2026-27 School Finance and Categorical Programs JBC Briefing.pdf (1,665 KB)

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Joint Budget Committee

Staff Budget Briefing FY 2026-27 Department of Education School Finance and Categorical Programs Prepared by: Andrea Uhl, JBC Staff December 2, 2025

Joint Budget Committee Staff 200 E. 14th Avenue, 3rd Floor Denver, Colorado·80203 Telephone: (303) 866-2061 leg.colorado.gov/agencies/joint-budget-committee

JBC Working Document - Subject to Change Staff Recommendation Does Not Represent Committee Decision

Contents Overview of Department ............................................................................................................................................ 2 Recent Appropriations............................................................................................................................................3 Graphic Overview ....................................................................................................................................................... 4 Cash Funds Detail ...................................................................................................................................................6 General Factors Driving the Budget ........................................................................................................................... 7 Public School Finance .............................................................................................................................................7 Categorical Programs........................................................................................................................................... 14 Summary of Request ................................................................................................................................................ 16 Issue: R1 State Share of Total Program .................................................................................................................... 18 Summary.............................................................................................................................................................. 18 Recommendation ................................................................................................................................................ 18 Discussion ............................................................................................................................................................ 18 Issue: R2 Categorical Programs Increase .................................................................................................................. 23 Summary.............................................................................................................................................................. 23 Recommendation ................................................................................................................................................ 23 Discussion ............................................................................................................................................................ 24 Budget Reduction Options ....................................................................................................................................... 30 Summary.............................................................................................................................................................. 30 Recommendation ................................................................................................................................................ 30 Discussion ............................................................................................................................................................ 30 FY 2025-26 Executive Order Budget Adjustments ................................................................................................... 34 Budget Reductions............................................................................................................................................... 34 Footnotes and Requests for Information ................................................................................................................. 35 Update on Long Bill Footnotes ............................................................................................................................ 35 Update on Requests for Information .................................................................................................................. 36 Department Annual Performance Report ................................................................................................................ 37 Appendix A: Numbers Pages .................................................................................................................................. A-1 Appendix B: State Education Fund Details ............................................................................................................. B-1

Additional Resources To find the online version of the briefing document search the General Assembly’s website for budget documents (content.leg.colorado.gov/content/budget#budget-documents-section).

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Overview of Department The Commissioner of Education, who is appointed by the State Board of Education, is the chief state school officer and executive officer of the Colorado Department of Education (CDE). The Commissioner and department staff, under the direction of the elected members of the State Board of Education, have the following responsibilities: •

• • • •

• • •

•

Supporting the State Board in its duty to exercise general supervision over public schools and K-12 educational programs operated by state agencies, including appraising and accrediting public schools, school districts, and the State Charter School Institute (Institute). Developing and maintaining state academic standards, and administering the associated statewide assessment program. Annually accrediting school districts and the Institute and making education accountability data available to the public. Administering the public school finance act and distributing federal and state moneys appropriated or granted to the Department for public schools. Administering education-related programs, including services for children with special needs, services for English language learners, public school transportation, adult basic education programs, and various state and federal grant programs. Administering educator licensure and professional development programs. Supporting the State Board in reviewing requests from school districts for waivers of state laws and regulations and in serving as the appellate body for charter schools. Promoting the improvement of library services statewide to ensure equal access to information, including providing library services to persons who reside in state-funded institutions and to persons who are blind and/or physically disabled. Maintaining the Colorado virtual library and the state publications library.

The Department also includes three “type 1” agencies: • • •

A seven-member Board of Trustees that is responsible for managing the Colorado School for the Deaf and the Blind, located in Colorado Springs. A nine-member State Charter School Institute Board that is responsible for authorizing and monitoring the operations of “institute charter schools” located within certain school districts. A nine-member Public School Capital Construction Assistance Board that is responsible for assessing public school capital construction needs statewide and making recommendations concerning the prioritization and allocation of state financial assistance for school construction projects.

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Recent Appropriations Department of Education Funding Source

FY 2023-24

FY 2024-25

FY 2025-26

General Fund [2]

$4,710,633,330

$4,526,083,284

$4,669,994,198

$4,712,488,079

Cash Funds

1,719,689,563

2,421,238,393

2,114,235,075

2,250,994,372

Reappropriated Funds

FY 2026-27 [1]

82,257,878

55,424,996

55,914,660

56,776,229

Federal Funds

1,049,944,421

870,229,410

849,259,856

850,810,920

Total Funds

$7,562,525,192

$7,872,976,083

$7,689,403,789

$7,871,069,600

661.9

742.1

751.4

750.5

Full Time Equivalent Staff

[1] Requested appropriation. [2] Includes General Fund exempt.

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Graphic Overview Department's Share of Statewide General Fund

27.6%

Based on the FY 2025-26 appropriation.

Department Funding Sources

General Fund

60.7%

Cash Funds

27.5%

Federal Funds

11.0%

Reappropriated Funds

0.7%

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Based on the FY 2025-26 appropriation.

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Distribution of General Fund by Division School District Ops - School Finance

97.5%

Charter School Institute

0.6%

Management and Administration

0.5%

Student Pathways

0.4%

Deaf and Blind School

0.3%

Educator Talent

0.3%

School Quality and Support

0.2%

Student Learning

0.1%

Library Programs

0.1%

School District Ops - Other

0.0%

Statewide Assessment

0.0% 0% Based on the FY 2025-26 appropriation.

100%

Distribution of Total Funds by Division School District Ops - School Finance

81.3%

School District Ops - Other

13.5%

Charter School Institute

1.3%

Student Learning

1.1%

Student Pathways

0.8%

Management and Administration

0.6%

Statewide Assessment

0.4%

Deaf and Blind School

0.3%

School Quality and Support

0.3%

Educator Talent

0.2%

Library Programs

0.1%

0% on the FY 2025-26 appropriation. Based

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100%

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Cash Funds Detail Department of Education – School Finance/Categorical Programs Cash Funds Detail Fund Name or Group State Education Fund

FY 2025-26 Approp.

Primary Sources of Fund Revenue

$1,411,704,697 [1] 0.3% of taxable income

Primary Uses in This Department Used throughout Department for eligible activities under Amendment 23; majority is for state share of total program and categorical programs

State Public School Fund

73,676,932 [1] 48.3% of non-bonus federal mineral State share of total program, state match for lease revenue, 12.6% of marijuana federal school lunches, supplemental online special sales tax collections, Public education programs School Fund interest earnings, revenue above the $150 million cap on the Public School Capital Construction Assistance Fund

Contingency Reserve Fund

1,000,000 [1] Transfer from General Fund

Public School Transportation Fund

Total

450,000 [1] Transfer from General Fund

State Board can authorize payments to assist districts with specific financial emergencies Provide operating expenditures for transportation for eligible districts, CSI schools, and facility schools

$1,486,831,629

[1] TABOR exempt.

Additional detail for select funds The use of the State Education Fund (SEF) for costs related to school finance is discussed later in this document; Appendix B includes a complete list of appropriations and transfers from the SEF.

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General Factors Driving the Budget For school finance (the Public School Finance and Categorical Programs subdivisions of the Department’s School District Operations division), the FY 2026-27 request consists of 71.7 percent General Fund, 24.9 percent cash funds, and 3.3 percent federal funds. Although local government revenues provide a significant source of funding for K-12 education in Colorado (including an estimated $4.6 billion for total program in FY 2025-26), local funds are not reflected in the State's annual appropriations to the Department of Education. The following sections review the role of the school finance formula and categorical programs in driving the Department’s annual budget.

Public School Finance The state share of districts’ total program funding for the public school finance formula is the primary driver of the Department’s budget. With $5.5 billion total funds and $4.4 billion General Fund, the state share represents 71.1 percent of the Department’s total budget and 94.0 percent of its General Fund appropriations in FY 202526.

Constitutional Requirements The Colorado Constitution requires the General Assembly to provide for the "establishment and maintenance of a thorough and uniform system of free public schools throughout the state". To meet this requirement, the General Assembly has established a statutory public school finance formula that takes into consideration the individual characteristics of each school district in order to provide thorough and uniform educational opportunities. That formula produces a “total program” funding amount for each school district, which is supported by both local and state revenues, and provides the primary source of funding for public schools in Colorado. For FY 2025-26, the formula allocates a total of $10.0 billion in state and local funds among Colorado’s 178 school districts and the State Charter School Institute. Section 17 of Article IX of the Colorado Constitution (passed by voters in 2000 as Amendment 23) requires the General Assembly to provide annual inflationary increases in the statewide base per pupil funding amount, which provides the foundation of the statutory school finance formula. For FY 2001-02 through FY 2010-11, this provision required base per pupil funding to increase annually by at least the rate of inflation plus one percent; for FY 2011-12 and subsequent fiscal years, the statewide base must increase annually by at least the rate of inflation. For example, for FY 2025-26, this provision required the General Assembly to increase the statewide base per-pupil funding amount by at least $195.42 (from $8,496 to $8,692), based on the actual 2.3 percent increase in the Denver-Aurora-Lakewood consumer price index in calendar year 2024.

Public School Finance Formula Public School Finance Act of 1994 (Old Formula) The Public School Finance Act of 1994 established a school finance formula used to distribute state and local funding to Colorado’s 178 school districts. Although the formula was modified over the years, the basic, 02-Dec-2025

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underlying structure of the formula was not changed until the passage of H.B. 24-1448 (New Public School Finance Formula). After accounting for the 74.2 percent of total program funding dedicated to the statewide base in FY 2024-25, the factors in the school finance formula that account for individual district characteristics drove the remaining 25.8 percent of total program. For FY 2024-25, the formula included the following factors: cost of living, size, at-risk, English language learner (ELL), and rural. From FY 2008-09 through FY 2023-24 the General Assembly used the budget stabilization factor (BSF) to reduce districts’ total program funding to a specified total amount based on available state revenues. In addition, the old formula required a minimum level of per-pupil funding ($10,792 per pupil for FY 2024-25 after the application of the budget stabilization factor), regardless of the impact of the above factors. Nine districts received funding based on minimum per-pupil funding in FY 2024-25. The old formula also provided a fixed amount of funding per pupil ($10,244 in FY 2024-25) for two types of students: • •

Students receiving full-time, online instruction through a multi-district program. (The formula funds students in single-district online programs at the same level as the district’s “brick and mortar” students.) Extended high school students in grades 13 or 14 in a Pathways in Technology Early College High School (PTECH) program and students in their fifth and sixth year of high school participating in the Teacher Recruitment Education and Preparation (TREP) Program.

H.B. 24-1393 limited the rate for students enrolled in a fifth year of high school through the Accelerating Students through Concurrent Enrollment (ASCENT) program to $9,588 per pupil for FY 2024-25, which was the amount of the FY 2023-24 extended high school rate.

