Colorado Supreme Court May Decide Constitutionality of Negative Factor

By Julie Pelegrin

Less than two years after the Supreme Court held in State v. Lobato that Colorado’s public school financing system complies with the constitutional requirement to provide a “thorough and uniform” system of public education, parents and school districts are again suing to increase the amount of state money appropriated for public schools. The new lawsuit – Dwyer v. State of Colorado – focuses on the negative factor and whether it violates the constitutional requirement to increase the amount of statewide base per pupil funding by inflation each year. To better understand the plaintiffs’ claim, we’ll start with some background on how the state funds its public schools.

Calculation of Total Program Funding and Amendment 23
calculator moneyUnder the “Public School Finance Act of 1994,” the department of education annually calculates the amount of operating money – called “total program funding” – that each school district receives. The calculation starts with the statewide base per pupil funding amount, which the General Assembly sets each year in statute. The department multiplies this amount by factors that account for each school district’s size and cost of living.  This sum is the school district’s “per pupil funding.” The department multiplies the school district’s per pupil funding by the number of pupils enrolled in the district then adds certain amounts for the at-risk pupils, multi-district on-line pupils, and ASCENT program pupils that the school district enrolls. Before the 2010-11 fiscal year, this final sum was a school district’s total program funding.

Total program funding is paid with a combination of school district tax revenues and state money. The department of education figures how much a school district will receive in local property tax and specific ownership tax revenues each year. The department subtracts this amount from the school district’s total program, and the amount that’s left is paid using state money. This amount is called the “state share” of total program funding.

In 2000, the voters of Colorado passed a citizens’ initiative – Amendment 23 – that requires the General Assembly to increase the amount of statewide base per pupil funding by inflation plus one percent every year for fiscal years 2001-02 through 2010-11 and by inflation every fiscal year thereafter. As explained earlier, statewide base per pupil funding is important because it’s the basis for calculating how much each school district receives in total program funding each year.

Creation of the Negative Factor
In 2010, the nationwide recession caused a significant decrease in the state’s revenues, and there was not enough money available to pay each school district’s state share of total program funding and all of the other costs of state government. The General Assembly amended the School Finance Act to create what is known as the “negative factor.” This factor is a percentage reduction in each school district’s total program funding to ensure that the state’s revenues are sufficient to pay the state’s share of total program funding for school districts and school housethe other expenses of state government.

Each year since 2000, the General Assembly has increased the amount of statewide base per pupil funding by at least the amount required in Amendment 23. However, because of the negative factor, the General Assembly in the 2014-15 fiscal year appropriated about $894.2 million less than it would have otherwise appropriated to fund the state share of total program funding.

Constitutional Challenge to the Negative Factor
Last June, a group that includes parents of students enrolled in public schools, educational organizations, and school districts – we’ll refer to them generally as “the parents” – filed suit against the State of Colorado, Education Commissioner Robert Hammond, and Governor John Hickenlooper – we’ll refer to them as “the state” – claiming that the statute that creates the negative factor is unconstitutional. The parents claim that the voters who approved Amendment 23 understood that it required total program funding levels to increase each year, regardless of other state funding or revenue needs. They argue that the negative factor actually is applied to and reduces the statewide base per pupil funding and that it therefore violates the requirements of Amendment 23.

Last August, the state filed a motion to dismiss the lawsuit. The state argued that the General Assembly has fully complied with the plain language of Amendment 23, which requires annual increases to statewide base per pupil funding, but does not require increases in total program funding for school districts.

The trial court issued an order in November of 2014 denying the state’s motion to dismiss. The trial court found that, since Amendment 23 prescribes minimum increases in the state funding for public education, the parents alleged sufficient facts by asserting that the negative factor reduces funding for school districts below the level that Amendment 23 requires.

Supreme Court Proceedings
Last January, the state asked the Colorado Supreme Court to exercise its original jurisdiction and issue a rule that the General Assembly’s actions to annually increase the statewide base per pupil funding amount comply with the requirements of Amendment 23, regardless of the negative factor. The Supreme Court directed the parents to file written answers as to why the Court should not grant the state’s request for a rule.

The parents have filed their answer, which makes generally the same arguments as the complaint – that the negative factor actually operates to reduce the statewide base per pupil funding and therefore violates Amendment 23. The parents also argue that, when Amendment 23 passed, the voters understood the language of Amendment 23 to be increasing per pupil expenditures.

The state has also filed its reply, which makes generally the same arguments as the motion to dismiss the lawsuit – that the language of Amendment 23 is plain and unambiguous and it requires only increases in the statewide base per pupil funding amount; it does not address the General Assembly’s authority to change or add any factors within the formula. The state argues that the General Assembly has increased the statewide base per pupil funding amount each year since Amendment 23 passed, and the negative factor has never reduced a school district’s per pupil funding amount below the statewide base.

So now, we wait for the Supreme Court to decide. If the Supreme Court decides to exercise its original jurisdiction and rules in the state’s favor, that would essentially decide the case. However, if the Supreme Court does not exercise its original jurisdiction, or if it rules in favor of the parents, the case may return to the district court for a full trial. Could be a long summer….