The 2025-26 School Finance Act, which will begin implementing a new school finance formula, won unanimous approval from the House Education Committee on Monday.
House Speaker Julie McCluskie, D-Dillon, pointed out the challenges to this year’s bill, including Gov. Jared Polis’s proposal to eliminate averaging by counting only the students in the seats on the Oct. 1 count day instead of averaging enrollment over four years.
That drew strong opposition from teachers, education allies, and lawmakers, although HB 1320 advocates for a three-year average beginning in 2026-27.
Under the new formula, public schools would receive an additional $500 million over the next seven years, with 15% of that applied in the 2025-26 budget and throughout the following five years. Under one of seven amendments to the bill adopted Monday, the final year would be set at 10%.
The new school finance formula was designed to allocate more resources to rural and underserved districts, students living with disabilities, at-risk students, and English Language Learners.
Rep. Meghan Lukens, D-Steamboat Springs, the bill’s other co-sponsor, told the House Education Committee that spreading out the phase-in by one additional year will protect the State Education Fund (SEF), the third prong of K-12 funding in addition to the state share and local share, paid for by property taxes. SEF relies on one-third of one percent of taxable income from Amendment 23 in 2000.
Lawmakers, particularly on the Joint Budget Committee, have sounded the alarms about the SEF’s stability, warning it could run out of money in the next three years. The fund balance in 2025-26 is expected to be around $1.1 billion, but the fund will cover a larger share of school finance this year than in the past.
A January report pointed out that General Fund appropriations have been held constant during the last two fiscal years due to the relatively large balances available in the SEF. But by the 2027-28 fiscal year, the balance could drop from its current $1.1 billion to about $200 million.
House Bill 1320 increases total per-pupil funding by $400, to $11,852 per student, an increase in state support of $256 million.
Public education is the second largest item in the state budget and will exceed $10 billion for the first time in 2025-26.
The new school finance formula, a bill McCluskie carried in the 2024 session, intends to hold districts harmless through the implementation period. That’s important to the 21 school districts, primarily in rural communities, that are seeing significant declines in enrollment. Under HB 1320, these districts would receive no additional funding but wouldn’t lose money either.
The rest of the state’s 178 school districts will see an average increase of 2.9%.
Lukens told the committee that keeping promises to Colorado students is essential even in tough fiscal times.
Chuck Carpenter, Denver Public Schools’ chief financial officer, was part of the coalition that worked with McCluskie on the 2024 rewrite of the 30-year-old school finance formula, which he said tilted the scale toward wealthier communities. “This is a financially balanced and responsible way to go forward,” he said.
He pointed out that the state’s share of public education will drop by nearly $120 million. “This body is defunding its commitment to K-12” but can still push forward an improvement in school finance, Carpenter said.
Kevin Vick, president of the Colorado Education Association, said the School Finance Act showed that lawmakers listened, especially on the issue of averaging, which would have resulted in millions of dollars in cuts. He said there are still critical details to address, such as establishing a system to track funding losses, which was also addressed through an amendment.
It’s not just funding; it’s a vital step in fulfilling the promise from last year, said Adam Hartman, superintendent of Canon City Schools in Fremont County. The new formula and HB 1320 will increase funding in his district by more than a half million dollars and provide much-needed stability, which will help the district avoid cuts to classroom programs. “It’s timely support for rural schools,” Hartman said.
HB 1320 now heads to the House Appropriations Committee.
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