New Public School Finance Formula (H.B. 24-1448 and H.B. 25-1320) House Bill 24-1448 (New Public School Finance Formula) enacted a new school finance formula beginning in FY 2025-26 and phased in over several years. The biggest difference between the old and new formulas is that the 1994 formula structure is multiplicative, meaning that the district adjustments made to the base for the cost of living and size factors flow through to the amount of funding that districts receive for the other factors. The new formula is additive, meaning that each factor is calculated directly using the base per pupil amount in the new formula, and then funding for each factor is additively summed to calculate district total program funding.

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The new formula changes the way the existing factors are calculated, creates two new factors (special education funding and locale), and removes the rural funding factor that existed in FY 2024-25. Components of the new formula are as follows: Foundation funding: The base per pupil amount, which is $8,692 for FY 2025-26 and constitutionally required to increase each year by at least the rate of inflation, is multiplied by the district’s funded pupil count to determine a district’s foundation funding. Student factors: At-risk, ELL, and special education factors are calculated directly off the base per pupil amount. Online and extended high school are funded at a flat rate per student. • • • •

At-risk: Increases from 0.12 to 0.25 for most districts. ELL: Increases the ELL factor from 0.08 to 0.25. Special education: New factor added at 0.25. This factor does not impact categorical funding for special education. Online and extended high school: H.B. 24-1448 did not change how online and extended high school funding are calculated. However, S.B. 25-315 (Postsecondary and Workforce Readiness Programs) reduces the Accelerating Students Through Concurrent Enrollment (ASCENT) rate from $10,480 to $7,140 in FY 202526 and repeals ASCENT in FY 2026-27. The Teacher Recruitment and Education Preparation (TREP), Pathways in Technology Early College High School (P-Tech), and online rate for FY 2025-26 is $10,480.

District factors: The new formula modifies the calculation of the size and cost of living factors and creates a new locale formula for some districts. These factors are multiplied by the base per pupil x funded pupil count (excluding online and extended high school). •

•

Cost of living: Under the old formula, district cost of living factors were applied only to the portion of the base associated with personnel costs, and because of the way they were calculated, could never decrease. Under the new formula, a district’s cost of living factor is applied to the full base. In addition, factors are recalculated every two years by comparing district cost of living to the cost in the lowest cost of living district. Cost of living factors can thus increase or decrease every two years when recalculated, but cannot exceed 0.23. Size: The new formula utilizes the same size factor calculation structure as the old formula, except that only districts with a funded pupil count of 6,500 or less receive size factor funding. The new formula does not include size factor smoothing or charter school subtraction provisions. Locale funding: New factor based on a district’s locale designation, as determined by the federal National Center for Education Statistics. Only districts with the following locale designations receive funding, at the weight in parenthesis, and districts classified as rural remote or town remote receive their locale factor calculation, plus $100,000. ◦ Rural fringe (0.15), rural distant (0.2), rural remote (0.25), town fringe (0.025), town distant (0.05), town remote (0.1)

Due to budget constraints, certain components of H.B. 24-1448 were subsequently amended by H.B. 25-1320 (School Finance Act). The structure of the new formula was left unchanged, but the phase-in, student averaging, and hold harmless provisions were amended as shown below. New Formula Phase-In Year FY 2025-26

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H.B. 24-1448 18%

H.B. 25-1320 15%

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Year FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 FY 2031-32

H.B. 24-1448 34% 50% 66% 82% 100% 100%

H.B. 25-1320 30% 45% 60% 75% 90% 100%

The old formula allowed districts to use up to five-year averaging to calculate their funded pupil count. Averaging was reduced to a maximum of four years by H.B. 24-1448 and further reduced by H.B. 25-1320. Student Averaging Year FY 2025-26 FY 2026-27

H.B. 24-1448 Four-year Four-year

FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 FY 2031-32

Four-year Four-year Four-year Four-year Four-year

H.B. 25-1320 Four-year Three-year, except use four-year if formula not phased-in at 30% in FY 2026-27 Three-year, except drop to two-year or smoothing if SEF balance projected below $200 million at end of FY 2026-27 Averaging or smoothing provision determined in FY 2027-28 Averaging or smoothing provision determined in FY 2027-28 Averaging or smoothing provision determined in FY 2027-28 Averaging or smoothing provision determined in FY 2027-28

H.B. 25-1320 also changed the hold harmless provisions established by H.B. 24-1448: • • •

For FY 2025-26 and FY 2026-27, districts receive the greater of their actual FY 2024-25 total program or their phased-in total program under the new formula. Twenty-one districts are being held harmless in FY 2025-26. For FY 2027-28 through FY 2030-31, districts receive the greater of the old formula + 1% or their phased-in total program under the new formula. Beginning in FY 2027-28, the averaging used to calculate the new formula is also used for calculating the old formula for hold harmless purposes.

State and Local Share The formula’s calculations of each district’s per pupil allocation do not account for or determine whether the funding comes from state or local sources. After determining each district’s allocation, Legislative Council Staff (LCS) and the Department determine the state and local shares for each district based on the local revenues available. Local property and specific ownership taxes provide the first source of revenue for each district's total program funding. Property taxes are based on each district's tax rate (the mill levy) and the portion of property value that is taxable (the assessment rate). Specific ownership taxes are paid when registering a motor vehicle. These local tax revenues are collected and expended by each school district, and thus are not reflected in the state budget. The FY 2025-26 appropriation anticipates a total of $4.6 billion in local tax revenues will be available to support public schools pursuant to the statutory school finance formula - this amount does not include any bond or override mills, as those are outside of the school finance formula. State appropriations fill the gap between local tax revenues and total program funding for each district. Two constitutional provisions have historically limited property tax revenues available for public school operations: 02-Dec-2025

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•

In 1982, voters approved a property tax reform measure that included a provision (generally called the "Gallagher amendment") that initially reduced the residential assessment rate from 30.0 percent to 21.0 percent, and then capped the residential share of property taxes at approximately 45 percent, which forced continued reductions in the residential assessment rate to maintain the residential share of property taxes as residential property values rose faster than overall property values. As a result of the Gallagher amendment, the residential assessment rate declined from 30.00 percent to 7.15 percent. Voters repealed the Gallagher amendment through approval of Amendment B in the 2020 election, which resulted in the residential assessment rate remaining at 7.15 percent rather than continuing to decline based on the Gallagher formula. Assessment rates have since been altered by several different property tax related bills. In 1992, voters approved the Taxpayer's Bill of Rights (TABOR). Prior to TABOR, local governments could generally collect and spend the same amount of property tax revenue each year by periodically increasing or decreasing mill levies. With respect to school district property taxes, TABOR: (1) imposes a property tax revenue limit based on inflation and changes in student enrollment; (2) prohibits districts from increasing a mill levy without voter approval; and (3) requires voter approval for any increase in assessment rates (which are set statewide). TABOR reduced local revenues as a share of total program funding by reducing school district mill levies from the uniform mill of 40.080 (established by the General Assembly in 1988) to disparate mill levies ranging from 1.680 to 27.000. Senate Bill 07-199 (School Finance Act) froze total program mill levies in most school districts starting in FY 2007-08 and stopped most districts’ levies from continuing to decline. Two more recent bills (H.B. 20-1418 (School Finance) and H.B. 21-1164 (Total Program Mill Levy Tax Credit)) require certain school districts to increase mill levies that had been reduced in error in previous years. House Bill 20-1418 required the mill levy collections but also instituted a system of mill levy credits in affected districts that prevented any change in property taxes paid for FY 2020-21. However, with the enactment of H.B. 21-1164, affected districts began phasing out the mill levy credits at a rate of 1.0 mill per year in FY 2021-22, increasing the local revenues available for school finance.

As a result of the aforementioned circumstances, the State’s share of total program funding increased from 43.2 percent in CY 1988 to 66.6 percent in FY 2014-15, while the local share fell from 56.8 percent to 33.4 percent. The mill levy changes instituted by H.B. 20-1418 and H.B. 21-1164 are increasing local revenues compared to what they would have been absent those statutory changes.

State and Local Share of Total Program Over Time 70.0% 65.0% 60.0%

State Share

55.0% 50.0% 45.0% 40.0%

Local Share

35.0% 30.0%

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Historic Trends Total program funding and statewide average per pupil funding both increased relatively steadily from FY 200001 through FY 2009-10, pushed upward by the inflation plus 1.0 percent requirement. Changing economic conditions and the implementation of the budget stabilization factor added volatility starting in FY 2008-09. The following graphic illustrates school districts’ total program funding by fund source from FY 2008-09 through FY 2025-26. The segments at the top of each bar illustrate the impact of the budget stabilization factor, which reach a high of $1.05 billion in FY 2020-21 and was discontinued in FY 2024-25. Total Program Funding by Source ($ billions) $12.0

BSF

$10.0

Federal Funds

$8.0

Local Funds $6.0

Other State Funds $4.0

General Fund $2.0

$0.0

Over that same period, statewide average per pupil revenue (PPR) grew from $6,882 to $11,858. However, after adjusting for inflation in FY 2024-25 dollars, growth in average PPR was $581 dollars over that time frame. Inflation-adjusted PPR actually decreased in several years over that same period, as shown in the following graph.

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Statewide average PPR gains have been modest when adjusted for inflation. $14,000

$12,000 Average PPR (nominal)

Average PPR (inflation-adjusted)

$10,000 $8,000 $6,000

$4,000 $2,000 $0 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26

Summary In summary, several factors affect the amount of state funding appropriated through the public school finance formula, including: the inflation rate, pupil counts, changes in the cost of living, the number of at-risk and ELL students, changes in the local share, changes in the calculation of formula factors, and budgetary pressures that warrant the use of cost-saving measures such as the budget stabilization factor. The following table shows key data related to school finance funding for the last three fiscal years, as well as the current appropriation for FY 2025-26 (which will be adjusted during the supplemental process). Total Program Funding: Key Data Description Funded Pupil Count Annual Percent Change Change in Denver-Boulder Consumer Price Index for Previous Calendar Year Statewide Base Per Pupil Funding Annual Percent Change Statewide Average Per Pupil Funding

FY 2022-23

FY 2023-24

FY 2024-25

FY 2025-26 Initial Approp.

