State Funding For Schools

School funding is determined by a "total program" amount calculated largely by enrollment, minus the "local share" contributed by districts through property taxes and specific ownership taxes. The state covers the remaining difference through state equalization payments, also known as state aid.

Current Year Outlook (FY 2025-26)

The requirement for state aid has decreased significantly compared to the initial legislative appropriation.

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  State Aid Reduction: The state aid requirement is $104.3 million lower than previously budgeted.

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  Enrollment Drivers: Total program requirements fell by roughly $33 million due to lower-than-expected enrollment. Specifically, the funded pupil count dropped by about 4,100 students, with significant declines in at-risk (down ~3,800) and English Language Learner (down ~2,400) populations.

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  Local Share Increase: Revenue available for the local share is $71.5 million higher than expected. This includes an increase of over $67.9 million in property taxes and $3.6 million in specific ownership taxes.

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  Averaging Impact: Declining enrollment has increased the impact of multi-year averaging, which now adds over 18,000 student FTE to the counts—a 64 percent increase from earlier estimates—tempering the funding drop.

Budget Year Outlook (FY 2026-27)

Conversely, the state aid requirement is projected to rise in the coming budget year.

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  State Aid Increase: The state aid obligation is expected to increase by approximately $232 million year-over-year.

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  Cost Drivers: Total program requirements are projected to grow by $211 million relative to current levels. This is driven by updated inflation expectations (rising from 2.3 percent to 2.5 percent) and enrollment estimates.

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  Local Share Decrease: Revenue for the local share is projected to decrease by nearly $21 million due to a projected 0.8 percent decline in school district assessed values.

Formula and Fund Balances

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  New Finance Formula: The new formula created by House Bill 24-1448 is being phased in over seven years. Current forecasts for local share and State Education Fund (SEF) diversions suggest the implementation will continue without a pause in FY 2025-26 or FY 2026-27.

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  State Education Fund (SEF): Under current law (Scenario 1), if the General Fund contribution grows by 3.0 percent annually, the SEF is projected to end FY 2026-27 with a balance of $523 million.

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  Kids Matter Account: The newly created Kids Matter Account within the SEF is expected to receive $218 million in FY 2026-27.