Diving into the school’s wallets

Taxation of Colorado’s thriving marijuana trade was supposed to improve the funding of the state’s schools, but from the numbers it would appear that some school districts have seen little of that windfall.

In the 2018-19 budget proposal Gov. John Hickenlooper released in November, schools are going to see an increase of $343 in per pupil funding. Plus, rural school districts are supposed to benefit from another $10 million in marijuana taxes to meet their teacher shortage.

In general, people assume that marijuana tax money is helping schools.

Which is true, according to the Colorado Department of Revenue. In the Fiscal Year 2016-17, $40 million of the marijuana tax revenue was distributed to the Public School Capital Construction Assistance Fund. Another $31.6 million were transferred to the Public School Fund.

But Jennifer Okes, Executive Director of the School Finance Division at the Colorado Department of Education, said the contribution of marijuana money is minimal. Between 1 and 1.63 percent of education funding is based on marijuana sales tax revenues. “The percent decreases to 0.48 to 0.80 percent when all the funding streams to school districts are included in the comparison,” explained Okes.

Share of marijuana sales taxes revenues in overall education funding. [CDE]

“Marijuana tax dollars absolutely do not help school districts to the extent the general public believes,” said Bill Sutter, Chief Financial Officer in the Boulder Valley School District.

Denver Public School District shares an explanation on why marijuana tax revenues do not help their district.

Boulder is one of the counties with the highest marijuana sales tax revenues. But, as Sutter explained, “local taxes do not flow to school districts. Local school districts, with a couple limited exceptions, are not funded by any local sales tax.”

At least, not directly. All the locally collected marijuana sales taxes are thrown into one pot and redistributed to the districts as their share of the state taxes.

The Public School Finance Act of 1994 regulates, how much money every district is assigned. In short, the act determines the Total Program Funding by “a base per pupil amount and additional amounts […] based to characteristics unique to the district, such as costs of living and district enrollment.” [CDE].]

“Arguably, some of those state sales and excise tax dollars collected in Boulder go to areas that have prohibited the sale of recreational marijuana,” said Sutter.

State sales, use taxes as well as state income taxes contribute to the state’s share of school funding. The local share is represented by revenues from property taxes and specific ownership taxes, for example vehicle registration taxes.

State and local tax contributions are still the main sources of revenue for schools (see map below).

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State grants do not count as state tax contribution, but are also a source of revenue that is provided by the state. They don’t have be “grants” in the narrow sense, explained Christina Larson, Superintendent of the school district Moffat 2.

In her district, state grants contributed 50 percent to the district’s revenues in 2016.

“Building funds and projects constituted the largest percent of that funding,” said Larson. In 2016, the district was awarded a BEST grant for the construction of a new school building.

The “Building Excellent Schools Today” program, shortened BEST, is one of the grants under the umbrella of the Capital Construction Assistance Fund which is financed by marijuana tax revenues.

Which means that school districts like Boulder have to be eligible for some kind of state grant to benefit from their local marijuana sales taxes.

And the application process, as for all kinds of grants, is not always smooth.

Larson herself was not part of the application process for their grant. “But I know it requires months of research […], community investment and approval of a bond, and several years of […] construction and maintenance,” she said.

As Sutter explained, the marijuana sales tax dollars “do not flow to districts for operating expenditures, meaning teachers, bus drivers, textbooks, utility bills, etc.”

Operating costs, or capital expenditures, represent the main expenditure in 12 of Colorado’s 179 public school districts.

Larson said, this expense in her district “accounts for all of the property, buildings and equipment the district owns.” This includes heating, cooling, light, running the cafeteria or equipment “like desks, chairs, fillings cabinets, etc.”

Okes added renovation of school buildings or buying school busses to the list. “Many schools may have such expenditures, but many other may not,” she explained the differences between the school districts.

But, as said, these expenditures are not covered by grant funding.

“Competitive state grants for public school operations are not a sustainable way to allocate resources,” said Sutter. “All children should benefit from public resources, not just those that happen to be in a district that can write a good grant proposal or have the facilities and resources to create an additional program.”

Okes seems to be aware of these complaints.

“I think there may have been a misperception by some in terms of what the marijuana tax money was to be used for and how much it would impact education funding,” said Okes. But nevertheless, the discussion in how marijuana tax revenues should be spent is still open, according to Okes: “I would assume that the legislature will continue to have these discussions in future years,” she said.

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