879,477

859,783

853,934

845,943

-0.8%

-2.2%

-0.7%

-0.9%

3.5%

8.0%

5.2%

2.3%

$7,478

$8,076

$8,496

$8,692

3.5%

8.0%

5.2%

2.3%

$9,596

$10,670

$11,452

$11,858

Annual Percent Change

6.4%

11.2%

7.3%

3.5%

Total Program Funding [1]

$8,439,302,433

$9,174,031,433

$9,778,950,899

$10,031,606,091

Annual Percent Change

5.6%

8.7%

6.6%

2.6%

$3,449,247,817

$4,177,967,863

$4,186,738,872

$4,563,359,211

Local Share of Total Program Funding Annual Percent Change State Share of Total Program Funding

5.2%

21.1%

0.2%

9.0%

$4,990,054,616

$4,996,063,570

$5,592,212,027

$5,468,246,880

Annual Percent Change 6.0% 0.1% 11.9% [1] Reflects total program funding after application of the budget stabilization factor for FY 2022-23 and FY 2023-24.

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-2.2%

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Categorical Programs Programs designed to serve particular groups of students (e.g., students with limited proficiency in English) or particular student needs (e.g., transportation) have traditionally been referred to as "categorical" programs. Unlike public school finance funding, there is no constitutional requirement that the General Assembly increase funding commensurate with the number of students eligible for any particular categorical program. The state constitution requires1 the General Assembly to increase total state funding for all categorical programs annually by at least the rate of inflation plus one percent for FY 2001-02 through FY 2010-11, and by at least the rate of inflation for subsequent fiscal years. For example, the calendar year 2024 percentage change in the DenverAurora-Lakewood consumer price index was 2.3 percent, so the General Assembly was required to increase state funding for categorical programs in FY 2025-26 by at least that rate, equal to an additional $12.5 million. The FY 2025-26 appropriation actually totaled $17.8 million in state funds, exceeding the minimum requirement by $5.3 million. Senate Bill 22-127 (Special Education Funding) created inflationary requirements specific to special education starting with the 2024-25 budget year and declared the General Assembly’s intent to fully fund special education services each year2. Specifically, the per pupil funding provided to Tier A students was increased to $1,750 and increases annually by inflation. A series of bills provided additional appropriations totaling $109.0 million between FY 2013-14 and FY 2023-24 with the intention of funding Tier B pupils at or near the maximum $6,000 per student. The $109.0 million is also subject to annual inflationary increases. Because these calculations are tied to the number of students receiving special education services, the annual increase required to comply with special education statute has and will likely continue to exceed the Amendment 23 requirement for categorical programs as a whole if student counts continue to increase. The following graphic shows the inflationary increase required by Amendment 23 for each year since 2001-02 compared to the actual increases provided.

Actual Increases Compared to Minimum Required $90.0 $80.0

Millions

$70.0 $60.0 $50.0 $40.0 $30.0

Required Increase

Actual Increase

$20.0 $10.0 $0.0

1 2

Colorado Constitution, Article IX, Section 17, created by Amendment 23 Section 22-20-114, C.R.S. (1)(c)(III) and (1.3)

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The General Assembly annually determines how to allocate the required increase among the various categorical programs. Since FY 2000-01, the General Assembly has increased state funding for categorical programs by $417.0 million. In certain fiscal years (including every year since FY 2021-2022), the General Assembly has elected to increase state funding by more than the minimum, constitutionally-required amount, resulting in a larger base to which the required inflationary requirement is applied each year. The following table shows the change in state funding for each categorical program since FY 2000-01. Increases in State Funding for Categorical Programs Since FY 2000-01 FY 2000-01 Appropriation $71,510,773 3,101,598 36,922,227 17,792,850 5,500,000 5,788,807 948,140 600,000

FY 2025-26 Appropriation $388,694,798 35,866,264 72,973,821 32,689,057 16,793,762 9,473,039 1,606,548 1,115,829

Total

$142,164,395

$559,213,118

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Long Bill Line Item Special Education - Children with Disabilities English Language Proficiency Program Public School Transportation Career and Technical Education Programs Special Education - Gifted and Talented Children Expelled and At-risk Student Services Grant Program Small Attendance Center Aid Comprehensive Health Education

Total Increase in State Funds by Dollar and Percentage $317,184,025 443.5% 32,764,666 1056.4% 36,051,594 97.6% 14,896,207 83.7% 11,293,762 205.3% 3,684,232 63.6% 658,408 69.4% 515,829 86.0% $417,048,723

293.4%

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Summary of Request Department of Education Total Funds

General Fund [1]

Cash Funds

Reapprop. Funds

Federal Funds

FTE

FY 2025-26 Appropriation SB25-206 (Long Bill) Other legislation

$7,756,003,663 -66,599,874

$4,711,597,574 -41,603,376

$2,139,481,573 -25,246,498

$55,664,660 250,000

$849,259,856 0

742.3 9.1

Total

$7,689,403,789

$4,669,994,198

$2,114,235,075

$55,914,660

$849,259,856

751.4

$4,669,994,198 50,000,000 0 -3,916,033 0

$2,114,235,075 116,990,163 14,539,542 0 450,000

$55,914,660 0 0 0 0

$849,259,856 0 0 0 0

751.4 0.0 0.0 0.0 0.0

-950,000

0.0

-233,273

0.0

-100,000 -202,079 47,603

0 -92,292 0

0 -8,646 0

0 -41,996 0

0.0 0.0 0.0

2,462,638 -295,487 356,101 -5,858,862

900,472 18,600 2,086 5,133,999

869,828 -1,344 1,731 0

1,572,140 12,886 8,034 0

0.0 0.0 1.8 -2.7

$7,871,069,600

$4,712,488,079

$2,250,994,372

$56,776,229

$850,810,920

750.5

$181,665,811 2.4%

$42,493,881 0.9%

$136,759,297 6.5%

$861,569 1.5%

$1,551,064 0.2%

-0.9 -0.1%

Item

FY 2026-27 Requested Appropriation FY 2025-26 Appropriation $7,689,403,789 R1 State share of total program 166,990,163 R2 Categorical programs increase 14,539,542 R3 CSI Mill Levy Equalization -3,916,033 R4 BEST assessment IT system 450,000 R5 READ Act awareness campaign and evaluation -950,000 R6 Restructuring social studies assessment -233,273 R7 Local Accountability Grant Program reduction -100,000 R8 Administrative efficiencies -345,013 R9 CSDB teacher salary increase 47,603 Employee compensation common policies 5,805,078 Operating common policies -265,345 Impacts driven by other agencies 367,952 Prior year actions -724,863 Total Increase/-Decrease Percentage Change [1] Includes General Fund Exempt.

R1 State share of total program [legislation]: The Executive Branch’s school finance request proposes implementing the new formula as planned for FY 2026-27 but anticipates pausing implementation for FY 202728. Year 1: A net increase of $167.0 million. This includes increases of $50.0 million General Fund, $45.3 million from the State Education Fund, and $71.7 million from the State Public School Fund. Year 2: Anticipates a General Fund increase of $275.0 million above the FY 2026-27 request and a pause in the implementation of the new school finance formula. See the first issue brief in this document for a detailed discussion of the school finance formula.

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R2 Categorical programs increase: The Department requests $14.5 million to meet its constitutional requirement3 to increase categorical programs by at least the rate of inflation each year. The request is based on the Office of State Planning and Budgeting’s (OSPB) estimated 2.6 percent inflation rate and will be paid from the State Education Fund. The requested increase for each categorical program line is shown below. See the second issue brief in this document for a detailed discussion of categorical program funding. R2 Requested Increases in State Funding for Categorical Programs Long Bill Line Item Special Education - Children with Disabilities English Language Proficiency Program Public School Transportation Career and Technical Education Programs Special Education - Gifted and Talented Children Expelled and At-risk Student Services Grant Program Small Attendance Center Aid Comprehensive Health Education Total

FY 2025-26 Appropriation $388,694,798 35,866,264 72,973,821 32,689,057 16,793,762 9,473,039 1,606,548 1,115,829

FY 2026-27 Request $398,800,863 36,555,792 75,256,184 33,769,287 17,167,234 9,478,248 1,607,186 1,117,866

Change in State Funding $10,106,065 689,528 2,282,363 1,080,230 373,472 5,209 638 2,037

Percent Change 2.6% 1.9% 3.1% 3.3% 2.2% 0.1% 0.0% 0.2%

$559,213,118

$573,752,660

$14,539,542

2.6%

Prior year actions: The request for School District Operations - subdivisions (A) Public School Finance and (B) Categorical Programs includes a net decrease of $15.9 million for the impact of prior year budget decisions and legislation. However, staff has noted an error of -$13.9 million from the State Education Fund related to H.B. 251320 (School Finance Act). The adjustment for total program savings attributable to H.B. 25-1320 was also included in calculations for R1 and is therefore double counted. The Department indicates that it will submit a corrected budget amendment in January. Prior year actions

Item SB 23-287 School Finance Act FY 25-26 Salary survey FY 25-26 Step Plan HB 25-1320 School Finance Act

Total Funds $1,058,115 320,267 74,320 -17,365,530

Total

-$15,912,828

General Fund $0 40,340 6,259 0

Cash Funds $1,058,115 6,531 2,144 -17,365,530

Reapprop. Funds $0 0 0 0

$46,599

-$16,298,740

Federal Funds $0 273,396 65,917 0

FTE 0.0 0.0 0.0 0.0

$339,313

0.0

Colorado Constitution, Article IX, Section 17, created by Amendment 23

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Issue: R1 State Share of Total Program Current law requires the General Assembly to implement the new school finance formula at 30 percent in FY 2026-27 while allowing up to 3-year averaging. The Executive Branch R1 State Share of Total Program request does not propose any changes for FY 2026-27, but anticipates that implementation will be paused in FY 2027-28. Many of the underlying assumptions in the R1 calculation will change with the December economic and revenue forecast(s). The January budget submission will incorporate updated data that will be used to adjust the FY 2025-26 appropriation and analyze the sustainability of implementing the new formula in FY 2026-27 onwards.

Summary • • •

Current law, as enacted in H.B. 25-1320 (School Finance Act), requires the General Assembly to implement the new school finance formula at 30 percent in FY 2026-27 while allowing up to 3-year averaging. The Governor’s budget request does not include any statutory changes to the formula for FY 2026-27, but suggests a likely implementation pause in FY 2027-28. Based on Legislative Council Staff projections, the General Assembly should start considering one or more cost savings measures no later than FY 2027-28 to reduce the cost of the school finance formula.

Recommendation Staff recommends that the Joint Budget Committee, the Education Committees, sponsors of the next School Finance Act, and other interested parties start discussing statutory changes to decrease the cost of the school finance formula for FY 2027-28 or sooner.

