October 1 (the official count day). Districts are given an stopportunity to provide documentation that a student re-established membership by October 31

    for a student who may be absent on the official count day.

    Generally, pupils in grades 1 through 12 are counted either as full-time or part-time depending upon the number of scheduled hours of coursework. Kindergarten, preschool special education, and a limited number of at-risk preschool (see Colorado Preschool and Kindergarten Program discussion below) pupils are counted as part-time. Beginning in FY 2007-08, students enrolled in the “Fast College, Fast Jobs” program (see Fast College, Fast Jobs” Program discussion below)

    who are enrolled in at least 12 credit hours of higher education courses are counted as a .85 FTE. All other students in the program are counted as full time.

    For most school districts, funding is based on the number of pupils counted in the current school year. However, for a district with an enrollment fluctuating from year to year, funding is based on an average of up to three prior years' October pupil counts and the current year's October pupil count. As such, the impact of annual enrollment variances on funding is softened. Beginning in FY 2003-04, the funded pupil count is defined as the district’s “On-line Pupil Count”

    plus the district’s Colorado Preschool and Kindergarten Program Pupil Count plus the higher of

    current year enrollment or the average of 2, 3, or 4 years enrollment. Pupil enrollment shall include any pupil enrolled during FY 2001-02 in an on-line program.

    HB04-1362 established the State Charter School Institute. The Institute will have twelve charter schools in FY 2007-08. The institute charter school enrollment is added to the funded pupil count and on-line pupil enrollments of the “accounting district”. The accounting district is defined as

    school district within whose geographic boundaries an institute charter school is physically located.

    School district funded enrollments in budget year 2007-08 are projected to range from 59.5 full-time equivalent (FTE) pupils to 81,443.3 full-time equivalent (FTE) pupils.

    ; Colorado Preschool and Kindergarten Program (C.R.S. 22-28-101)

    The Colorado Preschool and Kindergarten Program's main objective is to provide high quality early

    education support to children whose existing risk factors increase their chances of early school failure.

    Districts provide these services in partnership with families and other community resources serving

    families. In budget year 2007-08, funding is provided for the participation of up to 16,360 children

    (including up to 2,454 or 15% for full-day kindergarten pupils) who are eligible to be included in districts'

    funded pupil counts.

    Fast College, Fast Jobs Program (C.R.S. 22-35.5-101) ;

    SB07-148 established a Fast College, Fast Jobs Pilot Program. Districts eligible to participate are those

    offering ninth through twelfth grades with a graduation rate of less than seventy-five percent. The

    program allows students to receive a high school diploma and an associate’s degree or a career and

    technical education certificate within five years.

    B) Total Program Funding to school districts is based on a per-pupil formula that calculates Total Program. For each pupil funded (see definition of “funded pupil count” above) in the October 1

    pupil count, the formula provides a base per-pupil amount of money plus additional money to recognize district-by-district variances in: (a) cost of living, (b) personnel costs, and (c) size. The Total Program amount also includes additional funding for at-risk pupils. As these components vary among school districts, so do the expenses of the districts and, as such, the amount of Total Program funding provided.

    To calculate Total Program, use the following formula:

    Funded Pupil

    Count Total Per- Pupil At-risk On-line

    (October 1 Times Funding Plus Funding Plus Funding

    ; Total Per-pupil Funding

    Base Funding -- the base amount of funding for each pupil is $5,087.61 in budget year

    2007-08. To this amount is added funding based on the specific factors as outlined

    below to arrive at a Total Per-pupil Funding amount for each district.

    Cost of Living Factor -- the cost of living factor reflects the differences in the costs of

    housing, goods, and services among each of the 178 school districts in the state. Cost

    differences are reviewed every two years to allow for timely recognition of economic changes.

    This factor is index-based, with a range from 1.010 to 1.641 in budget year 2007-08.

    The cost of living calculation changed in FY 2004-05, replacing inflation with the increase in

    household income level. A district’s cost of living factor is increased based on its cost of

    living increase above the household income increase, rather than its increase above inflation.

    Personnel Costs Factor -- the personnel costs factor varies by school district based on

    enrollment. For all districts, employee salaries and benefits represent the largest single

    expense. As such, the formula directs funding based on these costs, using historical

    information and incorporating the above cost of living factor. This factor is projected to range

    from 79.98% to 90.50% in budget year 2007-08.

    Size Factor -- like the above personnel costs factor, the size factor is determined using an

    enrollment-based calculation and is unique to each school district. This factor is included to

    recognize purchasing power differences among districts and to reflect the expression of

    funding on a per-pupil basis.

