Education Funding

Colorado’s School Funding System Goes on Trial

By Todd Engdahl, Education News Colorado — August 01, 2011 9 min read
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Is the system Colorado uses to pay for its schools constitutional?

That short but infinitely complex question is the focus of a five-week trial in the case of Lobato v. State, which opens Monday before Denver District Judge Sheila Rappaport.

The outcome of the trial could have far-reaching but hard-to-predict impacts on school districts, classrooms, the state budget and the taxes that Colorado citizens and businesses pay.

Studies done for the plaintiffs estimate that “full funding” of Colorado schools could cost $2 billion to $4 billion more a year than the state spends now. Such increases would wreck the state budget and decimate other programs, say Gov. John Hickenlooper, a defendant, and Attorney General John Suthers, who is leading the state’s defense.

(If the plaintiffs win, the trial isn’t expected to end with an order that the state spend a specific amount on education. Rather, the plaintiffs are asking the judge to find the current finance system unconstitutional and tell the legislature to come up with a new one.)

The case “really goes to the heart of what we want from our education system today,” said Kelly Hupfeld, associate dean of the School of Public Affairs, University of Colorado Denver, and an education policy expert.

The plaintiffs “are saying if you want standards-based education … then you have to fund it accordingly. What the state is saying is there’s no requirement to fund at a particular level. They’re also saying there’s not much evidence that when you spend more on education you get better results.”

The case will provide a forum for expert views on that issue of spending and results, one of the most contentious in education.

Two of the top expert witnesses are well-known national figures, Linda Darling-Hammond for the plaintiffs and Eric Hanushek for the defendants.

“In the education reform world this is like an all-star lineup,” Hupfeld said. “This is going to be pretty monumental.”

What’s at Stake

Lobato is a lawsuit about “adequacy,” or whether the state’s school finance system is adequate and is appropriately designed to support the kind of education required in the state constitution, which mandates a “the establishment and maintenance of a thorough and uniform system of free public schools throughout the state.”

The large group of plaintiffs who brought the suit (see below) argues that the current finance system is underfunded and allocates money in an “irrational and arbitrary” way that violates the “thorough and uniform” standard.

Further, they claim the system doesn’t provide constitutionally adequate education to disabled, poor and minority students or to English-language learners and doesn’t provide enough funding to meet state requirements for instruction and student achievement. Plaintiffs also claim the current system violates constitutionally guaranteed local control of schools because it doesn’t give school districts enough money to fully exercise that control.

The Colorado Supreme Court framed the Lobato issues in a 2009 ruling that directed the case be heard in district court:

“To be successful, they [plaintiffs] must prove that the state’s current public school financing system is not rationally related to the General Assembly’s constitutional mandate to provide a ‘thorough and uniform’ system of public education. … The trial court must give substantial deference to the legislature’s fiscal and policy judgments. It may appropriately rely on the legislature’s own pronouncements concerning the meaning of a ‘thorough and uniform’ system of education. If the trial court finds the current system of public finance irrational and thus unconstitutional, then that court must permit the legislature a reasonable period of time to change the funding system so as to bring the system in compliance with the Colorado Constitution.”

Above the lawsuit loom the larger policy and political issues of whether courts can tell the legislature what to do, and whether education spending should be considered in the larger context of other state programs and constitutional provisions that put limits on state and local revenues and on local property taxes.

Gov. John Hickenlooper and Suthers, speaking with reporters before the trial started, repeatedly emphasized their belief that the state can’t afford to spend a lot more on schools and that school finance ultimately is a legislative and voter decision.

Debate over adequacy of school funding has intensified nationwide in recent years as pressures on school budgets have increased at the same time that schools have been required to do a better job of educating at-risk and special education students, raising test scores, transforming their operations, graduating more high school seniors and sending more students to college.

Lawsuits involving some aspect of school funding have been brought in 45 states. Starting in the 1970s, lawsuits focused on equity – disparities in spending between individual districts in a state. In recent years the focus has turned to adequacy – and whether schools receive enough money to produce the results expected of them.

Thirteen funding cases currently are in process across the nation, according to the National Access Network, an organization at Columbia University that tracks the issue.

Of cases decided so far, 22 have been in favor of plaintiffs and 11 for states, according to the group.

Big Cast of Characters

The Colorado plaintiffs include 26 parents (representing 40 children) from across the state, plus 21 school districts. Many of the districts are small, rural ones in the impoverished San Luis Valley, but Aurora, Colorado Springs District 11, Jefferson County and Pueblo City also are among the group.

A second group of plaintiffs, nine parents of 21 children, are represented by the Mexican American Legal Defense and Educational Fund and entered the case in 2010 as “intervenors.”

