The Law of Unintended Consequences

Education Planning on March 7th, 2014 No Comments

Prior to the School Finance Act of 1988, Colorado school districts could levy up to four mills of assessed valuation to pay for capital-related expenses, i.e., construction and maintenance of facilities.

Since 1988, the capital reserve fund was incorporated into the general fund with specific per pupil dollar amounts allocated for that purpose.  However, once the State began reducing education funding due to the recession, the legislature repealed all requirements for setting aside operating revenue for capital needs in order to give districts some flexibility to work with budget cuts.  Today, many school districts have reduced the amount of money transferred to the capital reserve fund and others have removed it altogether.

Without this requirement, school districts can now allocate more of their operating budget to per-pupil spending.  Given the recent economic conditions and Colorado’s worsening educational finance situation, school districts can certainly put this extra money to good use, but how much money are school districts losing in the long run by not budgeting toward capital improvements?  Consider the following example:

Let’s say a 4,500-student school district had a total assessed valuation of $450 million dollars.  At the pre-School Finance Act level, the district could have levied four mills of its assessed valuation to cover its capital needs, which equates to $1.8 million dollars.  In per pupil terms, this would equal $400 per pupil.   Compared with today, a school district may reserve anywhere from zero to $200 dollars per pupil.

Because K-12 funding continues to erode in Colorado, it’s highly unlikely that school districts will be able to recoup their capital reserve budgets; certainly not to the level needed for the long run.   (One way to look at it is that the State is successful in pushing capital costs back to school districts.  Maybe the legislature should re-authorize a capital reserve mill levy?  If they aren’t going to face up to the tasks at hand they should at least give local school districts some tools with which to solve the problems.)  Regardless, putting off these imminent maintenance needs does nothing but increase long run costs – the old “penny wise but pound foolish” syndrome and losing sight of the big picture.

Asking for educational funding to be restored to the level required by Amendment 23 is unrealistic given the fiscal cliff the State is facing over the next several years.  A reckoning of the three amendments (Gallagher, TABOG* and Amendment 23) must be accomplished and soon.  In the interim, my suggestions to the legislature are as follows:  

  • DON’T micromanage the BEST program.  If necessary, just tighten the guidelines as necessary and hold the BEST Board accountable – let them do what they are supposed to do;
  • Restore as much educational funding as reasonably possible; and
  • Instead of listening to the loud but generally uninformed anti-tax sentiment, do something you were elected to do – LEAD!  Stating that there is “no appetite for” a tax increase is not leading and it doesn’t provide a solution.

*: Intentionally spelled this way because it isn’t a Taxpayers Bill of Rights approved by a well-informed and financially astute electorate.  It’s a Taxpayers Bill of Goods because it was “sold” to an unwitting populace.

Let me know your thoughts! Email me or post your thoughts, below.

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