    "Smaller" districts (fewer than 4,023 pupils) receive greater size factors and, thus, increased

    funding than do "medium-sized or large" districts (greater than 4,023), which receive more

    moderate size factor adjustments.


    A district with fewer than 500 pupils and in which a charter school operates receives an

    additional, compensating adjustment via an increased size factor designed to help mitigate

    the impacts of such an arrangement in a small district.

    Size factors are projected to range from 1.0297 to 2.3601 in budget year 2007-08. Each size

    factor was reduced by .0045 in FY 2003-04.

    At-Risk Funding -- Eligibility for participation in the federal free lunch program is used as a

    proxy of each school district's at-risk pupil population. Increased funding is provided to

    recognize that expenses among districts vary, as pupil populations vary, especially at-risk

    populations. For each at-risk pupil, a district receives funding equal to at least 12%, but no

    more than 30%, of its Total Per-pupil Funding (see prior discussion). As a district's

    percentage of at-risk population increases above the statewide average (roughly 31.24%), an

    increased amount of at-risk funding is provided.

    A district receives funding for the greater of: (1) each actual pupil eligible for the federal free

    lunch program; or (2) a calculated number of pupils based on the number of grades 1-8

    pupils eligible for the federal free lunch program as a percent of the district's entire population.

    Beginning in FY 2005-06 the definition of at-risk students was expanded to include students

    whose CSAP scores are not included in calculating a school’s performance grade because

    the student’s dominant language is not English and who are also not eligible for free lunch.

    On-Line Funding -- Pupils enrolled in a district’s on-line program are funded at the on-line

    per pupil amount of $6,135, unless the student was enrolled in the districts on-line program

    in FY 2001-02; then a pupil is funded at the districts current per pupil funding amount as

    calculated below.

    C) Minimum Total Program

    For budget year 2007-08, each school district is guaranteed Total Program funding consisting of the sum of $6,275.42 per traditional pupil plus $6,135 per online pupil. In FY 2007-08 minimum per pupil funding for traditional pupils was increased to represent 94.3% of the state average per pupil funding less on-line funding. In FY 2008-09, minimum per pupil funding for traditional pupils will equal 95% of the state average per pupil funding less on-line funding. In budget year 2007-08, eleven districts are projected to receive funding based on the Minimum Total Program provision.

    D) Maximum Total Program

    Each school district's annual Total Program per pupil funding cannot exceed 125% of its prior budget year Total Program per pupil funding. For budget year 2007-08, no district is projected to reach this maximum limit.

    E) Limitation on Increases in Total Program

    Each school district's annual revenue and spending growth is limited by its percentage of growth in pupil enrollment plus the rate (percentage) of inflation, in accordance with the Taxpayer's Bill of Rights (TABOR) state constitutional amendment. This limit initially may restrict a district's ability to accept the full amount of funding as determined by the Total Program formula calculation. In such a case, to subsequently receive the full formula amount of funding, a district must certify to the Colorado Department of Education that receiving the full amount of Total Program funding


    would not violate its TABOR limit. A district may need to seek voter authorization for an increase to its TABOR limit before being able to make such a certification.

    In budget year 2007-08, 3 districts will be required to comply with the certification process or risk not receiving over $6 million of funding. The remaining 175 districts have received prior voter authorization and, thus, will receive the full formula amount of total program funding. F) Illustration of Total Program Calculation

    In budget year 2007-08, Total Program funding for all 178 school districts is projected to range from $6,275.42 per pupil to $14,351 per pupil, with an average across all districts of $6,658 per pupil.

    On-Line Low High

    Funded Pupil Count 2,223.0 65.8 1,155.8

    Base Funding (BF) $5,087.61 $5,087.61 $5,087.61

    Cost of Living (CL) 1.131 1.171 1.107

    Personnel Costs (PL) 86.27% 80.02% 84.67%

    Size (SZ) 1.0571 2.3364 1.1146

    ------------ ----------- -----------

    Total Per-Pupil Funding $5,986 $13,513 $6,184 SZ*[(BF*CL*PL)+(BF*(1-PL))]

    At-Risk Pupil Count 515.0 34.0 681.0 37.4

    "Base" At-Risk Funding $718 $1,622 $742 $1,336 12% * Total Per-pupil Funding

    "Population" At-Risk Funding N/A N/A 348.0 N/A district % > state %

    ------------ ------------ ------------ -----------

    Total At-Risk Funding (included in Total $4,074,168$4,074,168$4,074,168$369,929 $49,952$55,134 $690,117 Per-Pupil Funding)