Some 100 school boards have passed resolutions supporting the lawsuit. Roughly half of the state’s 178 districts have contributed money to the cause, according to Ken DeLay, executive director of the Colorado Association of School Boards.

A notable exception is the conservative Douglas County board, which has passed two resolutions opposing the lawsuit.

Various stages of the case have drawn formal involvement by other groups. Before the state Supreme Court ruled that the case should go to trial, CASB, the Colorado Association of School Executives, the Colorado Education Association, the Colorado Lawyers Committee, the Colorado Center on Law and Policy, the Colorado League of Charter Schools and Padres Unidos all filed briefs with the court.

The trial will be a battle of experts testifying about their views and research on school funding, the amount of money needed to implement reform laws and the degree to which financial support affects academic achievement.

The plaintiffs’ listed expert witnesses include Darling-Hammond, a Stanford University education professor who has a high national profile on education issues, as well as Bruce Baker and W. Steven Barnett of Rutgers University, who have done extensive research on school finance and adequacy.

The state’s top expert witness is Hanushek of the Hoover Institution (which is affiliated with Stanford), a leading expert on the economics of education.

The lists of other possible witnesses filed by the parties are a who’s who of Colorado education, including superintendents, academics, former legislators and state officials.

The plaintiffs are expected to take two and half weeks to present their case, and the intervenors and the state a week each, according to plaintiffs’ lawyer Kathleen Gebhardt, of the non-profit Boulder firm Children’s Voices, which focuses on educational issues.

The Case

The Lobato case has been floating around the Colorado courts since the first version of the suit was filed on June 23, 2005.

In 2006, Denver District Judge Michael Martinez dismissed the case, ruling the current school finance system meets the requirements of Amendment 23, isn’t subject to court review and that the school districts didn’t have standing to sue. Martinez made his decision on legal grounds and didn’t hear any factual evidence.

That decision was appealed, and in 2008, a three-judge panel of the Colorado Court of Appeals upheld Martinez’ decision, ruling that while the parents had standing to sue, school districts did not and that there was no claim because school finance is the responsibility of the legislature.

That second ruling also was appealed, and the Colorado Supreme Court’s 2009 ruling revived the case, concluding the plaintiffs have standing to sue, school districts can be part of the case and that the issue can legally be considered by the courts.

Citing an earlier school finance case, the high court’s 4-3 majority concluded, “We interpret Lujan v. Colorado State Board of Education, 649 P.2d 1005 (Colo. 1982), as recognizing the authority of the judiciary to review whether the current funding system is constitutional.” (The Court of Appeals had relied on a federal court precedent to toss the case out, but the state Supreme Court disagreed with that.)

The case of Lujan v. State Board of Education challenged the equity of school funding and made it all the way to the state Supreme Court, which upheld the school finance system, concluding that the state constitution doesn’t require absolute equality in school spending or services.

But the case did establish, at least in the minds of current Supreme Court justices, the validity of court review over education spending.

In 2000, another case, Giardino v. State Board, was settled with the state agreeing to pay $190 million over 10 years for school construction costs. That settlement later was folded into the Building Excellent Schools Today construction program created by the legislature in 2008.

School Finance

Colorado school districts spent about $10.2 billion for all expenses in 2009-10, the most recent year for which the state Department of Education has data. Instructional costs totaled $4.4 billion.

Schools get money from a variety of sources, many of them earmarked, such as state funds for transportation costs, property taxes to pay off bonds and federal funds for special education students and high-poverty schools.

In Colorado, the most closely watched budget item is what’s called total program funding, the combination of state and local funds used to pay staff, operate buildings and support other basic operations. Total program funding is about $5.2 billion in 2011-12.

Under the school finance formula created in 1994, the legislature each year sets a base amount of per-pupil funding. Additional factors such as district size, staff cost of living and numbers of at-risk students are considered to come up with customized per-pupil amounts for each district. Districts receive varying percentages of state aid based on the amount of local revenues. Overall, the state contributes nearly 65 percent of total program funding.

However Rappaport rules sometime after the Lobato trial ends, that decision won’t be the end of the story.

From EdNews Colorado

Given the state constitutional requirement that voters approve tax increases, ultimately “the voters may need to decide how much they prioritize education,” said Hupfeld.

Despite plaintiffs’ success in other states around the country, Suthers remains skeptical that such suits affect education quality. Noting that such cases are “a 10- to 15-year process” in some states, he believes, “litigation has shown this is not the way to resolve educational problems.”

Republished with permission from Education News Colorado. Copyright © 2011 Public Education & Business Coalition. For more information, visit


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