Discussion Background and Assumptions The school finance formula and State Education Fund models include a plethora of variables, most of which vary between OSPB and LCS and change at several points throughout the year. The annual JBC staff briefing for school finance takes place prior to the finalization of current year enrollment counts and school district assessed value calculations, which are used for a final update to current year appropriations and projections for the budget request year. On the following pages, staff will summarize the OSPB R1 request for school finance and demonstrate three scenarios using LCS modeling. The assumptions used in OSPB versus LCS models differ substantially at the moment, but will start to converge by the time the FY 2026-27 budget is finalized. The biggest difference in the current modeling is that OSPB has adjusted the estimated local share upwards by $148.8 million in FY 2026-27 based on preliminary assessed value data received from counties. Official updated assessed value data will be incorporated into the December economic and revenue forecast for both agencies. JBC and LCS staff have not attempted to update local share estimates at this point, which causes the JBC/LCS staff projections to appear substantially more pessimistic than OSPB’s. LCS also uses slightly higher inflation estimates than OSPB 02-Dec-2025

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throughout this modeling period, which equates to higher total program costs and larger SEF expenditures for categorical programs.

Governor’s FY 2026-27 Request Relative to the current FY 2025-26 appropriation, the Governor’s budget request projects an increase of $275.8 million in total program costs for FY 2026-27, including a $50.0 million General Fund increase and a $117.0 million cash funds increase. The request implements the new school finance formula as required by H.B. 251320 for FY 2026-27. As noted above, the Governor’s request differs significantly from LCS/JBC staff estimates due to differing inflation assumptions and OSPB’s incorporation of preliminary local share expectations. The following table shows the Governor’s FY 2025-26 request relative to the current FY 2025-26 appropriation. FY 2026-27 Governor's Request Item Funded Pupil Count Local Share State Share General Fund State Education Fund State Public School Fund Total Program Funding SEF Ending Balance

FY 2025-26 Appropriation 845,943 $4,563,359,211 5,468,246,880 4,388,686,861 1,008,893,087 70,666,932 $10,031,606,091 $542,405,726

Requested Change (FY 2026-27 R1) -6,001 $108,820,829 166,990,163 50,000,000 45,327,449 71,662,714 $275,810,992 -$263,383,521

Total FY 2026-27 Request 839,942 $4,672,180,040 5,635,237,043 4,438,686,861 1,054,220,536 142,329,646 $10,307,417,083 $279,022,205

H.B. 25-1320 includes a provision that if the SEF balance is projected to be less than $200.0 million at the close of FY 2026-27 (based on the March 2027 LCS forecast), then the General Assembly shall implement a smoothing factor or use two-year averaging. Current OSPB projections estimate the FY 2026-27 ending balance at $279.0 million; R1 therefore does not contemplate a switch to two-year averaing (or a smoothing factor). However, R1 does anticipate that formula implementation will be paused at 30 percent (instead of increasing to 45 percent) in FY 2027-28 due to SEF and General Fund balancing challenges. Even with the expected implementation pause, R1 includes a placeholder increase of $275.0 million General Fund for FY 2027-28.

LCS/JBC Staff Projections As previously noted, the underlying data included in these projections will change based on the December 2025 revenue forecasts. Forecast changes will include updated estimates for local share, revenues to the SEF and SPSF, enrollment, and inflation. Current projections do not account for anticipated changes to the FY 2025-26 appropriation that will be made through the mid-year adjustment bill. Staff examined three scenarios for this document in order to grasp the magnitude of General Fund increases required under each in order to keep the ending balance of the SEF at $100.0 million in FY 2029-30. Scenarios 2 and 3 allow the SEF balance to go negative in FY 2027-28 by limiting General Fund increases in FY 2026-27 and FY 2027-28 to the OSPB request and placeholder amounts. This demonstrates that the requested increases may not be sufficient in the near term. However, adjustments to the local share and other assumptions that will be made with the December forecasts could erase the negative balance for FY 2027-28.

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Scenario 1: Current Law Current law modeled using LCS assumptions shows required annual General Fund increases of around $300 million, or 6.2 percent, for the next four years. Increases of this magnitude would not trigger a switch to twoyear averaging or smoothing in FY 2027-28. Scenario 1: Current Law Item Total Program Change in Total Program Funded Pupil Count % chg in Funded Pupil Count

FY 2025-26 $10,031.6 $252.7 845,943 -0.9%

FY 2026-27 $10,326.0 $294.4 837,957 -0.9%

FY 2027-28 $10,690.5 $364.5 836,604 -0.2%

FY 2028-29 $11,056.3 $365.8 835,710 -0.1%

FY 2029-30 $11,444.2 $387.9 835,333 0.0%

Local Share State Share State Public School Fund State Education Fund (SEF) General Fund General Fund increase General Fund % increase

$4,563.4 $5,468.2 70.7 1,008.9 4,388.7 150.0 3.5%

$4,523.4 $5,802.6 177.1 965.6 4,659.9 271.2 6.2%

$4,696.3 $5,994.2 97.8 948.5 4,947.9 288.0 6.2%

$4,753.6 $6,302.7 96.3 952.7 5,253.6 305.8 6.2%

$4,810.4 $6,633.8 96.5 959.0 5,578.3 324.7 6.2%

SEF Beginning balance

$1,058.8

$554.7

$383.1

$251.1

$155.4

SEF Deposits Income taxes Kids Matter diversion Other transfers Interest earnings Total deposits

$1,035.5 0.0 0.0 44.7 1,080.3

$1,110.8 216.6 31.0 37.0 1,395.4

$1,176.4 229.4 0.0 29.3 1,435.2

$1,227.8 239.4 0.0 25.3 1,492.5

$1,281.3 249.9 0.0 25.2 1,556.4

SEF expenditures State share of total program Categorical programs Other expenditures Total expenditures

$1,008.9 395.4 180.0 $1,584.3

$965.6 411.1 190.2 $1,566.9

$948.5 430.7 188.1 $1,567.2

$952.7 446.7 188.8 $1,588.2

$959.0 463.2 189.6 $1,611.8

$554.7

$383.1

$251.1

$155.4

$100.0

SEF Ending Balance

Scenario 2: FY 2027-28 Implementation Pause Using OSPB General Fund Placeholder The second scenario assumes a one-year pause in formula implementation for FY 2027-28, meaning the new formula would remain at 30 percent implemented instead of increasing to 45 percent. This scenario uses OSPB’s proposed General Fund increases for the next two fiscal years – which results in a negative SEF balance in FY 2027-28. This demonstrates that the requested increases may not be sufficient in the near term. It is likely that the local share and other assumptions will improve with the December forecast, but the projected SEF ending balance needs to not only be positive, but ideally over $100.0 million in any given year. Staff notes that projected savings attributable to a one-year pause differ significantly between OSPB and LCS due to assumptions about how the hold harmless calculation and the use of averaging for that calculation would be impacted by the 02-Dec-2025

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pause. OSPB estimates savings of $90.0 million, while the LCS model estimates savings of $38.9 million due to an assumption that the requirement to use the same averaging in the old formula as the new formula beginning in FY 2027-28 would also be delayed. Scenario 2: FY 2027-28 Implementation Pause Using OSPB General Fund Placeholder Item Total Program Change in Total Program Funded Pupil Count % chg in Funded Pupil Count

FY 2025-26 $10,031.6 $252.7 845,943 -0.9%

FY 2026-27 $10,326.0 $294.4 837,957 -0.9%

FY 2027-28 $10,651.6 $325.6 836,604 -0.2%

FY 2028-29 $10,966.7 $315.1 835,710 -0.1%

FY 2029-30 $11,349.4 $382.7 835,333 0.0%

Local Share State Share State Public School Fund State Education Fund (SEF) General Fund General Fund increase General Fund % increase

$4,563.4 $5,468.2 70.7 1,008.9 4,388.7 150.0 3.5%

$4,523.4 $5,802.6 177.1 1,186.8 4,438.7 50.0 1.1%

$4,695.4 $5,956.2 97.8 1,144.7 4,713.7 275.0 6.2%

$4,752.4 $6,214.3 96.3 627.3 5,490.7 777.0 16.5%

$4,809.3 $6,540.1 96.5 867.0 5,576.6 85.9 1.6%

SEF Beginning balance

$1,058.8

$554.7

$161.9

-$166.3

$63.4

SEF Deposits Income taxes Kids Matter diversion Other transfers Interest earnings Total deposits

$1,035.5 0.0 0.0 44.7 1,080.3

$1,110.8 216.6 31.0 37.0 1,395.4

$1,176.4 229.4 0.0 29.3 1,435.2

$1,227.8 239.4 0.0 25.3 1,492.5

$1,281.3 249.9 0.0 25.2 1,556.4

SEF expenditures State share of total program Categorical programs Other expenditures Total expenditures

$1,008.9 395.4 180.0 $1,584.3

$1,186.8 411.1 190.2 $1,788.1

$1,144.7 430.7 188.1 $1,763.4

$627.3 446.7 188.8 $1,262.8

$867.0 463.2 189.6 $1,519.8

$554.7

$161.9

-$166.3

$63.4

$100.0

SEF Ending Balance

Scenario 3: Two-Year Averaging Using OSPB General Fund Placeholder The third scenario assumes a change to two-year student count averaging starting with FY 2027-28, which results in average estimated annual state share savings of around $34.4 million. This scenario uses OSPB’s proposed General Fund increases for the next two fiscal years – which results in a negative SEF balance in FY 2027-28. As previously stated, this outlook is likely to improve with December forecast data. Scenario 3: Two-Year Averaging Using OSPB General Fund Placeholder Item Total Program Change in Total Program Funded Pupil Count % chg in Funded Pupil Count

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FY 2025-26 $10,031.6 $252.7 845,943 -0.9%

FY 2026-27 $10,326.0 $294.4 837,957 -0.9%

FY 2027-28 $10,653.8 $327.8 833,385 -0.5%

FY 2028-29 $11,021.2 $367.4 832,706 -0.1%

FY 2029-30 $11,411.6 $390.5 832,375 0.0%

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Item

FY 2025-26

FY 2026-27

FY 2027-28

FY 2028-29

FY 2029-30

Local Share State Share State Public School Fund State Education Fund (SEF) General Fund General Fund increase General Fund % increase

$4,563.4 $5,468.2 70.7 1,008.9 4,388.7 150.0 3.5%

$4,523.4 $5,802.6 177.1 1,186.8 4,438.7 50.0 1.1%

$4,696.0 $5,957.8 97.8 1,146.3 4,713.7 275.0 6.2%

$4,753.1 $6,268.1 96.3 633.1 5,538.6 824.9 17.5%

$4,809.8 $6,601.8 96.5 859.6 5,645.7 107.1 1.9%

SEF Beginning balance

$1,058.8

$554.7

$161.9

-$167.9

$56.0

SEF Deposits Income taxes Kids Matter diversion Other transfers Interest earnings Total deposits

$1,035.5 0.0 0.0 44.7 1,080.3

$1,110.8 216.6 31.0 37.0 1,395.4

$1,176.4 229.4 0.0 29.3 1,435.2

$1,227.8 239.4 0.0 25.3 1,492.5

$1,281.3 249.9 0.0 25.2 1,556.4

SEF expenditures State share of total program Categorical programs Other expenditures Total expenditures

$1,008.9 395.4 180.0 $1,584.3

$1,186.8 411.1 190.2 $1,788.1

$1,146.3 430.7 188.1 $1,765.0

$633.1 446.7 188.8 $1,268.6

$859.6 463.2 189.6 $1,512.4

$554.7

$161.9

-$167.9

$56.0

$100.0

SEF Ending Balance

Conclusion The above scenarios demonstrate that even if cost-savings mesaures such as an implementation pause or twoyear averaging are employed, there is still reason to be concerned about the General Assembly’s ability to sustainably implement the new school finance formula. Staff acknowledges that the LCS/JBC staff modeling at this time is likely overly pessimistic and looks forward to updating the data for inclusion in the annual required sustainability plan. In any case, staff is confident in the assertion that the General Assembly should prepare to implement one or more cost savings measures no later than FY 2027-28 to reduce the cost of the school finance formula.