     On-Line Pupil Count......................... N/A N/A 27.0

    Per-Pupil Funding N/A N/A 6,135

Total On-Line Funding N/A N/A $165,645

Total Program Formula......................... $13,676,614 $944,302 $7,836,705

Per-Pupil $6,152.33 $14.351 $6,780

Total Program Funding Guarantee $13,950,259 $412,922 $7,249,339

    Minimum Total Program Guarantee $6,275.42 $6,275.42 $6,275.42

    Total Program per Pupil................. $6,275.42 $14,351 $6,780


G) Earmarked Revenue (C.R.S. 22-54-105)

    Each school district individually has the discretion, within the limits of existing law, to determine how its Total Program moneys are spent, with three exceptions required by the state in budget year 2007-08.

    1. Instructional Supplies and Materials -- Each school district must budget a

    minimum of $180 per pupil for instructional supplies and materials. Beginning in

    FY2006-07, if a district’s expenditures for instructional supplies, materials and

    capital outlay exceeds the amount required to be budgeted in a given year, the

    district may subtract an amount equal to the amount of excess expenditures in

    that budget year from the amount required to be budgeted in the subsequent

    budget year.

    2. Capital and/or Insurance Reserves -- Most school districts must budget a

    minimum of $292 per pupil, not to exceed $800 per pupil, for capital reserves or

    for insurance reserves/other risk management activities. However, this revenue

    allocation is optional for any district with existing capital reserves in excess of

    $1,460 per pupil (five years of the minimum allocation requirement).

     For the 2007-08 budget year and each budget year thereafter, allows a school

    district that sells lands, buildings, or both, collects payment in lieu of the

    reservation or dedication of sites and land areas for schools, or collects

    payments or contributions as a result of a voluntary agreement with a developer

    and deposits the proceeds of the sale or the collection of payment or

    contributions into the district's capital reserve fund to reduce the total amount of

    per pupil revenues that the district is required to allocate to the fund by an

    amount equal to the amount of the sale proceeds deposited into the fund.

    3. Programs for At-Risk Pupils -- Each school district must allocate at least 75% of

    its at-risk funding to school or district-wide instructional programs for at-risk

    pupils or to staff development associated with teaching at-risk pupils in each



    Two local sources of revenues are incorporated into the Public School Finance Act of 1994 (as amended): property taxes and specific ownership (vehicle registration) taxes. Funding for a school district's Total Program is provided first by local sources of revenues (the Local Share); if these local sources are insufficient to fully fund Total Program, state moneys fund any shortfall. A) Property Taxes

    Each school district is required to impose a property tax levy to finance its Local Share of Total Program. The ability to raise money from property taxes varies widely among districts. Differences in tax bases (assessed property values) result in differences in revenues collected, using a given mill levy. Nonetheless, no district's property tax revenues are transferred to any other district; instead, moneys raised remain in the district which imposes the tax. The county assessor determines the valuation of all property located within a district's boundaries (e.g. residential, commercial, agricultural, oil, and gas). The state is responsible for determining the valuation of public utilities within district boundaries. Regardless of property type, assessed

    valuation is based on a percentage of the property's actual value. For example, in budget year

    2007-08, residential property is expected to have an assessed valuation equal to 7.96% of its actual value.


    One mill of tax is the same as one-tenth of one percent (.001). Therefore, on residential property with an actual value of $100,000 and, thus, an assessed valuation of $7,960, each mill of tax raises $7.96.

    Beginning in FY 2007-08, legislation was passed to stabilize school district mill levies. The legislation caps mill levies at 27 mills and freezes mill levies for districts with mill levies of 27 mills or less. This legislation applies to the Total Program mill levy only. It does not affect override, bond, special building and technology, full-day kindergarten excess cost, or transportation mill levies. Additionally, this mill levy cap/freeze does not apply to districts that have not held a successful TABOR election (see discussion above).

    The three school districts which have not held a successful TABOR election must levy the least/smallest mill resulting from the following three options: (1) the mill that it levied in the prior year; (2) the mill necessary to entirely pay for its Total Program and categorical programs, less any specific ownership tax revenues and minimum State Share funding received (see subsequent discussion); or (3) the maximum mill allowed by the TABOR constitutional amendment. Statewide across all school districts, property taxes are projected to provide $2,204 per pupil, or about 33.1% of Total Program funding.

    B) Specific Ownership Taxes

    Vehicle registration taxes are collected by counties and are shared with school districts. Each district's Local Share includes an amount of specific ownership tax revenue equal to the prior budget year's actual amount received.

