The Jeffco School Board approved a 2020-21 budget on June 17 after months of uncertainty about state funding levels. The budget includes a $34 million 5 percent cut in state funding. To address the funding gap, the district will rely in part on one-time funds from the CARES Act and other savings.
The Colorado legislature didn’t pass the School Finance Act until June 12 due to COVID-related delays, leaving school districts across the state waiting to see what their final state allotment would be.
Of the $34 million cut, $30.6 million in cuts will affect neighborhood and option schools, said Kathleen Askelson, Jeffco’s chief financial officer. District charter schools, innovation schools, and the preschool program will make decisions about the remaining $3.4 million in cuts.
2020-21 budget includes 5 percent drop in state funding
The 5 percent cut results in a $397 drop in state per-pupil revenue between last year and the coming year. Per-pupil funding for 2019-20 was $8,288, but is estimated to be $7,891 for the upcoming school year.
Jeffco Schools also anticipates a loss from other funding sources, including a $3 million drop in specific ownership tax because vehicle sales dropped steeply. Askelson also estimated a loss in interest revenue of $1.7 million for the coming year.
In total, cuts in state funding and cuts from other funding sources resulted in a $37.7 million decrease from 2019-20 funding levels.
However, the district was able to identify approximately $16.4 million in savings. That number includes $5 million in retirement and turnover savings, Askelson said. Another $1 million in utility savings and $3 million in ongoing savings will offset the funding cut.
Additional expenses include an additional one-time line item of $5.5 million for COVID-19 expenses. Those include the purchase of personal protective equipment and supplies, as well as other related expenses. Another $2.6 million is mandated as a PERA increase, along with a $1 million insurance premium increase. An additional $5.5 million will support at-risk students.
The pandemic radically changed the funding conversation
In a typical year, school funding amounts are approved by the state legislature in late May, but nothing has been typical about schools or state funding since mid-March.
In early spring, Jeffco Schools was anticipating a $16.6 million increase in state funding. At the time Jeffco was surveying the community to determine how to spend the additional dollars. In addition, the Jeffco School Board had directed $17 million for compensation as the district negotiated with employee associations.
However, the March 16 state budget projected a steep decrease in anticipated revenue, dropping from an expected $832.5 million in additional revenue to only $27.3 million.
That March 16 projection was wildly optimistic, as it turned out. By early May, the state was facing a $3.3 billion budget shortfall.
April-May projections
As the Joint Budget Committee scrambled to rewrite the budget to account for new fiscal realities, Jeffco and other school districts started reworking their budgets.
In April, the Colorado Department of Education told school districts to anticipate cuts of 1 to 10 percent for the 2020-21 year. Without updated funding numbers from the state, staff were forced to work out a number of “best guess” scenarios.
During that time, the district also put together a Citizen Budget Advisory Committee to provide recommendations for potential 2020-21 budget cuts. The June 17 meeting included the final report from the Citizen Budget Advisory Committee.
At the June 4 board meeting, Askelson presented a model that predicted a 12 percent cut of $74.3 million. She cautioned that it was only a model because the state funding numbers were still up in the air. Because the School Finance Act had just been introduced that day, Askelson’s model was based on previous economic downturns.
The June 4 model also relied heavily on CARES Act funding and projected $26.2 million in cuts ranging from decreases in central administration and capital transfer to cuts in student based budgeting, furlough days and money drawn from reserves.
Colorado released new school funding estimates in early June
By June 10, Jeffco had concrete numbers to work with that improved the budget picture for 2020-21. Updated budget numbers presented at the June 10 study session anticipated a $31.5 million state funding decrease.
By the time the legislature passed the School Finance Act on June 12, that number had dropped to $30.6 million after passthroughs.
With more economic uncertainty on the horizon, however, additional cuts may be required later during the 2020-21 year. Staff also anticipate making more budget cuts for the 2021-22 and subsequent school years.
Budget Stabilization Factor impact
One big unknown in early June was how much legislators would increase the state Budget Stabilization Factor (BSF), because any increase results in further cuts to K-12 funding. The BSF, also formerly known as the negative factor, was created to balance the state budget during the Great Recession and has continued to be used every year since, resulting in less school funding than voters approved with Amendment 23.
For 2020-21, the state legislature increased the BSF to $601 million. That’s an increase of $29 million over the 2019-20 BSF of approximately $572 million.
In Jeffco, this resulted in a $662 cut to per-pupil revenue for 2020-21. As a result, there has been a cumulative $861 million shortfall in funding from 2010-11 through the 2020-21 year, Askelson said.
CARES Act Funding to offset 20-21 cuts
CARES Act funding for specific COVID-19 uses will offset some of Jeffco’s funding cuts this year.
Jeffco Schools received two kinds of CARES Act one-time funding. The first, known as ESSER, goes directly to schools and is based on Title 1 allocations. Jeffco received approximately $7 million, and $1 million will be passed through to charter and innovation schools.
The Coronavirus Relief Fund (CRF) also provided another $40 million allocation for Jeffco, of which $36 million remains after passthroughs to charter and innovation schools, Askelson said. The rules governing the CRF are very strict, and the use of the funds will be audited, she added. The guidelines for the ESSER funds are broad, but that amount is smaller.
District staff have been working closely to ensure they are able to spend the money appropriately. One caveat is that the funding has to be used for work that is “sufficiently different,” Askelson explained. Items already in the budget, including 1:1 devices, may not qualify as sufficiently different.
“We may end up having to do some additional work around this to be flexible in order to spend these funds,” Askelson told board members at the June 10 study session.
At the June 17 meeting, Askelson said that Jeffco built some flexibility into the 2020-21 budget to work with the grant. She recommended transferring $20 million in eligible costs to the grant to the 2019-20. That move frees up $20 million from last year’s budget that can be moved to reserves.
The 2020-21 budget will rely on a spend-down of reserves of $21.3 million and the remaining CARES Act funds.
In essence, Askelson explained, the grant funds free up money that can be moved to reserves. Money moved to reserves can be used to offset current-year cuts while maintaining overall reserve levels.
Long-term forecast may include mid-year rescissions, multiple years of cuts
Superintendent Jason Glass cautioned that adjustments to the budget are still expected.
“This has been a wild ride preparing this budget,” Glass said, “and it will continue to be a wild ride.”
“We expect changes to continue to happen into the fall,” he added. Those changes may include a mid-year recession from the state. Jeffco Schools is also still negotiating with employee associations.
“There are a number of other moving parts that are still happening,” Glass said.
Glass told the board to expect staff to come back to them with amended or revised budgets in the fall.
“This is our best thinking at this point, but this is a changing landscape,” he said.
“There are a lot of unknowns, a lot of things very different from prior years that we’ll have to watch closely,” Askelson said.
Because the economy will affect state funding for multiple years, future cuts are forecast for the next few school years.
“We still have a big lift coming in the next budget to right-size the next budget because all that grant money will be going away,” said board member Brad Rupert. “I want to make sure that everyone listening is aware this is being balanced this year with one-time money so we still have a lot of work to do next year.”