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Issue: R2 Categorical Programs Increase Amendment 23 of the Colorado Constitution requires the total amount of state funding appropriated for categorical programs to annually increase by at least the rate of inflation. The General Assembly has the authority to allocate the mandatory increase among the various categorical programs. Historically, the Committee and the General Assembly generally allocated that increase based on a formula that considers the difference between state and federal funding provided for each program and the total amount that school districts actually spend on the program/services. Changes to special education funding in recent years has altered the method by which the Joint Budget Committee allocates funding among categories.

Summary •

•

Historically, the Long Bill allocated the required inflationary increase based on the difference between state and federal funding for a program and school district’s actual expenditures for that purpose in the most recent year for which that information is available. The General Assembly has stated its intent4 to fully fund special education programs for children with disabilities up to the statutory maximum. The amount required to fully fund special education for children with disabilities in FY 2026-27 will be calculated based on a December 2025 count which is not yet available. The Department provided an estimate of $26.3 million, which exceeds the estimated Amendment 23 inflationary increase by $11.8 million. Fully funding special education and providing increases to other categorical programs will require a significantly higher appropriation than what has been requested and what is required by Amendment 23. The Committee must therefore weigh the implications of providing additional funding for categorical programs against proposed changes to the new school finance formula and other statewide budgetary constraints.

Recommendation Staff recommends that the Committee discuss the allocation of the required increase in categorical funding for FY 2026-27 with interested parties, including the Department, the Governor’s Office (who proposed the allocation in R2 in collaboration with the Department), and the Education Committees. Staff assumes any increase above the Amendment 23 requirement would be made from the State Education Fund. Therefore, interested stakeholders should consider how appropriations in excess of the minimum for categorical programs would negatively impact the balance of the State Education Fund as it relates to the General Assembly’s ability to implement the new school finance formula.

Section 22-20-114 (1)(c)(III)(D), C.R.S.

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Discussion Background Programs designed to serve particular groups of students (e.g., students with limited proficiency in English) or particular student needs (e.g., transportation) have traditionally been referred to as "categorical" programs. The constitution requires the General Assembly to increase total state funding for all categorical programs annually by at least the rate of inflation. For example, the calendar year 2024 percentage change in the Denver-AuroraLakewood consumer price index was 2.4 percent, so the General Assembly was required to increase state funding for categorical programs in FY 2025-26 by at least that rate, equal to an additional $12.5 million. The FY 2025-26 appropriation actually totaled $17.8 million in state funds, exceeding the minimum requirement by $5.3 million. The General Assembly annually determines how to allocate the required increase among the eight categorical line items. In certain fiscal years (including every year since FY 2021-22), the General Assembly has elected to increase state funding by more than the minimum constitutionally-required amount, resulting in a larger base to which the required inflationary requirement is applied each year. The constitution also requires that money from the State Education Fund not supplant the level of General Fund appropriations existing on December 28, 2000, for categorical programs. This provision actually requires the General Assembly to maintain an appropriation of at least $141,765,474 General Fund; however, the General Assembly added $22.0 million General Fund to the Special Education Programs for Children with Disabilities line item in FY 2019-20 through S.B. 19-246 (School Finance), so the current appropriation includes $163,765,474 General Fund. All of the increases (in the Long Bill and other legislation) for categorical programs since then have been paid from the State Education Fund.

Past Allocation Method Prior to FY 2024-25, staff recommended that the Committee consider four factors when allocating state funds among categorical programs: 1. Are districts required by federal law to provide the services? 2. What percent of districts' actual expenditures are covered by state and federal funds? 3. If the program has a statutory reimbursement formula, how close does state funding come to the maximum statutory reimbursement? 4. Are districts' expenditures for providing the service proportionate, or are certain districts impacted significantly more than others? For years, the Department and staff used similar mechanisms to allocate the constitutionally-required increases among categorical line items, based on the difference between state and federal funding provided for a program and school districts’ actual expenditures. Thus, programs with a larger gap between state and federal funds and total district expenditures (those for which school districts are absorbing the greatest cost within their budgets) received the largest increase. This mechanism typically allocated the largest dollar amount to special education programs for children with disabilities because that line item has the largest shortfall in terms of the amount of money, and allocated the largest percentage increase to the English language proficiency program because that line item has had the 02-Dec-2025

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largest shortfall in percentage terms. Since FY 2000-01, special education for children with disabilities increased by $317.2 million (443.5 percent) and funding for the English Language Proficiency Program (not including the English language learners factor in the school finance formula) increased by $32.8 million (1,056.4 percent). As discussed earlier in this document, funding for special education programs for children with disabilities has been increased through several bills outside of the Long Bill and is now subject to statutory inflationary requirements in addition to constitutional requirements.

Considerations for FY 2026-27 Allocation The General Assembly’s commitment to fully funding special education, or even just meeting inflationary requirements specific to special education without fully funding Tier B at $6,000 per student, has essentially rendered the old staff allocation mechanism unusable. The cost of fully funding special education in a given year will likely equal or exceed the Amendment 23 increase, especially if special education student counts continue to rise. The amount required to fully fund special education for children with disabilities in FY 2026-27 will be calculated based on a December 2025 count which is not yet available. The Department estimates an increase of $26.3 million is needed to fully fund special education, or $16.7 million to meet the inflationary requirement without fulfilling the intent to fully fund. The latter would result in Tier B being prorated at $5,665 per pupil. The estimated CY 2025 inflation rate used by OSPB for the request is 2.6 percent, which equates to a $14.5 million increase for categorical programs as a whole. The request will be amended in January after the final inflation rate is determined. The R2 request increases the FY 2025-26 special education appropriation by inflation and allocates the remaining increase using the expenditure gap mechanism described above. This strategy meets the constitutional requirement but not the statutory requirements specific to special education. R2 Requested Increases in State Funding for Categorical Programs Long Bill Line Item Special Education - Children with Disabilities English Language Proficiency Program Public School Transportation Career and Technical Education Programs Special Education - Gifted and Talented Children Expelled and At-risk Student Services Grant Program Small Attendance Center Aid Comprehensive Health Education Total

FY 2025-26 Appropriation $388,694,798 35,866,264 72,973,821 32,689,057 16,793,762 9,473,039 1,606,548 1,115,829 $559,213,118

FY 2026-27 Request $398,800,863 36,555,792 75,256,184 33,769,287 17,167,234 9,478,248 1,607,186 1,117,866 $573,752,660

Change in State Funding $10,106,065 689,528 2,282,363 1,080,230 373,472 5,209 638 2,037 $14,539,542

Percent Change 2.6% 1.9% 3.1% 3.3% 2.2% 0.1% 0.0% 0.2% 2.6%

In addition to the recent attention given to closing the special education funding gap, the General Assembly has also examined the adequacy of public school transportation funding. S.B. 23-094 (School Transportation Task Force) created the School Transportation Modernization Task Force to study issues facing school transportation systems and use the findings to develop and recommend policies, laws, and rules to improve public school transportation across the state in order to better meet student needs and alleviate burdens on school districts. The final task force report was released on December 1, 2024 and includes twelve recommendations, three of which relate specifically to funding: •

Recommendation #4 proposes the creation of a Transportation Innovation Fund, similar to what was proposed by H.B. 22-1395 (Transportation Innovation Grant Program). That bill would have provided $7.5

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•

million for grants from the Revenue Loss Restoration Cash Fund; it was deemed postponed indefinitely. The task force recommendation does not suggest a dollar amount or fund source for the grant program. Recommendation #10 suggests the General Assembly should examine reimbursement percentages and the gap between state funding and expenditures while considering the categorical budget request each year. While there is no dollar amount tied to this recommendation, data included on the following pages provides insight into the current funding gap for this category. Recommendation #11 proposes utilizing a single-factor reimbursement process and increasing public school transportation funding by $10.0 million.

Given that keeping up with special education funding alone requires more than the Amendment 23 increase, it will be not be possible to close the gap in transportation funding , or any other category, without substantially exceeding the R2 request.

Conclusion In light of the recent policy changes to special education funding, staff expects to recommend that the Committee meet the inflationary requirements for special education programs for children with disabilities and provide modest increases to other categorical programs. However, the special education inflationary increase is estimated to exceed the minimum by $2.2 million. Fully funding special education would exceed the minimum by $11.7 million – a portion of which is attributable to underfunding by $5.5 million in FY 2025-26. Any appropriations made in excess of the requested amount will impact the State Education Fund balance and should therefore be weighed in consideration with other changes to school finance. For the Committee’s reference, the following pages include three tables associated with categorical funding that reflect different lenses through which to consider the increase for FY 2026-27. •

•

Table A shows the gap between state and federal funding and actual local expenditures in FY 2023-24 - the data which would drive the standard JBC staff allocation model absent recent policy changes for special education. Table B shows the gap between funding levels and "full funding" for the programs with statutory formulas for that year. In this case “full funding” would reflect the statutory amounts for each program – but would not reflect district expenditures. Table C summarizes four potential options for allocating the required Amendment 23 increase, including the method that was used for the FY 2025-26 appropriation.

