rolling the dice

The legislative habit of gambling on the future

One of the many peculiarities of Colorado’s complex state budgeting process is the legislature’s weakness for spending – or at least promising to spend – money before it’s even collected.

The latest example popped up just last week, when the House approved House Bill 14-1342, a measure that would provide extra funding for higher education construction projects – but only if the 2013-14 budget year ends with more surplus revenues than currently predicted.

K-12 education has benefited from such tactics in the past, and there has been some fear in districts that this year’s higher ed plan might disadvantage K-12.

The scheme probably means that the State Education Fund would receive a smaller infusion of cash than it might have otherwise. But in any event the higher ed finance plan won’t affect district funding in 2014-15, an issue that’s the focus of a separate – and bigger – debate.

“It’s based on ‘if’ there’s money left at the end of the year,” said Dillon Democratic Rep. Millie Hamner, chair of the House Education Committee.

So the K-12 lobby has decided not to pick a fight over HB 14-1342 and instead to remain focused on its main goal for 2014 – persuading lawmakers to make as large a dent as possible in the state’s $1 billion K-12 funding shortfall.

“Do we like this amendment? No!” Bruce Caughey, executive director of the Colorado Association of School Executives wrote in an email to members last week. He said the CASE legislative team recommended “that we do not get drawn into a battle with higher education, the governor and the Joint Budget Committee” and remain focused on reducing the shortfall, known at the statehouse as the “negative factor.” A group of superintendents is pushing for a reduction of as much as $275 million. A pending bill, House Bill 14-1292, proposes $100 million.

That doesn’t mean HB 14-1342 will get a free ride in the Senate. Denver Democratic Sen. Pat Steadman, vice-chair of the Joint Budget Committee, doesn’t like the idea of earmarking unknown future revenues. “I’m not the biggest fan,” Steadman said Tuesday morning before the bill was approved by the Senate Appropriations Committee. “I expect we’ll be talking more about the bill on the floor,”

Budget timeline
  • The legislature will vote by May 7 on a budget for the 2014-15 fiscal year, which starts July 1.
  • That budget is based on revenue estimates that were issued in late March.
  • Actual tax collections almost always differ from those estimates, especially when revenues are increasing.
  • So, backers of HB14-1342 are betting that when the state closes its 2013-14 books next fall there will be a bigger actual surplus than was predicted this spring, providing money for buildings.

Summary of HB 14-1342

Like virtually every other budget fight, the HB 14-1342 tussle has its roots in the 2008 recession, which sent state tax revenues into a tailspin. Among the many programs cut was construction on college campuses.

Revenues have been slowly recovering over the last two years, and lawmakers, lobbyists and executive branch bureaucrats hoped the 2014 legislative session would provide the opportunity to put some catch-up spending in the 2014-15 budget.

Even before the session started, Gov. John Hickenlooper proposed a $100 million increase in higher ed operating funds, a plan widely supported in the legislature. And college leaders and lobbyists also were looking forward to a boost in construction funding.

The Capital Development Committee, a joint House-Senate panel that reviews construction projects, produced a list that included some college projects. But the committee’s plans were derailed on March 20 when JBC members announced they would back an alternative project list supported by Gov. John Hickenlooper, which included only two higher education buildings, one at the Auraria Higher Education Center and one at the University of Colorado campus in Colorado Springs.

That’s when the higher education lobby and sympathetic legislators sprang into action and came up with the plan to spend possible future money on those campus buildings. The amendment was added to the bill last Thursday and given final approval in the House on Friday.

The amended bill protects two programs that the 2013 legislature had designated as recipients of sany urplus funds – the Colorado Water Conservation Board ($30 million) and the State Education Fund ($31.1 million).

In theory, that means the SEF would get less money than it would have under a 2013 law that allocated 75 percent of any surplus to the fund. (The SEF is a dedicated account that is used to supplement state General Fund spending on schools and for other K-12 spending.)

Even with the cap on the SEF transfer, Hamner called the bill “a fair compromise,” adding, “I have to look at the bigger view” of both K-12 and higher ed needs.

If there’s enough surplus to cover the water board and SEF transfers (plus $10.3 million to be kept in the General Fund), then any money above that would go to a ranked list of higher education construction projects. There’s a cap of $119.5 million on the campus spending. If the surplus revenue is more than about $190 million, the money above that goes to the SEF.

In past years lawmakers have used the future-revenues gambit to benefit the education fund, and those gambles have paid off. For instance, the SEF last fall received slightly more than $1 billion in 2012-13 surplus funds.

And K-12 advocates are trying to go back to that well. A House amendment to House Bill 14-1298, the annual School Finance Act, proposes diverting 75 percent of any 2014-15 surplus into the SEF.

