After three decades of little change in the way money is disbursed to school, Colorado officially has a new funding formula that will go into effect in the upcoming school year and begin directing an additional $500 million to schools over the next seven years.
Gov. Jared Polis made the new formula official Friday morning when he signed House Bill 1320 into law at Lukas Elementary School in Westminster against a backdrop of squirmy young learners.
“What funding our schools means is better pay for teachers and resources for classrooms and supports and specials and professional development and supporting paraprofessionals,” Polis said before signing the legislation and a couple other education bills. “And, of course, it’s up to each school district and school how that money is best used and deployed, and they have an important role in doing that, but the state is an important funder of education. And I’m confident with this school finance act we’ll be able to invest in education and get better results for all of you, the students and the learners.”
The state’s new approach to funding districts — totaling more than $10 billion for next year — will ramp up spending on schools serving high populations of kids who bring additional challenges to school, including kids from low-income families and those learning English.
The formula that state lawmakers settled on looks different from both the original design of the new formula adopted during the 2024 legislative session and an education budget Polis proposed several months ago.
A state budget deficit totaling about $1.2 billion sent lawmakers in search of programs and agencies to trim, creating uncertainty about what the future of education funding would look like. Lawmakers largely preserved dollars for education with the powerful Joint Budget Committee committing $150 million from the state’s general fund to public schools.
A last-minute addition to the legislation went one step further to protect schools against funding cuts into the future. Lawmakers created what they call the “Kids Matter Fund” within the State Education Fund, which contains reserves for the school funding formula and other education programs. The new fund will collect an estimated $230 million for school operations for the 2026-27 school year using 0.00065% of income tax revenue.
Colorado House Speaker Julie McCluskie, a Dillon Democrat and lead driver of school funding changes (right), joined Gov. Jared Polis and other lawmakers to make the state’s new school funding formula official May 23, 2025, at Lukas Elementary School in Westminster. (Erica Breunlin, The Colorado Sun)Districts won’t receive quite as much funding for the 2025-26 school year as they would have had the formula rolled out the way legislators initially proposed. In total, the state’s 178 districts will receive about $16 million less than lawmakers first promised.
However, the formula spelled out in House Bill 1320 also spares districts from much more serious cuts outlined in Polis’ early budget proposals, which recommended retiring a finance tool Colorado has used for years known as averaging. Colorado has long based district funding on the number of students that district serves averaged across five years, which protects districts experiencing declining enrollment from sudden and significant funding losses. Polis has repeatedly called the state’s averaging mechanism outdated and criticized it for giving districts money for kids they no longer serve.
“This matters because every kid deserves the chance to succeed”
The newly funding formula, backed by a bipartisan group of legislators, will average student counts for the purposes of funding over four years and includes a plan to begin phasing out averaging. The state will implement the new formula over seven years instead of six as lawmakers initially proposed and will ensure all districts receive at least as much funding next year as they did for the 2024-25 school year. Most school districts will receive more state funding.
The state is also increasing the base amount it spends per student by about $195 to about $8,692.
Most bill sponsors joined Polis at the Westminster elementary school for the bill signing, including Colorado House Speaker Julie McCluskie, a Dillon Democrat and one of the leading legislators behind the new formula.
McCluskie said the formula will give all students a fair shot at a promising future, regardless of their background.
“We have been on a march to try and achieve more equity in our school funding formula and approach for years,” she said. “I am so grateful because I know in my district, in counties like Lake County where students living in Leadville coming from low-socioeconomic backgrounds, students who are learning English, students with special education needs, that we need to be driving more resources to their classrooms to make sure that they are learning at the levels they can to be successful, thriving adults.”
Sponsor Sen. Jeff Bridges, a Greenwood Village Democrat and JBC chair, said the new law creates a school finance act that, for the first time, funds Colorado schools in an equitable way.
“This matters,” Bridges said. “This matters because every kid deserves the chance to succeed no matter where they come from and for too long in this state … we have not been ensuring that the kids who need the resources are getting those resources. This formula — as it moves forward, as we fully fund it and this bill ensures that it will be fully funded moving forward — this ensures that kids in our state are getting the resources they need. We know that different kids cost different amounts of money to get to where we want them to be, which is reading by 8 and ready by 18.”
Sen. Paul Lundeen, a Monument Republican and another bill sponsor, called the state’s school funding plan “the great big, beautiful bill,” playing off the federal tax and spending measure President Donald Trump has dubbed a “big, beautiful bill.” Lundeen said putting students at the center of school funding, instead of school districts, is one of the most important aspects of the new law.
“Not that we don’t love our institutions,” Lundeen said. “We do. They’re important. We support them, but they are not the centerpiece. They are not what it’s all about. These beautiful, shiny faces, these incredible minds that will build the future of Colorado, that’s what the funding formula is becoming about.”
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