    Statewide across all school districts, specific ownership taxes are projected to provide $203 per pupil, or about 3.1% of Total Program funding.


    Funding from the state (State Share) is provided to each school district whose Local Share is insufficient to fully fund its Total Program. Payments of State Share moneys are made monthly to districts and are funded primarily from state income (personal and corporate) and sales and use tax revenues collected.

    In budget year 2007-08, State Share financing to districts is projected to range from $131 per pupil to $11,402 per pupil. (Each district is guaranteed at least $131.21 per pupil.) Statewide across all school districts, State Share is projected to provide $4,251 per pupil, or about 63.8% of Total Program funding.


    Override Revenues (C.R.S. 22-54-108)

    A school district may desire to spend more property tax revenues than authorized/required to fund its Total Program. In this event, a district must seek approval from its voters to raise and expend "override" property tax revenues via an additional mill levy. Override revenues also are permitted for a district whose budget year 1994-95 actual Total Program exceeded its budget year 1994-95 formula calculation (a "hold harmless" district).

    A district’s override revenues cannot exceed 20% of its Total Program or $200,000, whichever is greater, plus an amount equal to the maximum dollar amount of property tax revenue that the district could have generated for FY 2001-02 in a Cost of Living Adjustment election. All override


    revenues come from increased property taxes; no additional state funding occurs. A district's

    authorization to raise and expend "override" revenues does not affect the amount of State Share

    funding which the district is eligible to receive.

    Capital/Building Needs

    Five distinct avenues through which a school district may meet its capital/building needs are

    discussed below.

    1. Capital Reserve Fund (C.R.S. 22-45-103(c))-- Most districts are required to budget at

    least $292 (but no more than $800) per pupil to meet capital and/or insurance needs (see

    previous Earmarked Revenue discussion). Capital-related expenditures are allowed for:

    (1) acquisition of land, improvements, buildings, equipment, and furnishings and

    construction of new facilities and additions to existing facilities; (2) alterations and

    improvements to existing structures; (3) acquisition of school buses and certain other

    equipment; (4) installment purchase or lease agreements; and (5) software licensing

    agreements. In order for any expenditure to qualify as a “capital expenditure,” an

    individual item must cost at least $1,000 and any given project must cost at least $2,500. 2. Bonded Indebtedness (C.R.S. 22-42-102) -- A district may hold an election to authorize

    it to issue bonds to meet its capital needs. Principal and interest payments on bonds are

    paid from increased property tax revenues generated by a separate, additional mill that

    the district must be authorized to levy. A district may not have outstanding bond debt in

    excess of 20% (25% for rapidly growing districts) of its assessed property valuation or 6%

    of its actual property value, whichever is greater.

    School districts considering submitting a ballot question for bonded indebtedness to the

    electors of the district shall invite each charter school to participate in discussions

    regarding the possible submission of a ballot question. (See Charter School Section


    3. Special Building and Technology Fund (C.R.S. 22-45-103(1)(d)) -- A district may hold

    an election to authorize it to levy up to ten mills for not longer than three years. Moneys

    generated by this levy are available to fund the purchase of land, the construction,

    purchase, and maintenance of facilities, and the purchase and installation of building

    security, instructional, and informational technologies.

    4. Capital Construction Expenditures Reserve (C.R.S. 22-54-117) and School

    Renovation and Construction Fund (C.R.S. 22-43.7-103) -- Through a competitive

    grant process, a district may apply for funding for capital construction, renovation, or

    technology. School Districts are required to provide matching funds. The funds cannot

    be used for athletic facilities.

    5. Loan Program for Capital Improvements in “Growth Districts” (C.R.S. 22-2-125) -- A

    district which is identified as a “growth district” as defined above, is eligible to apply for a

    loan from the State Treasurer. This debt must be voter approved and if a property tax

    mill levy is the method of repayment, such levy must also be approved at the same time.

    At the time of the loan application, the district must specify the method of repayment and

    the terms of repayment may not exceed 10 years. The district must also have voter

    approval for a repayment period of longer than one year.

    If a property tax mill levy will be used to repay the loan, the mill must be no more than 5

    mills or a number of mills determined by dividing the latest statewide average per pupil

    assessed valuation (PPAV) by the latest PPAV of the growth district, whichever is less. If

    the district’s PPAV is greater than the statewide average PPAV, the growth district may

    impose an additional property tax levy of no more than 1 mill.


Contingency Reserve (C.R.S. 22-54-117)

    The Colorado State Board of Education is authorized to approve emergency supplemental payments to assist school districts. Such payments are made at the discretion of the Board and following applicable statutory guidelines.