Earmarking to-be-collected funds, whatever the purpose, bothers Steadman, one of the legislature’s budget experts. “It’s not the way to do it,” he said in an interview. Noting that the legislature meets every year, he notes, “We’ll be here next year to spend next year’s money.” Budgeting should be done “in real time,” he said.

He also said earmarking too much money ahead of time might limit the 2015 legislature’s ability to make annual mid-year budget adjustments.

The Senate is considering HB 14-1342 this week, along with the main 2014-15 budget, House Bill 14-1336. Steadman says he’ll have some proposed amendments for the higher ed construction bill, so the debate will continue.

Use the Education Bill Tracker for links to bill texts and other information.

money matters

Why Gov. Hickenlooper wants to give some Colorado charter schools $5.5 million

Students at The New America School in Thornton during an English class. (Photo by Nic Garcia)

If Mike Epke, principal of the New America School in Thornton, had a larger budget, he would like to spend it on technical training and intervention programs for his students.

He would buy more grade-level and age appropriate books for the empty shelves in his school’s library, and provide his teachers with a modest raise. If he could really make the dollars stretch, he’d hire additional teacher aides to help students learning with disabilities.

“These are students who have not had all the opportunities other students have had,” the charter school principal said, describing his 400 high school students who are mostly Hispanic and come from low-income homes.

A $5.5 million budget request from Gov. John Hickenlooper, a Democrat, could help Epke make some of those dreams a reality.

The seven-figure ask is part of Hickenlooper’s proposed budget that he sent to lawmakers earlier this month. The money would go to state-approved charter schools in an effort to close a funding gap lawmakers tried to eliminate in a landmark funding bill passed in the waning days of the 2017 state legislative session.

Funding charter schools, which receive tax dollars but operate independently of the traditional school district system, is a contentious issue in many states. Charter schools in Colorado have enjoyed bipartisan support, but the 2017 debate over how to fund them hit on thorny issues, especially the state’s constitutional guarantee of local control of schools.

The legislation that ultimately passed, which had broad bipartisan support but faced fierce opposition from some Democrats, requires school districts by 2020 to equitably share voter-approved local tax increases — known as mill levy overrides — with the charter schools they approved.

The bill also created a system for lawmakers to send more money to charter schools, like New America in Thornton, that are governed by the state, rather than a local school district.

Unlike district-approved charter schools, which were always eligible to receive a portion of local tax increases, state-approved charter schools haven’t had access to that revenue.

Terry Croy Lewis, executive director of the Charter School Institute, or CSI, the state organization that approves charter schools, said it is critical lawmakers complete the work they started in 2017 by boosting funding to her schools.

“It’s a significant amount of money,” she said. “To not have that equity for our schools, it’s extremely concerning.”

CSI authorizes 41 different charters schools that enrolled nearly 17,000 students last school year. That’s comparable to both the Brighton and Thompson school districts, according to state data.

Hickenlooper’s request would be a small step toward closing the $18 million gap between state-approved charter schools and what district-run charter schools are projected to receive starting in 2020, CSI officials said.

“Gov. Hickenlooper believes that working to make school funding as fair as possible is important,” Jacque Montgomery, Hickenlooper’s spokeswoman, said in a statement. “This is the next step in making sure that is true for more children.”

If lawmakers approve Hickenlooper’s request, the New Legacy charter school in Aurora would receive about $580 more per student in the 2018-19 school year.

Jennifer Douglas, the school’s principal, said she would put that money toward teacher salaries and training — especially in the school’s early education center.

“As a small school, serving students with complex needs, it is challenging and we need to tap into every dollar we can,” she said.

The three-year old school in Aurora serves both teen mothers and their toddlers. Before the school opened, Douglas sent in her charter application to both the Aurora school board and CSI. Both approved her charter application, but because at the time her school would receive greater access to federal dollars through CSI, Douglas asked to be governed by the state.

Douglas said that her preferred solution to close the funding gap would be to see local tax increases follow students, regardless of school type or governance model. Until that day, she said, lawmakers must “ensure that schools have the resources they need to take care of the students in our state and give them the education they deserve.”

For Hickenlooper’s request to become a reality, it must first be approved by the legislature’s budget committee and then by both chambers. In a hyper-partisan election year, nothing is a guarantee, but it appears Hickenlooper’s proposal won’t face the same fight that the 2017 charter school funding bill encountered.

State Rep. Jovan Melton, an Aurora Democrat who helped lead the charge against the charter school funding bill, said he was likely going to support Hickenlooper’s proposal.

“You almost have to do it to be in alignment with the law,” Melton said. “I don’t think with a good conscious I could vote against it. I’m probably going to hold my nose and vote yes.”

Payment dispute

Fired testing company seeks $25.3 million for work on TNReady’s bumpy rollout

PHOTO: TN.gov

Tennessee officials won’t talk about the state’s ongoing dispute with the testing company it fired last year, but the company’s president is.

