Colorado School Finance Action in Court and Legislature

Last Updated: May 30, 2013

This article appeared in the May 2013 Rural Policy Matters.

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The future of school funding in Colorado is unclear following a supreme court ruling in late May that the state's educational finance system meets constitutional muster. At the time of the ruling the state legislature had begun re-working the way it funds schools in response to a lower court's earlier ruling that the system was not constitutional. "This ruling is a devastating blow to the children of Colorado," said Kathleen Gebhardt, lead attorney for the plaintiffs and member of the Rural Trust Board. 

Arguments in court  

Colorado’s highest court heard arguments in the Lobato school finance case in March after state officials appealed last year’s Denver District Court decision that found the state'school funding system unconstitutional. (Editor’s note: See previous RSFN coverage here.)

In the district court's strongly worded ruling, Judge Sheila Rappaport ordered the State to design, fund, and implement a system of public education that guarantees that all students graduate with the knowledge and skills they need for citizenship and postsecondary education.

Attorneys for the state had argued that state officials’ hands are tied by tax laws that prevent them from doing any more for schools. Specifically, they said that Rappaport should have considered evidence about how Colorado’s Taxpayer Bill of Rights (TABOR) law and other amendments impact school funding.

But plaintiff attorneys said schools and students across the state are suffering the underfunding that has resulted from the arbitrary nature of the system. The state has never made a rational determination about the cost of a “thorough and uniform” school system. Instead, plaintiff lawyers argued, the legislature decided how much to spend and divided it by pupil.

Gebhardt described the state of schools in Colorado saying, "Fifty years from now, our kids will face unimaginable global challenges, and they will be armed only with the education that we provide today."

During oral arguments, the justices were actively engaged with both sides. Justice Gregory Hobbes noted that there was significant disparate treatment of rural students, Latino students, and American Indian students, even as the state argued it is doing all it can. “I’m concerned that the argument is, ‘We can’t do it,’ and therefore it becomes an excuse for, ‘We won’t do it,’” Hobbs said.

The justices also raised the issue of separation of powers during oral argument. They asked the lawyers in the case how to balance judicial involvement with legislative work on school finance. The attorneys for the plaintiffs responded that a ruling in their favor would give the legislature a chance to do their job: by ordering needed reforms. The plaintiffs pointed out that the lower court’s ruling establishes that the role of courts is to rule on constitutional questions, such as the one at hand.

The Lobato lawsuit was first filed in 2005. Taylor Lobato, the named plaintiff, is now in college. She has said publicly that she began college far behind her undergraduate peers in academic preparation.

The assistant attorney general argued for the state of Colorado. Terry Miller argued for the plaintiffs. David Hinjosa argued for plaintiff-intervenors Mexican American Legal Defense Foundation (MALDEF), representing primarily English language learners and their parents and families. Chief Justice Michael Bender noted the large number of amicus briefs in the case. Rural Trust was among the friends of the court that submitted briefs.

Gebhardt said, “This case has been ongoing for eight years. During that time, the violation of Colorado children’s constitutional rights has continued: school budgets have been cut, mandates added, class sizes increased, school hours decreased, student populations increased, and the number of teachers decreased. The trial court, after hearing evidence for five weeks, found that the current system of school finance is not only unconstitutional, but unconscionable.”

Legislative efforts

Apart from the court’s ruling, Colorado schools could see some benefits resulting from major school finance reform legislation if voters approve a related tax increase this November. Senate Bill 213, which Governor John Hickenlooper is expected to sign, is the result of a multi-year effort to revamp the state’s funding system.

The bill addresses a number of key funding concerns and reflects compromises forced by the legislative process. The new proposal takes into account the ability of the local district to raise revenue and size factors. It also includes a small district weight and a measure to helps address declining enrollment. In addition, the bill enhances special education funding, addresses teacher recruitment and retention issues across geographical regions, adds full-day kindergarten, and makes other significant reforms.

One of the central features of the plan is a significant shift of funding to districts with the highest concentrations of at-risk students and English language learners. The reforms would also eliminate a cost-of-living weight in the formula, which typically rewards higher-property wealth districts to the disadvantage of lower-property wealth districts.

The formula is intended to encourage wealthy but low-spending districts to raise more revenue locally. One part of SB 213 incentivizes districts to increase local millage by matching the increase with state funds. A provision would hold all districts harmless until 2020.

The bill also includes initiatives that would improve transparency in the system, so that parents and others could view their local school revenues and expenditures online.

SB 213 is the result, in part, of the work of the School Finance Partnership, a coalition made up of school leaders, advocates, officials, and business representatives. The group sought to make major changes to key elements in Colorado’s funding formula, including expanding the use of weighted student funding for poverty and for English Language Learners. The group conducted outreach and convened focus groups across the state and commissioned an update of Colorado’s school finance adequacy study. Augenblick, Palaich and Associates and updated a 2011 report conducted for the same purposes and that study utilized the professional judgment and successful schools approach.

Senator Mike Johnston (D-Denver) led the legislative effort, which took two years to reach the legislative stage. SB 213 passed both houses of the Colorado Legislature but will only be enacted if voters approve a tax-increase initiative planned for the November ballot. Johnson and his allies have said that the state needs to recognize differences in local tax ability and effort among districts and that TABOR and other constitutional amendments have served to shift funding over the years. If approved by voters, the new formula would go into effect in 2015–16. The current Colorado school finance formula was created in 1994.

The statewide tax initiative would have to raise between $750 million and $1.1 billion annually in order to pay for the funding for programs under the new formula. Last year, a legislative effort to improve education funding through increases in sales and income tax was not successful.

The increase in basic K–12 operating costs, known as total program funding, is just under $900 million a year. The results of the “costing-out” study estimated Colorado could be as much as $4.7 billion short of what it needs to fund K–12 schools adequately.

Some education advocates in the state say that SB 213 does not address this massive shortfall, and that it should not be viewed as a sufficient response to the Lobato lawsuit. Others say that while SB 213 is not perfect, it is a dramatic improvement over the status quo.

Work is still underway to finalize the language and format of the tax question.

Read more:

Coverage of the Colorado Supreme Court decision:

Local coverage on the
Lobato arguments:

Website on Lobato case with history and background:

Coverage of legislation:

Editorial supporting the legislation at its introduction:

Website of the organizations that worked on the school funding reform:

2013 Update to the costing-out study:


Read more from the May 2013 Rural Policy Matters.