DALLAS – Colorado charter schools will gain the same financial footing as traditional public schools under legislation recently signed into law by Gov. John Hickenlooper.
Touted as the first law of its kind in the United States, House Bill 1375 requires school districts to develop a plan before the 2019-2020 school year to share local mill levy override revenue with charter schools.
Mill levy overrides are voter-approved property tax increases usually earmarked for specific programs such as full-day kindergarten or teacher training. The local tax increases have become more common as state funding has stagnated.
“Not only is this law a significant step towards public school funding equity in Colorado – no other similar law has ever passed in the United States,” said Dan Schaller, director of governmental affairs at the Colorado League of Charter Schools.
Hickenlooper signed the bill into law June 2 at the Rocky Mountain Prep Academy in Denver after it won final passage in the House and Senate. The bill carried compromises with an earlier Senate version.
“With a combined vote of 77-23 across both chambers at the Capitol, I’m proud to say my colleagues supported it in an overwhelmingly bipartisan fashion,” said House sponsor Rep. Lang Sias, R-Arvada, in a statement after passage.
Under previous law, school districts were not required to share mill levy override dollars with their charter public schools. Some districts did share the overrides, though they were not required to by state law. That created a funding disparity of about $34 million between the traditional and charter schools, according to the legislative analysis.
Charter schools currently enroll about 115,000 students in Colorado, representing nearly 13% of total K-12 public school enrollment in the state.
“If all Colorado charter public school students were combined into a single school district, it would be the largest district in the state,” said state Senate sponsor Owen Hill, R-Colorado Springs. “No group of students should be systematically underfunded, but a group this large and vital to the health of our public school system certainly deserves a level, fair playing field, which HB 1375 will finally help provide.”
Opponents of the bill, including House Democrats representing large school districts in Adams County and Aurora, said the loss of local control over how schools are funded is unfair to the taxpayers.
Moreover, critics say that charter schools drain scarce resources from struggling traditional schools and that charters can receive additional funds from donors and the federal government that they don’t have to share with the district. In Colorado, new and expanding charter schools have received more than $82 million in targeted federal funds.
The Colorado Education Association opposed the previous Senate version of the bill that was killed in a House committee. The CEA said Senate Bill 61 required little oversight in return for the additional local funding.
CEA President Kerrie Dallman said the compromises worked out in the final bill will allow parents to gain a clearer view of the charter school their children might attend.
“Our work with this coalition was instrumental in bringing a new era of accountability and transparency to charter schools that our parents and taxpayers have never had,” Dallman said.
Referring to Rocky Mountain Prep, where Hickenlooper signed the legislation, Dallman said the school’s 22 waivers under state law will soon have to be posted.
“Currently, Rocky Mountain Prep's website provides no information that this school does not have to follow laws in the same way as traditional neighborhood schools,” Dallman said.
Starting next year, charter schools must post comprehensive tax forms online, such as the copies of their IRS Form 990, that show how much money they receive from outside sources including gifts, grants and donations.
Also included in the new law are provisions that eliminate two automatic waivers around gifts, grants and donations, and competitive bidding.
“This may prevent no-bid contracts from being awarded to for-profit vendors connected to a taxpayer-funded charter school,” the CEA said. “The law also requires that charters have a named contact in place at the school, available during business hours, to answer questions about all waivers.”
The law allows school districts to apportion property tax revenue for specified underserved populations.
If a district is distributing a portion of the mill levy revenue to the charter schools during the 2016-17 budget year, it must maintain the same distribution amount for the 2017-18 and 2018-19 budget years.
By July 1, 2018, each school district that chooses to adopt a plan must post the plan on the school district's website. If the school district chooses to distribute 95% of the per pupil amount, it must post a notice by July 1, 2018. A year later, the district declares the amount received in revenue, amount distributed for underserved populations, and the amount distributed to each charter school and each innovation school.
Still unresolved is the issue of local funding for charter public schools authorized by the Colorado Charter School Institute that are not part of an established school district. The Colorado Charter School Institute (CSI) is the state's only non-district charter school authorizer, and it authorizes 39 Colorado charter schools.
HB17-1375 creates the structure for a fund to equalize funding for CSI schools, but no money is appropriated toward the fund this year. It would take about $15 million to equalize funding for children attending CSI schools, according to legislative estimates.
In the past five years, enrollment has grown 30% for the state’s 1,700 charter schools, according to the Colorado Department of Education. In the number of charter schools per capita, Colorado ranks third behind Arizona and Wisconsin with 3.34 schools per Coloradan, according to analysis by the Hechinger Report, an educational research organization for journalists.
Like traditional schools, Colorado charter schools receive 100% of the per pupil revenues or money designated by the state legislature each year for operating expenses, capital reserve and risk insurance. The charter school authorizer may retain up to 5% of documented central administrative costs for oversight of the charter school. A charter school is allowed to purchase services from their authorizer or a third party.
Public schools receive two types of funding from Colorado, a formula that is common in most states. Base funding is the amount of money for basic educational needs of an individual student. Categorical funding finances programs such as special education, summer school or efforts to reduce class size.
Colorado charter schools enjoy state financial support for construction through a percentage of the marijuana excise tax. This year $25 million is appropriated, which equates to $277.98 per eligible full-time student.
The schools can also issue bonds through the Colorado Education and Cultural Facilities Authority, the largest financier of charter schools in the nation. The authority has issued nearly $1.9 billion for 50 schools in the state.
"Colorado has been a leader in financing charter schools via tax-exempt bonds, partly because in Colorado, charter schools’ main source of revenue is the state's per pupil revenue, which must cover operations as well as facilities," said Mark Heller executive director of the CECFA. "The lower costs of borrowing thru tax-exempt bonds helps charter schools stretch very limited resources."
Although the agency can help finance a start-up school, those issuing bonds through the authority have generally been in existence about three years and have at least 300 students. Charter schools are also eligible for the state’s backing through the Intercept program.
Although CECFA does not require a rating to finance charter school bonds, those that achieve investment-grade qualify for the state's moral obligation pledge, which carries a rating of A from S&P Global Ratings, Heller said.
Nationally, student enrollment in charter schools grew 70% from 2009 to 2014, according to the National Alliance for Public Charter Schools. With about 2.7 million students charter schools enroll more than 5% of the total number in public schools. In 12 school districts, more than 30% of students attend charter schools. In nearly 150 districts, at least 10% of students attend charter schools.
Since 2000, more than 92 bills affecting bond finance for charter schools have passed in state legislatures, though some were vetoed, according to a list compiled by the Education Commission for the States.
"Charter school funding through tax exempt bonds has become a proven and reliable investment vehicle that has benefited hundreds of thousands of children across the country," Heller said. "Critical savings from tax exempt bond financing have catalyzed the many other kinds of educational, cultural, health, and housing facilities that depend on financings via CECFA and similar authorities."