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Table A: Categorical Program Revenues and Expenditures: FY 2023-24

Long Bill Line Item Special Education - Children with Disabilities [1] English Language Proficiency Program [2] Public School Transportation Career and Technical Education Gifted and Talented Expelled and At-risk Student Services Grant Program Small Attendance Center Aid Comprehensive Health Education

State Funds $363,628,010 83,586,158 74,404,441 30,409,006 14,143,575 8,261,044 1,599,991 666,041

Federal Funds $205,798,519 10,957,262 0 6,616,339 0 0 0 0

Total State and Federal Funds $569,426,529 94,543,419 74,404,441 37,025,345 14,143,575 8,261,044 1,599,991 666,041

Total

$576,698,266

$223,372,119

$800,070,386

Total District Expenditures $1,534,954,188 166,989,267 $314,202,702 150,520,529 53,382,701 8,808,280 1,667,001 880,101 $2,231,404,770

State/Federal Share of Expenditures 37% 57% 24% 25% 26% 94% 96% 76%

Local Expenditures $965,527,659 72,445,848 $239,798,261 113,495,184 39,239,126 547,236 67,010 214,060 $1,431,334,384

[1] Includes $22.8 million in funding provided for Universal Pre-K through CDEC. [2] State funds includes $52.3 million distributed through the English Language Learner factor in the school finance formula

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Table B: Maximum Amount of State Funds Districts Were Statutorily Eligible to Receive

Long Bill Line Item Special Education - Children With Disabilities [1] [2]

Description of What Determines Maximum State Funding Number of students eligible for Tier A and Tier B funding, inflationary adjustments, max of $6,000 per Tier B student

State Funds $388,694,798

Maximum State Funding $414,957,165

Percent of Maximum Covered by State Funds 93.7%

Estimated Increase to Fund Statutory Maximum $26,262,367

English Language Proficiency Program [1] [2]

Number of eligible students and statewide average per pupil operating revenue

35,865,832

179,717,555

20.0%

143,851,723

Public School Transportation [3]

Total miles traveled and total transportation-related costs (excluding capital outlay expenses)

75,629,969

126,687,570

59.7%

51,057,602

Colorado Vocational Distributions Act [4]

Number of students participating in vocational education programs and cost of services per FTE in relation to each district's per pupil operating revenue

31,993,182

43,139,202

74.2%

11,146,020

Small Attendance Center Aid [4]

Number of eligible schools, those schools' enrollment, and eligible districts' per pupil funding

1,604,359

1,667,001

96.2%

62,642

Total

$232,380,353

[1] State funds based on FY 2025-26 appropriation and statutorily calculated maximum estimated for FY 2026-27. [2] State funds only reflects categorical program funding and does not include amounts attributable to factors received through the school finance formula. [3] State funds and maximum state funding based on FY 2023-24 appropriations and statutorily calculated maximum. [4] State funds and maximum state funding based on FY 2024-25 appropriations and statutorily calculated maximum.

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Table C: Options for the Allocation of the Increase in State Funding for Categorical Programs in FY 2026-27

Long Bill Line Item Special education programs for children with disabilities English language proficiency programs Public school transportation Career and technical education Gifted and talented Expelled and at-risk student services grant program Small attendance center aid Comprehensive health education

FY 25-26 Appropriation $388,694,798 35,866,264 72,973,821 32,689,057 16,793,762 9,473,039 1,606,548 1,115,829

A: Standard Model $9,807,862 735,907 2,435,879 1,152,888 398,592 5,559 681 2,174

% 2.5% 2.1% 3.3% 3.5% 2.4% 0.1% 0.0% 0.2%

Totals

$559,213,118

$14,539,542

2.6%

Examples of Options for Allocating Required Increase C: All to B: Dept. Special D. Method Request % Education % Used FY 25-26 $10,106,065 2.6% $14,539,542 3.7% $16,743,297 689,528 1.9% 0 0.0% 735,907 2,282,363 3.1% 0 0.0% 2,435,879 1,080,230 3.3% 0 0.0% 1,152,888 373,472 2.2% 0 0.0% 1,058,115 5,209 0.1% 0 0.0% 5,559 638 0.0% 0 0.0% 681 2,037 0.2% 0 0.0% 2,174 $14,539,542

2.6%

$14,539,542

2.6%

% 4.3% 2.1% 3.3% 3.5% 6.3% 0.1% 0.0% 0.2%

$22,134,500

4.0%

Description of Potential Allocation Options A: Standard model based on each category's share of the total gap in revenues versus expenditures. This method does not comply with the statutory requirement to annually increase Tier A per pupil funding and Tier B additional statutory funding for special education by inflation. B: Department request - similar to Option A but increases the special education appropriation by inflation. This method does not comply with the statutory requirement to annually increase Tier A per pupil funding and Tier B additional statutory funding for special education by inflation. C: Put entire inflationary increase toward special education for children with disabilities. An estimated $16.7 million is required to comply with the statutory requirement to annually increase Tier A per pupil funding and Tier B additional statutory funding for special education by inflation. D: Method used for FY 2025-26 appropriations. Calculate all categories using the standard model in Option A, increase the special education amount to meet inflationary requirements, and increase gifted and talented to comply with annualization of S.B. 23-187 (School Finance Act) for expanded screening. This results in an increase of $7.6 million above the Amendment 23 requirement.

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Budget Reduction Options This briefing document includes subdivisions (A) Public School Finance and (B) Categorical Programs of the School District Operations division of the Department of Education only. These subdivisions include $6.3 billion total funds in FY 2025-26, of which $6.0 billion is from the General Fund and the State Education Fund (SEF). The state share of districts’ total program funding makes up 87.4 percent of the total funds in this portion of the budget, followed by funding for categorical programs at 12.4 percent. Other line items related to school finance administration account for 0.2 percent of total funding in these subdivisions.

Summary • • • •

The only significant savings options in this section of the budget will come from statutory changes related to the school finance formula. The State Education Fund and the General Fund should be thought of interchangeably for the purposes of budget balancing. The Executive Branch request did not propose any changes to the school finance formula for FY 2026-27, but suggests that implementation should be paused in FY 2027-28 for savings of roughly $90.0 million. Staff has identified two additional options that would reduce the cost of the school finance formula.

Recommendation Staff recommends the Committee elevate the two options discussed below for consideration by the Education Committees and the sponsors of the next School Finance Act. These options should be considered in conjunction with the cost of sustainably implementing the new school finance formula and weighed against options such as pausing formula implementation or reducing the use of student averaging.

Discussion Funding History FY 2018-19 to FY 2025-26 The (A) Public School Finance and (B) Categorical Programs subdivisions make up approximately 26.0 percent of state General Fund appropriations. For the purposes of budget balancing, the State Education Fund should be thought of interchangeably with the General Fund. Any requirements for the state share that aren’t appropriated from the General Fund must be paid for from the SEF, and vice versa. The State Public School Fund (SPSF) picks up a minor portion of state share appropriations and typically does not have leeway to absorb additional school finance costs. This section of the budget has decreased since FY 2018-19 after adjusting for inflation5 despite constitutional requirements to annually increase base per pupil funding and categorical

Fiscal year 2018-19 appropriations are adjusted for inflation, calculated based on the Legislative Council Staff September 2025 forecast, which reflects an increase in the Denver-Aurora-Lakewood consumer price index of 30.1 percent between FY 2018-19 and FY 2025-26. 02-Dec-2025

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programs. Use of the budget stabilization factor during this time period resulted in a cumulative $3.3 billion reduction to the state share of districts’ total program funding. FY 2018-19 to FY 2025-26 Appropriations Comparison - Adjusted for Inflation

Fund General Fund/SEF Total Funds

FY 2018-19 Nominal $4,672,973,100 $4,995,526,568

FY 2018-19 Adjusted $6,081,260,267 $6,501,021,209

FY 2025-26 $5,966,367,650 $6,255,710,476

$ Change from FY 2018-19 Adjusted ($114,892,617) ($245,310,733)

% Change from FY 2018-19 Adjusted -1.9% -3.8%

Budget Requests for General Fund Relief There are no FY 2026-27 requests for General Fund relief for this section of the budget. The Executive Branch indicated it will formally recommend pausing implementation of the new school finance formula in 2027-28 in its January budget request for estimated savings of $90.0 million.

Additional Options for JBC Consideration The table below summarizes two additional options identified by JBC staff that would reduce the cost of the school finance formula. These ongoing options could be considered for the upcoming or later fiscal years. Staff believes these potential changes would be more appropriately considered by the Education Committees and/or within the School Finance Act. These options should be considered in conjunction with the cost of sustainably implementing the new school finance formula and weighed against options such as pausing formula implementation or reducing the use of student averaging. Additional Options for General Fund/SEF Relief

Option Specific ownership tax for local share

Bill ? Y/N Y

-23,600,000

-$242,400,000

SEF/General Fund -$218,800,000

Part-time enrichment funding Total

Other Funds

Description Require districts to contribute all SOT to their local share of total program, thereby reducing the state share Change the rate used to fund part-time enrichment students from 0.5 to 0.25

Specific Ownership Tax for Local Share Staff has recently been made aware that not all specific ownership tax (SOT) revenue received by school districts is included in the local share calculation for the school finance formula. SOT is an annual tax paid during vehicle registration and collected by the counties. Statute6 instructs county treasurers to distribute SOT revenue to local governments (school districts, cities, special districts, and the county itself) in proportion to the amount of property taxes collected by each. For example, a school district that receives 50 percent of all the property taxes collected in a county would receive 50 percent of the SOT collected in the county. The school finance formula does not count all SOT revenue against the district’s local share. Some districts collect more specific ownership taxes than others because the voters in those districts have approved additional 6

Section 42-3-107 (24) (a), C.R.S.

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property taxes. The formula specifically does not count any SOT revenue attributable to bond redemption or override mills approved by voters7. This system results in districts that are successful in passing voter-approved mill levy override and bond measures receiving an added benefit of additional SOT that is in a sense “sheltered” from inclusion in the local share. Conversely, districts that are not successful in passing voter-approved mills are essentially required to contribute all of their SOT receipts to the local share calculation. In FY 2023-24, school districts received $453.5 million in SOT. Of that amount, $234.7 (51.8 percent) was included in local share calculations for the school finance formula, while $218.8 million (48.2 percent) was retained by districts for unrestricted use (and deposited in their general funds in most cases). A statutory change requiring all SOT revenue to be counted toward local share would decrease the state share by the amount of “sheltered” revenue. While this change would not result in a net gain to school districts as a whole, the funds would be redistributed through the school finance formula rather than remaining with the districts that have passed voter-approved mill levy overrides and bond referendums.

