State Budget and School Finance. The state’s March Economic Forecast was released on March 19^th.  The economic condition has worsened as expected. Non-partisan legislative council staff (LCS) showed a decrease of $642 million in the general fund compared to December. Due to already being in a situation below the TABOR limit, this is a direct dollar for dollar hit to the state’s budget. Based on the LCS projections, the budget deficit is now projected to be $1.47 billion. The projection puts the state with a 6.5% reserve level at the end of the 2026-2027 fiscal year, less than half the 15 percent statutory requirement. Additionally, state education fund revenues are projected to decrease 5.3% in fiscal year 2025-2026, leading to a likely pause in the phase-in of the new finance formula. Finally, LCS staff noted an elevated risk of recession due to growing conflict in the Middle East.

The governor’s office budget had a more stable outlook than LCS staff, in addition to a lower deficit. This is based on the plan for the sale of Pinnacol Assurance totaling $400 million, one-time revenue that does not seem to have legislative support at this time. Finally, I have also learned that the JBC opted to accept the governor’s office budget in-lieu of LCS. This is more optimistic, however has a number of structural issues connected with it such as the aforementioned Pinnacol sale and is more suspect to a mid-year rescission.

JBC Stress Test Memo. On February 20^th the non-partisan Joint Budget Committee (JBC) staff provided an analysis to the JBC to provide a longer-term analysis for the state’s general fund. The stress test used three different baseline economic condition scenarios through 2029-2030: (a). revenues and expenditures without a recession, (b). a moderate recession resulting in a 6.6% reduction in general fund revenues, and (c). a severe recession resulting in a 13.2% reduction in general fund revenues.

The stress test assumed general fund obligations align with current law for the “big 6” which includes:

• Medicaid/Health Care Policy and Financing (HCPF) and its population plus inflation, plus 2% inflationary growth,
• K-12 education and the implementation of the new finance formula (1448), assuming a two year pause in the implementation, and inflation plus population growth,
• Higher Education and Human Services growth of inflation plus population growth plus 1% inflationary growth.
• Corrections and Judicial which also is based on inflation plus population growth similar to K-12.

Using the assumptions stated above, the non-partisan JBC staff projects the state’s general fund to be depleted by 2029-2030 in the case of no recession and depleted by 2026-2027 in the case of a moderate recession. Finally, I will note that HCPF is facing cuts recommended by JBC for the 26-27 fiscal year to maintain the specified inflation plus 2% inflationary growth, plus population growth. Those cuts include a reduction in bed availability to serve health conditions through Medicaid and a reduction in paid hours to home caregivers to care for individuals with disabilities from 80 to 56 hours per week.

School Finance. A number of K-12 cuts are being discussed to potentially include:

1. A change to count SOT collections from MLO and Bond Overrides as part of local share – This would allow the state to include approximately $200 million in additional local contribution, equally decreasing state contribution. For Platte Valley this would equate to approximately $250,000 in reduction. I liken this to the state using a portion of our MLO to count towards our school finance total program.
2. A delay in the implementation of the new school finance formula – This would save the state approximately $75 million and was an agreed upon option with K-12 if the state was placed in a position where it had budgetary issues.
3. A change from the current 3 year averaging (26-27) to 2 year averaging – This would save approximately $49 million.
4. Cutting grants administered by CDE, with an undisclosed amount in potential savings.

Yours in Education,

Jeremy Burmeister, Ed.D., Superintendent of Schools

“The average ones will do it some of the time. The good ones will do it most of the time. The great ones will do it ALL the time.” Dwayne “The Rock” Johnson, actor, professional wrestler, and former Division 1 football player.