Wednesday, September 23, 2015

Colorado Supreme Court Says State Can Reduce School Funding Even Though Constitution Says Otherwise

On Monday in Dwyer v. State, the Colorado Supreme Court held that its constitutional mandate that specifically requires annual increases in "statewide base per pupil funding" does not prohibit the state from reducing the total amount of funds per pupil it provides to school districts.  That does not make sense, so let me explain.  

In 200o, the voters of Colorado amended their constitution.  That amendment required state per pupil funding to grow for the next ten years at a rate of inflation plus one percent.  After that, it would grow at rate no less than inflation.  The precise language of the amendment read: 

In state fiscal year 2001–2002 through state fiscal year 2010–2011, the statewide base per pupil funding, as defined by the Public School Finance Act of 1994, article 54 of title 22, Colorado Revised Statutes on the effective date of this section, for public education from preschool through the twelfth grade and total state funding for all categorical programs shall grow annually at least by the rate of inflation plus an additional one percentage point. In state fiscal year 2011–2012, and each fiscal year thereafter, the statewide base per pupil funding for public education from preschool through the twelfth grade and total state funding for all categorical programs shall grow annually at a rate set by the general assembly that is at least equal to the rate of inflation.

In 2007, to balance the state budget, Colorado passed legislation to reduce the overall spending on education. As a result, the funding that districts received per pupil from the state fell.  This week the Colorado Supreme Court held that these cuts were constitutional.

On its face, this holding is perplexing.  The rationale the court used to reach this holding is no less. The court said it was applying plain meaning analysis.  It reasoned that the constitutional amendment only required increases to base per pupil funding.  The legislation passed by the state did not technically cut base per pupil funding.  Rather, the state used a complicated formula to reduce overall funds for districts that the state says are not base per pupil funds.  That might sound reasonable to someone who does not understand school finance or the intent of the voters in amending the constitution.  To others, this is preposterous.

First, the will of the voters was to obligate the state to increase funding for schools, which up until that point had been woefully low.  Any way you run the numbers, the state of Colorado's new legislation has permitted it to reduce education funding.

Second, the constitutional amendment did not define base per pupil funding, and there is no definitive school finance dictionary to look to for its meaning.  But that term as commonly understood by experts has a few aspects.  It refers to the state funding per pupil for regular education students.  Most states add to that base number for students who have special needs, such as poverty, language, disability, homelessness, etc.  If the base funding per pupil was $7,000, schools would get $7000 for every student they enrolled.  For every student with special needs, the school might get some additional funding beyond the base.  With that said, some states might say the base funding per pupil for general education students is $7000 and the base funding per pupil for low income students is $9000.  Thus, there would be more than one base funding number.

Another aspect of base funding is locality costs.  Due to geography, district size, etc., it may cost more to educate a regular education student in Denver than say Grand Junction.  A state would use a multiplier to make those adjustments.  The multiplier for Denver might be 1.1 and for Grand Junction 1.0.  With a base per pupil funding level of $7000, Denver would get $7,700 per pupil after the multiplier and Grand Junction $7,000.

Under both aspects of base funding, the base funding is the number that the state adds to when it doles out money to districts.  As long as the base number increases, school funding per pupil does not go down.  Presumably, this is the reason the amendment used that phrase.  It allowed voters to ensure increases in overall education funding without needing to understand the ins-and-outs of school finance multipliers.

Rather that apply this plain meaning, the Colorado Supreme Court used the state's new complicated work-around definitions of base funding and called it plain meaning.  This is, of course, problematic because if the legislature is allowed to define base funding any way it wants and change the meaning from year to year, the voters' will and intent become irrelevant.  This is exactly what has happened.

Relying on the state's definitions, the court reasoned that the state had actually increased base funding each year.  The cuts came at the end of the process when the state reduced the final total funds sent to districts. Those cuts were not cuts to base funding, according to the court, but just reductions in spending. 

This is the sort of fancy accounting and defining that gets taxpayers sent to jail.  This is like a taxpayer claiming on his federal return that he paid $10,000 in local real estate taxes this year--which he did on October 1--but refusing to acknowledge he got a $3,000 real estate tax relief check back from local government on October 30.  In school finance, the state is doing the inverse.  It is saying it is giving schools $7000 per pupil base funding, for instance, but only sending them a check for $6,700.

Or this is like state government enacting ten new mandatory holidays, but refusing to pay hourly workers for those holidays and claiming it has not reduced their salaries.  Their hourly rates may have stayed the same or could have even been increased, but their w-2's at the end of the year will be smaller.

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