JBC adopts midyear school finance adjustment, adds statutory clarification to protect four districts

Andrea Ewell, JBC staff, told the Joint Budget Committee the midyear school finance supplemental shows a $104,000,000 reduction in the state share for the current year driven by a roughly 4,000 drop in funded pupil count and a $70,000,000 increase in local share, and recommended taking the reduction from the state education fund rather than cutting the general fund or State Public School Fund. "There's a big $104,000,000 reduction," Ewell said while describing updated pupil counts and local share changes.

The most consequential issue during the discussion was a modeling discrepancy arising from recent reading of statute for SB 1320's hold-harmless phase-in. Staff reported four districts — led by Mesa — face a "negative phase-in" increment under a strict statutory reading, which would reduce their phase-in amounts and cause Mesa to lose roughly $635,000 (staff estimated $643,000 to correct). Committee members pressed whether the statute allowed preventing a negative increment and whether the committee should fix the outcome for the current year or clarify statute for both 2026 and 2027.

After debate, the committee voted to adopt the staff recommendation for the state share of total program and to include clarifying language in the midyear supplemental to preserve a de-facto third hold-harmless for the affected districts in the current year. Senator Mobley moved the clarifying language; the motion passed with the committee recording a 5 to 0 vote with Representative Taggart excused. Staff said the $643,000 would be added back to the midyear appropriation and charged to the state education fund so that totals match the committee's intent.

Why it matters: midyear adjustments lock updated pupil counts and revenue shares into the current-year calculation that drives funding to every district. The committee's clarification avoids an unexpected cut to a small set of districts mid-school-year and signals lawmakers will use targeted statutory language when statutory reading and modeling diverge.

The committee also referred an associated temporary IT project manager request for CDE's school finance modernization project to the Joint Technology Committee for FY27 consideration and confirmed the midyear school finance bill will carry the technical changes staff recommended. The committee indicated it will address any FY27 statutory adjustments as part of the School Finance Act drafting and figure-setting process.