UNDERSTANDING FUNDING FOR KANSAS PUBLIC SCHOOLS. Past, Present, And Future

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1 UNDERSTANDING FUNDING FOR KANSAS PUBLIC SCHOOLS Past, Present, And Future

2 Kansas Constitution: the State of Kansas must provide adequate and equitable education for all. Adequate = enough money to provide a quality education Equitable = each student gets the same quality of education Pre-1970s Wide disparities in per-pupil spending 1973 School District Equalization Act Districts with less local tax resources (poorer districts) get more education money from the state than districts with more local tax resources (wealthier districts) Law was flawed: Per-pupil spending ranged from $2,700 to $12,000 A LITTLE HISTORY

1992 - School District Finance and Quality Performance Act Designed to equalize educational opportunities statewide Statewide property tax for K-12 education (originally 35 mills,

3 School District Finance and Quality Performance Act Designed to equalize educational opportunities statewide Statewide property tax for K-12 education (originally 35 mills, but gradually reduced to 20 mills) Two types of state funding: Base state aid and equalization aid Law in effect until switch to block grant system in 2015 THE OLD FINANCE LAW (1992)

4 BASE STATE AID PER PUPIL Schools received a base amount of funding (chosen by Legislature) per student Amount from state = Base state aid per pupil X weighted enrollment count In English: Schools received more or less additional money based on the needs of their students. Weighting factors: Transportation, special education, family income levels, and more TWO TYPES OF STATE AID UNDER THE OLD FINANCE LAW

5 EQUALIZATION AID Additional funding for poorer schools based on property values in the district Meant to allow for similar learning opportunities across all districts, rich or poor Provided three types of aid: Local Option Budget (originally meant for extras above and beyond basic education) Districts levy tax to get an LOB of up to 30% of the district s state financial aid amount. At this point, most districts rely on this for day-to-day operations. Because of this, it s often called the Supplemental General Fund. Capital Outlay (for repairing buildings, buying equipment, etc.) Bond and Interest (state assistance in paying off bonds approved by local voters for building new facilities) TWO TYPES OF STATE AID UNDER THE OLD FINANCE LAW

6 General Fund Money for day-to-day operations Local Option Budget (LOB) Also known as Supplemental General Fund Originally for extras, now used for day-to-day operations OPERATING FUNDS

7 FLOW OF MONEY: State of Kansas Local Taxes Federal Gov. KPERS (State Retirement Fund) Special Ed. General Fund Local Option Budget Capital Outlay Bond & Interest Fed Prog. (Title, Grants, Etc.) LOCAL SCHOOL DISTRICT FUNDS Other Operating Funds - Vocational, Professional Development, Virtual, Food Service, Etc.

8 EQUALIZATION AID: State of Kansas Local Taxes Federal Gov. KPERS (State Retirement Fund) Special Ed. General Fund Local Option Budget Capital Outlay Bond & Interest Fed Prog. (Title, Grants, Etc.) LOCAL SCHOOL DISTRICT FUNDS Other Operating Funds - Vocational, Professional Development, Virtual, Food Service, Etc.

9 Governor and legislators said the 1992 law was too frequently litigated Introduced block grants to set static funding levels for two years ( and ) while Legislature makes a new funding formula Base state aid per pupil = Whatever the district received in minus 0.4% 0.4% reduction set aside in Extraordinary Needs Fund Fund meant to help districts if they had big drops in valuation or gains in enrollment Equalization for Capital Outlay and LOB prorated at 75% for Block grants reduced equalization money even though the Supreme Court said fully funding these satisfied the equity requirement Money shifted so more appears to go from the state to the General Fund BLOCK GRANTS:

FLOW OF MONEY: BLOCK GRANTS (2015-16) 20 mills State of Kansas Local Taxes Federal Gov.

10 FLOW OF MONEY: BLOCK GRANTS ( ) 20 mills State of Kansas Local Taxes Federal Gov. KPERS (State Retirement Fund) State distribution to General Fund now includes 20 mills in local taxes, special ed., and KPERS Special Ed. General Fund Local Option Budget Capital Outlay Bond & Interest Fed Prog. (Title, Grants, Etc.) LOCAL SCHOOL DISTRICT FUNDS Other Operating Funds - Vocational, Professional Development, Virtual, Food Service, Etc.