Part-time Enrichment Funding After reviewing a March 2025 OSPB proposal to adjust a handful of districts' historic enrollment counts as a result of misclassified homeschool enrichment students, staff learned of a potential balancing-related option that would save upwards of $23.6 million in total program costs annually. This option would align funding for certain part-time students to the number of instructional hours the student actually receives. To qualify as being enrolled full-time (1.0 FTE), a student must be enrolled in at least 360 instructional hours. However, part-time enrollment (0.5 FTE) only requires a minimum of 90 instructional hours. There are generally four categories of part-time students: 1. Students with disabilities whose Individualized Education Programs call for less than full-time enrollment; 2. Kindergarten students in half-day programs; 3. Students past the age of compulsory education, usually completing a fifth year of high school or a dropout recovery program; and 4. Nonpublic home-based educational programs authorized under Section 22-33-104.5(6)(a), C.R.S., which are commonly known as “enrichment” or “homeschool enrichment” programs. The Department has anecdotally observed that the first three categories of part-time students are typically participating in approximately 180-instructional hours (half of the required 360 hours for full time enrollment), but that recent audits have revealed that part-time enrichment programs are typically designed to just meet the minimum required 90-hours of instructional time. Historically, the enrichment programs were designed to augment homeschool programming such as enrolling students in courses taken at the “brick and mortar” school – such as advance math courses or band. Over time, the programs have evolved to allow part-time enrollment to take place outside of a “brick and mortar” school. The enrichment category has grown significantly in recent years. Between FY 2019-20 and FY 2025-26 the Department’s preliminary data estimate that enrollment has grown by more than 110 percent (from 8,780 to 18,494). In FY 2024-25, it accounted for 86.0 percent of all part-time students.

Section 22-54-103 (11), C.R.S.

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The Department notes that districts do not typically provide the same services and incur the same level of expenditures for those students as regular full-time students. Using preliminary data for FY 2025-26, the Department estimates that aligning part-time enrichment funding at 0.25 PPR (90 hours of instructional hours) instead of 0.5 PPR would reduce total program costs by $40.2 million annually if adjustments are made to prior year counts, or $23.6 million annually if no prior year adjustments are made. Last year, this change would have impacted 62 districts; staff has requested an updated estimate for the current year.

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FY 2025-26 Executive Order Budget Adjustments Budget Reductions The Governor’s Office did not identify specific FY 2025-26 reductions for the Department of Education in Executive Orders. For the State as a whole, the Governor’s Office anticipates $3.0 million General Fund savings from a FY 2025-26 hiring freeze. The Governor’s Office has not provided estimates at the department level.

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Footnotes and Requests for Information Update on Long Bill Footnotes The General Assembly includes footnotes in the Long Bill to: 5. set forth purposes, conditions, or limitations; 6. explain assumptions; or 7. express legislative intent. This section discusses a subset of the footnotes relevant to the divisions covered in the briefing. For a full list of footnotes, see the end of each departmental section of the 2026 Long Bill (https://leg.colorado.gov/bills/sb25206). 10

Department of Education, School District Operations, Public School Finance, State Share of Districts’ Total Program Funding -- It is the General Assembly's intent that a portion of the amount appropriated for this line item, not to exceed $200,000 for fiscal year 2025-26, shall be transferred to the Legislative Council for the purpose of funding the biennial cost of living analysis pursuant to Section 22-54-104 (5)(c)(III)(B), C.R.S.

Comment: Section 22-54-104 (5) (c) (III) (A), C.R.S., requires the Legislative Council Staff to conduct a biennial study concerning the relative cost of living in each school district. The results of the study are then to be used to adjust each school district’s cost of living factor for purposes of calculating per pupil funding for the following two fiscal years. Last conducted in FY 2023-24, statute requires another study in FY 2025-26. The results of the study conducted in FY 2025-26 will impact funding requirements for FY 2026-27 and FY 2027-28. 11

Department of Education, School District Operations, Public School Finance, Extended High School -Pursuant to section 22-35-108.5 (2)(b)(II), C.R.S., the purpose of this footnote is to specify what portion of this appropriation is intended to be available for the Teacher Recruitment Education and Preparation (TREP) Program for the 2025-26 state fiscal year. It is the General Assembly's intent that the Department of Education be authorized to utilize up to $2,620,000 of this appropriation to fund qualified students identified as TREP Program participants. This amount is calculated based on an estimated 250 FTE TREP Program participants funded at a rate of $10,480 per FTE pursuant to section 22-54-204 (4.7), C.R.S.

Comment: The Committee added the Teacher Recruitment Education and Preparation (TREP) footnote in FY 2022-23 to designate a cap required by S.B. 21-185 (Supporting Educator Workforce in Colorado). The program, which started in FY 2022-23, allows participating students to concurrently enroll in postsecondary courses for two years following the student’s twelfth grade year. The Department can designate students as TREP participants if they are following the teaching career pathway, are on schedule to complete the specified courses by senior year, and are enrolling in the pathways postsecondary courses for the fifth and sixth year, among other requirements. The General Assembly is required to decide on the maximum number of TREP participants each year through the Long Bill process (with this footnote as the mechanism). The FY 2025-26 Long Bill includes slots for 250 FTE; this footnote will be modified in the mid-year adjustment bill to reflect actual utilization in the current year.

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Senate Bill 25-315 (Postsecondary and Workforce Readiness Programs) made changes to extended high school programs and required CDE to convene a working group to make recommendations concerning TREP. Recommendations are due to the Joint Budget Committee by December 1, 2025, which is after the time of this writing.

Update on Requests for Information The Joint Budget Committee may submit requests for information (RFIs) to departments. The Joint Budget Committee must prioritize the requests per Section 2-3-203 (3), C.R.S. This section discusses a subset of the RFIs relevant to the divisions covered in the briefing. For a full list of RFIs, see the letters requesting information (https://leg.colorado.gov/sites/default/files/rfi_fy_2025-26.pdf).

Requests Affecting Multiple Departments 3

Department of Education, Assistance to Public Schools, Categorical Programs; and Department of Higher Education, Division of Occupational Education, Distribution of State Assistance for Career and Technical Education pursuant to Section 23-8-102, C.R.S. - The Department of Education is requested to work with the Department of Higher Education and to provide to the Joint Budget Committee information concerning the distribution of state funds available for each categorical program, excluding grant programs. The information for special education programs for children with disabilities, English language proficiency programs, public school transportation, career and technical education, and small attendance center aid is requested to include the following: (a) a comparison of the state funding distributed to each district or administrative unit for each program in fiscal year 2024-25 and the maximum allowable distribution pursuant to state law and/or State Board of Education rule; and (b) a comparison of the state and federal funding distributed to each district or administrative unit for each program in fiscal year 2023-24 and actual district expenditures for each program in fiscal year 2023-24. The information for special education programs for gifted and talented children is requested to include a comparison of the state funding distributed to each district or administrative unit for each program in fiscal year 2023-24 and actual district expenditures in fiscal year 2023-24.

Comment: The Department submitted the information as requested. Staff uses this data for discussions and recommendations related to the annual R2 request for categorical programs.

Department of Education Requests There were no FY 2025-26 RFIs related to School Finance or Categorical Programs.

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Department Annual Performance Report Departments must publish an Annual Performance Report8 for the previous state fiscal year by November 1 of each year. This report summarizes the Department’s performance plan and most recent performance evaluation. In addition, departments develop and submit a Performance Plan9 for the current fiscal year to the Joint Budget Committee and the relevant Joint Committee of Reference by July 1 of each year. Per statute10, the Joint Budget Committee must consider performance plans submitted by departments and may prioritize budget requests intended to enhance productivity, improve efficiency, reduce costs, and eliminate waste. To find the performance plans, search the Office of State Planning and Budgeting website and select the performance plan (www.colorado.gov/pacific/performancemanagement/department-performance-plans).

Section 2-7-205, C.R.S. Section 2-7-204 (3)(a), C.R.S. 10 Section 2-7-204 (6), C.R.S. 9

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Appendix A: Numbers Pages Appendix A details the actual expenditures for the last two state fiscal years, the appropriation for the current fiscal year, and the requested appropriation for next fiscal year. Appendix A organizes this information by line item and fund source.

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Appendix A: Numbers Pages FY 2023-24 Actual

FY 2024-25 Actual

FY 2025-26 Appropriation

FY 2026-27 Request

Request vs. Appropriation

(3) School District Operations

This section provides funding that is distributed to public schools and school districts, as well as funding for Department staff who administer this funding or who provide direct support to schools and school districts.

(A) Public School Finance Administration FTE General Fund Cash Funds Reappropriated Funds Federal Funds Financial Transparency System Maintenance FTE General Fund Cash Funds Reappropriated Funds Federal Funds State Share of Districts' Total Program Funding FTE General Fund General Fund Exempt Cash Funds

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4,384,542 15.5 1,481,791 2,902,751 0 0

4,000,222 17.5 2,105,942 1,894,280 0 0

2,471,809 17.5 2,210,618 261,191 0 0

2,522,138 17.5 2,257,217 264,921 0 0

87,896 1.0 0 87,896 0 0

90,671 0.0 0 90,671 0 0

92,786 1.0 0 92,786 0 0

97,731 1.0 0 97,731 0 0

4,996,063,570 0.0 4,238,686,861 0 757,376,709

5,569,835,306 0.0 4,238,686,861 0 1,331,148,445

5,450,390,048 0.0 3,095,718,552 1,292,968,309 1,061,703,187

5,617,527,291 0.0 3,145,718,552 1,292,968,309 1,178,840,430

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Appendix A: Numbers Pages FY 2023-24 Actual Extended High School FTE General Fund Cash Funds

FY 2024-25 Actual

FY 2025-26 Appropriation

FY 2026-27 Request

0 0.0 0 0

22,376,720 0.0 0 22,376,720

17,856,832 0.0 0 17,856,832

3,849,216 0.0 0 3,849,216

School Finance Audit Payments FTE General Fund Cash Funds Reappropriated Funds Federal Funds

5,251,851 0.0 0 5,251,851 0 0

1,621,801 0.0 0 1,621,801 0 0

3,000,000 0.0 0 3,000,000 0 0

At-risk Per Pupil Additional Funding FTE General Fund Cash Funds

4,999,997 0.0 0 4,999,997

4,999,994 0.0 0 4,999,994

0 0.0 0 0

At-risk Supplemental Aid FTE General Fund Cash Funds

7,009,989 0.0 0 7,009,989

6,727,485 0.0 0 6,727,485

7,009,989 0.0 0 7,009,989

3,504,995 0.0 0 3,504,995

10,000 0.0 0 10,000

District Per Pupil Reimbursements for Juveniles Held in Jail FTE General Fund Cash Funds

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Request vs. Appropriation *

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Appendix A: Numbers Pages FY 2023-24 Actual

FY 2024-25 Actual

FY 2025-26 Appropriation

FY 2026-27 Request

Additional Funding for Rural Districts and Institute Charter Schools FTE General Fund Cash Funds

30,000,000 0.0 0 30,000,000

0 0.0 0 0

Mill Levy Override Matching Pursuant to Sec. 22-54-107.9, C.R.S. FTE General Fund Cash Funds

32,511,319 0.0 0 32,511,319

0 0.0 0 0

0 0.0 0 0 0 0

1,000,000 0.0 0 1,000,000 0 0

23,950,000 0.0 0 23,950,000

0 0.0 0 0

Contingency Reserve Fund FTE General Fund Cash Funds Reappropriated Funds Federal Funds New Arrival Students Funding FTE General Fund Cash Funds