Henry Scherich

Henry Scherich says Tennessee owes Measurement Inc. $25.3 million for services associated with TNReady, the state’s new standardized test for its public schools. That’s nearly a quarter of the company’s five-year, $108 million contract with the state, which Tennessee officials canceled after technical problems roiled the test’s 2016 rollout.

So far, the state has paid the Durham, North Carolina-based company about $545,000 for its services, representing about 2 percent of the total bill, according to a claim recently obtained by Chalkbeat.

Measurement Inc. filed the claim with the state in February in an effort to get the rest of the money that it says it’s owed. Since then, lawyers for both sides have been in discussions, and the company filed a lawsuit in June with the Tennessee Claims Commission. The commission has directed the State Department of Education to respond to the complaint by Nov. 30.

“We’re moving forward,” Scherich told Chalkbeat when asked about the status of the talks. “… We’re simply asking to be paid for the services we provided.”

Education Commissioner Candice McQueen declined last week to discuss the dispute, which she called “an ongoing pending lawsuit.” A spokesman for the attorney general’s office also declined to comment on Monday.

Scherich said he and other company officials have not been called to Nashville for hearings or depositions.

“Our lawyers and the state’s lawyers are still skirmishing each other,” he said. “…They argue about lots of things. It’s kind of like we’re establishing the ground rules for how this process is going to proceed.”

PHOTO: Grace Tatter
Education Commissioner Candice McQueen announced the firing of Measurement Inc. and the suspensions of most testing in April 2016.

Tennessee’s dramatic testing failure started on Feb. 8, 2016, when students logged on during the first morning of testing and were unable to load TNReady off the new online platform developed by Measurement Inc. The fallout culminated several months later when McQueen fired the company and canceled testing altogether for grades 3-8. In between were months of delays after McQueen instructed districts to revert to paper-and-pencil materials that would be provided by Measurement Inc. under the terms of their contract. Many of those materials never arrived.

The company’s claim suggests that the state was hasty in its decision to cancel online testing and therefore shares blame for a year of incomplete testing.

The Tennessee Department of Education “unilaterally and unjustifiably ordered the cancellation of all statewide electronic testing that occurred on February 8, 2016, following a transitory slowdown of network services that morning,” the claim says.

(In an exclusive interview with Chalkbeat the day before his company was fired, Scherich said Measurement Inc.’s online platform did not have enough servers for the 48,000 students who logged on that first day — a problem that he said could have been fixed eventually.)

The claim also charges that McQueen’s subsequent order to substitute paper test materials was “unnecessary and irresponsible” and impossible to meet because of the logistical challenge of printing and distributing them statewide in a matter of weeks.

In her letter terminating the state’s contracts with Measurement Inc., McQueen describes daily problems with the company’s online platform in the months leading up to the botched launch. “This was not just a testing day hiccup; the online platform failed to function on day one of testing,” she wrote.

McQueen said those experiences contributed to her department’s conclusion that Measurement Inc. was unable to provide a reliable, consistent online platform and left her with no option but to order paper and pencil tests. She also cited the company’s failure to meet its own paper test delivery deadlines for her ultimate decision to terminate the contracts and suspend testing.

The last sentence of the four-page termination letter says the state would “work with (Measurement Inc.) to determine reconciliation for appropriate compensation due, if any, for services and deliverables that have been completed as of the termination date after liquidated damages have been assessed.”

In addition to its invoices for work under the contract, Scherich said his company is owed another $400,000 for delivering test-related materials to the state after its contract was ended.

“We didn’t want to be a company that stood in the way of the programs of the state of Tennessee, so we provided all the information they requested,” Scherich said. “We were told we would be paid, we provided the information, and then we’ve not been paid.”

Founded in 1980, Measurement Inc. had been doing testing-related work for Tennessee for more than a decade before being awarded the 2014 TNReady contract, its biggest job ever. The company had a fast deadline — only a year — to create the state’s test for grades 3-11 math and English language arts after a vote months earlier by the legislature prompted Tennessee to pull out of PARCC, a consortium of other states with a shared Common Core-aligned assessment.

Scherich said the loss of the TNReady contract was “a major hit” for his company, but that Measurement Inc. has paid every employee and subcontractor who worked on the project. “We have had to go into debt to keep ourselves viable while we wait for this situation with Tennessee to be resolved,” he said, adding that the company continues to do work in about 20 other states.

To pursue its claim, Measurement Inc. has hired the Tennessee law firm of Lewis, Thomason, King, Krieg & Waldrop, which has offices in Nashville and Knoxville.

“I’m sure we’ll work out something amicable with the state over time,” he said. “I’m an optimistic person. But I think our lawyers and their lawyers will have to have a lot of negotiations.”

Below are Measurement Inc.’s claim against the state, and the state’s letter terminating its contracts with the company.

Editor’s note: This story has been updated with details about the claim’s status.