11 EQUALIZATION AID: BLOCK GRANTS ( ) 20 mills State of Kansas Local Taxes Federal Gov. KPERS (State Retirement Fund) All equalization money except Bond & Interest now goes to General Fund first (LOB and Capital Outlay amounts were lowered) Special Ed. General Fund Local Option Budget Capital Outlay Bond & Interest Fed Prog. (Title, Grants, Etc.) LOCAL SCHOOL DISTRICT FUNDS Capital outlay transfer is optional Other Operating Funds - Vocational, Professional Development, Virtual, Food Service, Etc.

12 Schools said the reduction in LOB and Capital Outlay violated equity requirement of the Kansas Constitution Kansas Supreme Court agreed Legislature has until June 30, 2016 to fix equity or they will shut schools down because no Constitutional funding system is in place SUPREME COURT INTERVENTION

13 The Legislature took action to fix the equity problem for the school year: Funded capital outlay according to old formula Cost to state: $23.5 million Changed the formula for LOB aid to give less money to districts Savings to state: $82.9 million Created new payment type called Hold Harmless to prevent school districts from losing money due to new LOB formula Cost: $61.8 million Actual increased equity funding to districts: $2.4 million but it s not new To be taken from undistributed money in the Extraordinary Needs Fund, which was taken from the districts in the first place THE EQUITY FIX

14 THE EQUALIZATION FIX 20 mills State of Kansas Local Taxes Federal Gov. KPERS (State Retirement Fund) Increased capital outlay aid Greatly reduced LOB aid Hold Harmless funds make up the difference Special Ed. General Fund Local Option Budget Capital Outlay Bond & Interest Fed Prog. (Title, Grants, Etc.) LOCAL SCHOOL DISTRICT FUNDS Other Operating Funds - Vocational, Professional Development, Virtual, Food Service, Etc.

15 Districts that don t receive equalization aid (wealthier districts) are not affected. For districts that do receive equalization aid: Districts generally receive more state aid in Capital Outlay as it is fully funded Districts generally receive less LOB aid as the formula was changed Hold Harmless money goes to the General Fund and makes up the difference There is almost no real change in total state aid EFFECTS OF THE EQUITY FIX

16 The Legislature put no more money into schools. They only shifted it around to different funds. In changing the LOB aid formula, they equalized downward. The additional funding in Capital Outlay is in effect a reduction to LOB, which is operating money (salaries, etc.) To have the same operating money they had before, districts receiving equalization aid have to raise local taxes. PROBLEMS WITH THE FIX

17 In areas where residents will tolerate a tax increase, districts might leave hold harmless money in the General Fund, raise taxes to make up what they ve lost in LOB, and actually have more money than before the changes. In areas where residents will NOT tolerate a tax increase, districts will just have to make do with less. This will likely have the effect of increasing inequity. MORE PROBLEMS WITH THE FIX

18 The Kansas Supreme Court will hold a hearing on May 10, A decision will follow in a timeframe determined by the court. Possible outcomes: Court accepts the Legislature s equity fix as-is Court rejects the fix and tells Legislature to try again within a specified timeframe Court rejects the fix and orders a specific solution BACK TO THE SUPREME COURT

19 The State of Kansas is broke. Revenues continue to come in below projections. Revenue forecasts were just reduced by another $300 million. Shortfalls are partially due to sluggish ag, oil and aviation markets, but mostly due to income tax cuts and business tax exemptions championed by Governor Brownback. Governor Brownback has said he will veto tax increases. What happens if the Court shuts down schools? Money flow under the new law could be helpful or harmful, depending on the district and whether its patrons can stomach a tax increase. OTHER CONSIDERATIONS

20 House Larry Hibbard Senate Forrest Knox YOUR LOCAL LEGISLATORS

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Financing Education In Minnesota 2016-2017 Created with Tagul.com A Publication of the Minnesota House of Representatives Fiscal Analysis Department August 2016 Financing Education in Minnesota 2016-17