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Rural school districts that don’t generate much money from their community’s property taxes would be prioritized in changes to a state match program, letting those districts raise at least $200,000 when voters approve a new tax.
That’s one of the recommendations approved Wednesday by a working group tasked with proposing changes to Colorado’s state match program for mill levy overrides.
Overrides provide local funding for schools when voters approve taxes on top of regular school funding taxes. Some Colorado districts have voter-approved overrides that give them the maximum allowed of extra funds, 25% or 30% more than their general funding. Other districts have never been able to get voters to approve an additional tax. In some communities, the reason districts don’t ask voters is because the amount generated wouldn’t add much to their budget.
The group described the issue as one of the state’s biggest inequities in school finance, but also the most challenging to tackle. That’s because there are a variety of reasons that communities don’t approve new taxes, and because in places where they do, there are also many reasons overrides don’t generate comparable amounts across different communities.
Lawmakers, with help from finance officials from school districts, created the state’s match program in 2022. But district leaders have complained that the program has not helped much to close the disparities between what district’s can raise in additional local funds.
In 2022-23, the state gave $10 million to 27 districts through the program. More than half of the districts received less than $50,000 from the state. For the 2023-24 school year, lawmakers increased the matching funds to $21.1 million but then ended up distributing a second round of $15.7 million to additional districts after criticism of the program. The solution was a temporary one and so lawmakers created the working group to look more closely at the problem with the funding model.
Under the recommended new distribution model from the working group, which is made up of two lawmakers and seven school district finance leaders, districts classified as rural and small-rural by the state would have a different formula for eligibility and for calculating a match than urban or suburban districts.
Rural districts that are eligible based on existing voter-approved mill levy overrides, and the amount of assessed value in their community, would be topped off by the state to ensure that their override is producing a minimum of $200,000 per year.
The group proposed that the state would first dole out funding to those rural districts — currently, its estimate is that it would cost about $6 million in the first year.
Then the state would distribute the rest of the money that the legislature can appropriate each year to the urban and suburban districts after. For this second tier, the state would calculate eligibility and match amounts using a similar model to the one it already uses, except for one change to the metrics that allows at least one more district, Adams 12, to be eligible for the match.
Unlike for rural and small-rural districts, the proposed calculation for larger districts takes into account a community’s median income.
For the second group of districts, the state estimates the cost would be about $21.5 million, but could be adjusted down based on what’s left over after rural districts are prioritized.
Having a two-tiered approach “really represents a significant approach of maximizing what we can do with scarce amounts of dollars,” said one group member, Brett Johnson, the chief financial officer for the Aurora school district, who helped come up with the idea.
“No matter what manipulation you’re making to the formula, from my perspective, it was rural and small rural that got the short end of the stick,” he added. “They got significantly lower amounts that sometimes didn’t make sense.”
In one previous year, one district got only about $2,000 in total from the state match program.
One group member said she expected having a minimum state match would help more districts use the program to ask voters to approve new mill levy overrides where they haven’t in the past.
But if that holds true, some group members raised concerns that the cost of the program could quickly rise. To be eligible for a match, a community must first have a mill levy override tax. If more districts are able to convince their voters who have never approved a mill levy override tax before, based on the incentive of the state match, more districts will be eligible for state dollars.
The working group also voted to recommend that the state report a breakdown of how much money is being distributed to school districts from the program so that lawmakers may adjust the program’s formula again in the coming years.
The working group will lay out its recommendations in a final report expected to be published in the next couple of weeks.
Yesenia Robles is a reporter for Chalkbeat Colorado covering K-12 school districts and multilingual education. Contact Yesenia at yrobles@chalkbeat.org.