    Charter School Funding (C.R.S. 22-30.5-112)

    Charter schools are funded based on the October 1 pupil count as reported to their school district. Charter schools receive 100% of the per pupil revenue for each pupil enrolled in the charter school. The district may charge the charter school for central administrative overhead costs for services actually provided to the charter school.

    For charter schools in districts with more than 500 pupils, these central administrative overhead costs may not exceed 5% of district per pupil revenue (see illustration above) for each pupil enrolled in the charter school including on-line pupils.

    For charter schools in districts with 500 or fewer pupils, these central administrative overhead costs may not exceed 15% of district per pupil revenue for each pupil enrolled in the charter school including on-line pupils.

    A charter school who is an eligible small attendance center will receive 100% of the funding

    provided to the district for a small attendance center. (C.R.S. 22-54-122(4)) Charter schools that serve students who may be eligible to receive services provided through federal aid programs shall comply with federal reporting requirements to receive the federal aid. Charter School At-Risk Funding new in FY 2004-05

    The alternate at-risk funding calculation applies only to charter schools that are newly created in FY 2004-05 or after; are in a district that has retained exclusive chartering authority; and the district has an at-risk percentage greater than 40%. The intent of the alternate at-risk funding calculation is to provide at-risk money based on the at-risk population served by the charter school.

    The alternate at-risk funding formula is: (The accounting district’s at-risk funding divided by the

    accounting district’s funded pupil count) x (the district charter school’s percentage of pupils eligible for free lunch divided by the accounting district’s percentage of pupils eligible for free lunch) NOTE: THIS CALCULATION WORKSHEET IS POSTED ON THE SCHOOL FINANCE


    Charter School Capital Facilities Funding

    School districts considering submitting any question of contracting bonded indebtedness to the electors of the district shall invite each charter school to participate in discussions regarding the possible submission of a question. Each district is encouraged to voluntarily include funding for the capital needs of the charter schools in the district’s question. A charter school that has capital

    construction needs may seek funding by requesting the district Board of Education to: 1) Include the charter school’s capital construction needs in the district’s ballot question for

    approval of bonded indebtedness; or 2) submit a special mill levy ballot question to the voters of the district, upon request of the charter school.

    The special mill levy for Charter Schools shall not exceed 1 mill in any year or exceed 10 years in duration for a single ballot question, but multiple ballot questions may be submitted. Costs of the


    election shall be borne by each charter school to receive revenue from the mill levy in proportion to the pro-rata share, unless other cost-sharing arrangements are agreed upon, or if the district decides to bear some or all of the costs.

    Charter School Capital Construction Funding

    In FY 2007-08 State Education Fund moneys to be distributed to charter schools for capital construction is $5 million. The funds will be distributed based on a per pupil share for all pupils enrolled in a “qualified charter school” that is not operating in a school district facility and half of the per pupil share for “qualified charter schools” operating in a school district facility and that has

    capital construction costs. No funding is provided to qualified charter schools operating in a school district facility that does not have capital construction costs.

    Colorado School Finance - Categorical Program Funding


    In addition to the Total Program funding provided by the Public School Finance Act of 1994 (as amended), Colorado school districts may receive state funding to pay for specific programs designed to serve particular groups of students or particular student needs. Such programs often are referred to as "categorical" programs.

    While there are many different programs which are funded, this brochure addresses the six primary categorical program areas which regularly receive state funding: English language proficiency education, gifted and talented education, small attendance centers, special education, transportation, and vocational education.

    In budget year 2007-08, the state of Colorado will make available approximately $210.9 million in support of these main categorical programs.

Small Attendance Centers

    (Article 54 of Title 22, CRS)

    In budget year 2007-08, it is estimated that roughly 897 pupils in Colorado will attend local schools each with less than a total of 200 pupils enrolled and each located 20 or more miles from any similar school (e.g., elementary) within the same school district.

    Districts operating these "small attendance centers" face unique costs attributable to these remote locations. Accordingly, separate state funding is available to school districts facing these challenges. In budget year 2007-08, a total of $961,817 is projected to be available to 11 school districts operating a total of 13 remote schools.

    Allocation of these funds is determined via a formula which incorporates the respective district's total pupil population and the relative burden added by the presence of small attendance center pupils. The total estimated impact of these schools is roughly $2.8 million. The available state funding will cover about 35% of this amount, while districts provide the remaining 65% from other available funds.

    Mary Lynn Christel

    Senior Consultant

    (303) 866-6818


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