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Request vs. Appropriation

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Appendix A: Numbers Pages FY 2023-24 Actual

FY 2024-25 Actual

5,104,269,164 16.5 4,240,168,652 0 864,100,512 0 0

5,609,662,199 17.5 4,240,792,803 0 1,368,869,396 0 0

5,481,831,464 18.5 3,097,929,170 1,292,968,309 1,090,933,985 0 0

5,631,511,371 18.5 3,147,975,769 1,292,968,309 1,190,567,293 0 0

Special Education - Children with Disabilities FTE General Fund Cash Funds Reappropriated Funds Federal Funds

561,542,608 63.0 93,572,347 247,285,957 0 220,684,304

588,527,830 100.0 93,572,347 281,992,829 0 212,962,654

591,135,231 100.0 93,572,347 295,122,451 191,090 202,249,343

601,561,268 100.0 93,572,347 305,228,516 191,090 202,569,315

English Language Proficiency Program FTE General Fund Cash Funds Reappropriated Funds Federal Funds

42,681,475 4.6 3,101,598 28,192,293 0 11,387,584

44,954,232 4.6 3,101,598 31,500,608 0 10,352,026

47,603,560 4.6 3,101,598 32,764,666 0 11,737,296

48,312,429 4.6 3,101,598 33,454,194 0 11,756,637

SUBTOTAL - (A) Public School Finance FTE General Fund General Fund Exempt Cash Funds Reappropriated Funds Federal Funds

FY 2025-26 Appropriation

FY 2026-27 Request

Request vs. Appropriation 2.7% 0.0% 1.6% 0.0% 9.1% 0.0% 0.0%

(B) Categorical Programs (1) District Programs Required by Statute

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Appendix A: Numbers Pages FY 2023-24 Actual SUBTOTAL FTE General Fund Cash Funds Reappropriated Funds Federal Funds

FY 2024-25 Actual

FY 2025-26 Appropriation

FY 2026-27 Request

Request vs. Appropriation

604,224,083 67.6 96,673,945 275,478,250 0 232,071,888

633,482,062 104.6 96,673,945 313,493,437 0 223,314,680

638,738,791 104.6 96,673,945 327,887,117 191,090 213,986,639

649,873,697 104.6 96,673,945 338,682,710 191,090 214,325,952

Public School Transportation FTE General Fund Cash Funds Reappropriated Funds Federal Funds

68,839,945 2.0 36,922,227 31,884,000 33,718 0

71,840,106 2.0 36,922,227 34,905,938 11,941 0

73,461,986 2.0 36,922,227 36,501,594 38,165 0

75,744,349 2.0 36,922,227 38,783,957 38,165 0

Transfer to the Department of Higher Education for Distribution of State Assistance for Career and Technical Education FTE General Fund Cash Funds Reappropriated Funds Federal Funds

30,514,944 0.0 17,792,850 12,722,094 0 0

31,993,182 0.0 17,792,850 14,200,332 0 0

32,689,057 0.0 17,792,850 14,896,207 0 0

33,769,287 0.0 17,792,850 15,976,437 0 0

(2) Other Categorical Programs

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1.7% 0.0% 0.0% 3.3% 0.0% 0.2%

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Appendix A: Numbers Pages FY 2023-24 Actual

FY 2024-25 Actual

FY 2025-26 Appropriation

FY 2026-27 Request

Request vs. Appropriation

Special Education Programs for Gifted and Talented Children FTE General Fund Cash Funds Reappropriated Funds Federal Funds

14,669,280 1.5 5,500,000 9,169,280 0 0

15,829,446 1.5 5,500,000 10,329,446 0 0

16,793,762 1.5 5,500,000 11,293,762 0 0

18,225,349 1.5 5,500,000 12,725,349 0 0

Expelled and At-risk Student Services Grant Program FTE General Fund Cash Funds Reappropriated Funds Federal Funds

9,471,511 1.0 5,759,731 3,711,780 0 0

9,548,112 1.0 5,788,807 3,759,305 0 0

9,473,039 1.0 5,788,807 3,684,232 0 0

9,478,248 1.0 5,788,807 3,689,441 0 0

Small Attendance Center Aid FTE General Fund Cash Funds Reappropriated Funds Federal Funds

1,599,991 0.0 787,645 812,346 0 0

1,604,359 0.0 787,645 816,714 0 0

1,606,548 0.0 787,645 818,903 0 0

1,607,186 0.0 787,645 819,541 0 0

Comprehensive Health Education FTE General Fund Cash Funds Reappropriated Funds Federal Funds

1,009,575 1.0 300,000 709,575 0 0

1,015,502 1.0 300,000 715,502 0 0

1,115,829 1.0 300,000 815,829 0 0

1,117,866 1.0 300,000 817,866 0 0

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Appendix A: Numbers Pages FY 2023-24 Actual

FY 2024-25 Actual

FY 2025-26 Appropriation

FY 2026-27 Request

Request vs. Appropriation

SUBTOTAL FTE General Fund Cash Funds Reappropriated Funds Federal Funds

126,105,246 5.5 67,062,453 59,009,075 33,718 0

131,830,707 5.5 67,091,529 64,727,237 11,941 0

135,140,221 5.5 67,091,529 68,010,527 38,165 0

139,942,285 5.5 67,091,529 72,812,591 38,165 0

3.6% 0.0% 0.0% 7.1% 0.0% 0.0%

SUBTOTAL - (B) Categorical Programs FTE General Fund Cash Funds Reappropriated Funds Federal Funds

730,329,329 73.1 163,736,398 334,487,325 33,718 232,071,888

765,312,769 110.1 163,765,474 378,220,674 11,941 223,314,680

773,879,012 110.1 163,765,474 395,897,644 229,255 213,986,639

789,815,982 110.1 163,765,474 411,495,301 229,255 214,325,952

2.1% 0.0% 0.0% 3.9% 0.0% 0.2%

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Appendix A: Numbers Pages

TOTAL - Department of Education FTE General Fund General Fund Exempt Cash Funds Reappropriated Funds Federal Funds

FY 2023-24 Actual

FY 2024-25 Actual

7,656,884,919 640.3 4,524,030,001 155,845,958 1,617,187,349 62,144,130 1,297,677,481

7,971,113,393 741.1 4,523,688,296 0 2,335,371,697 35,900,883 1,076,152,517

FY 2025-26 Appropriation 7,689,403,789 751.4 3,377,025,889 1,292,968,309 2,114,235,075 55,914,660 849,259,856

FY 2026-27 Request 7,871,069,600 750.5 3,419,519,770 1,292,968,309 2,250,994,372 56,776,229 850,810,920

Request vs. Appropriation 2.4% (0.1%) 1.3% 0.0% 6.5% 1.5% 0.2%

NOTE: An asterisk (*) indicates that the FY 2026-27 request is affected by one or more decision items.

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Appendix B: State Education Fund Details The State Constitution links funding for kindergarten through twelfth grade education to the rate of inflation and creates the State Education Fund (SEF).11 The SEF is funded by a diversion of one-third of one percent of federal taxable income that would have otherwise gone to the General Fund. The SEF retains any interest earned on the fund balance. Revenues to the SEF are not subject to the constitutional Taxpayer's Bill of Rights (TABOR) limitation on fiscal year spending, and SEF appropriations are not subject to the statutory limitation on state General Fund appropriations. The General Assembly may annually appropriate money from the SEF for: • • • • • • • • • •

compliance with the requirements to annually increase base per pupil funding for public school finance and annually increase funding for categorical programs; accountable education reform; accountable programs to meet state academic standards; class size reduction; expanding technology education; improving student safety; expanding the availability of preschool and kindergarten programs; performance incentives for teachers; accountability reporting; or public school building capital construction.

The following table shows expected appropriations and transfers (including some anticipated adjustments discussed during the Department of Education briefing for all other divisions) for FY 2025-26 and FY 2026-27. Funding related to public school finance and categorical programs makes up nearly 90.0 percent of all appropriations and transfers from the SEF, the majority of which goes to the state share of districts’ total program funding. Transfers and Appropriations from the State Education Fund Item Public School Finance and Categorical Programs: State share of districts' total program funding Categorical programs Transfer to Mill Levy Override Match Fund Supplemental at-risk aid At-risk per pupil additional funding Public school finance administration Financial transparency maintenance system District per pupil Reimbursements for juveniles held in jail (S.B. 10-054) Subtotal: School Finance and Categorical Programs

FY 2025-26 Expected

FY 2026-27 Request

$1,008,893,087 395,447,644 0 7,009,989 0 261,191 92,786 0 $1,411,704,697

$1,054,220,536 411,045,301 0 3,504,995 0 264,921 97,731 0 $1,469,133,484

11 Section 17 of Article IX of the State Constitution.

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Item Other Programs Healthy School Meals for All school meal reimbursements (H.B. 24-1206) Facility school funding Transfer to Early Literacy Fund (S.B. 13-260) Charter school capital construction CSI mill levy equalization Colorado Student Assessment Program Placeholder for S.B. 25-315 annualization (Sustain Funding) School Counselor Corps Grant Program (H.B. 08-1370) Assistance to BOCES (H.B. 12-1345) Early literacy assessment tool (H.B. 12-1345) School turnaround leaders development/school transformation (S.B. 14-124) Ninth-grade success grant and performance reporting (H.B. 24-1282) Child Nutrition School Lunch Protection Program (S.B. 08-123) Preschool to postsecondary alignment (S.B. 08-212) Local School Food Purchasing Programs (H.B. 24-1390) Content specialists Office of Online and Hybrid Learning and Innovation Schools Postsecondary Workforce Readiness Start-up (S.B. 25-315) Educator Effectiveness Unit Administration (H.B. 13-1257) English Language Learners technical assistance (H.B. 14-1298) Transfer to Colorado Teacher of the Year Fund (H.B. 14-1298) Interstate compact educational opportunities for military children (H.B. 08-1317) Subtotal: Other Programs Centrally Appropriated Line Items Total

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FY 2025-26 Expected

FY 2026-27 Request

$8,119,271 36,362,737 34,000,000 23,523,071 26,363,089 25,635,138 0 12,029,506 3,327,275 2,997,072 2,019,102 2,007,458 841,460 740,063 675,729 566,356 515,899 245,132 154,311 62,097 24,800 21,298 $180,230,864

$0 37,089,992 34,000,000 23,523,071 26,363,089 24,968,579 14,007,616 12,039,840 3,330,051 2,997,072 2,022,711 2,012,553 0 761,849 0 566,356 532,563 245,132 158,191 63,360 24,800 21,298 $184,728,123

$1,436,593

$1,631,661

$1,593,372,154

$1,655,493,267

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