Monday, June 4, 2018

Tracking the two-year increase in state aid to school districts

The Kansas Legislative Research Department has posted a new memo comparing state aid to school districts in 2017 with the Legislature’s appropriations for Fiscal Years 2018 (the school year just ending) and 2019 (the school year beginning in August) following the Kansas Supreme Court Gannon decision.

The memo shows total state aid increasing by about $475 million over the two years, which is more than 11 percent. The Legislature also approved foundation aid increases for the next four years expected to add over $500 million, allows the state attorneys to tell the Court state funding is increasing about $1 billion in response to the Gannon school finance order.

Several facts stand out in this report.

Most – but not all – of the additional funding is for “foundation” aid and special education state aid. Over $300 million of the $475 million is for a higher base amount per pupil and higher pupil weightings. Much of that is available for general educational purposes, but a portion must be used for specific programs such as at-risk services, bilingual education and pupil transportation.

The second largest increase is state special education aid ($54.9 million). With this increase, special education state aid is expected to cover 83.2 percent of the “excess cost” of special education services next year. That is $51.9 million short of the 92 percent of excess cost that is supposed to be covered under state law.

Special education costs not covered by state special education aid must be paid by transfers from general education funding.

A growing share of state aid is earmarked for special programs, rather than general operations. Over $44 million, or more than 9 percent, of the increased funding is for special programs and grants. Some of this money is available to every school district, but many programs are targeted to specific districts, or are limited pilot programs or competitive grants.

Increased funding includes a new $10 million pilot program to support mental health intervention teams in Wichita USD 259, Topeka USD 501, Kansas City USD 500, Parsons USD 503, Garden City USD 457 and Abilene USD 435; $5 million for school safety grants; $2.8 million to allow every high school junior or senior to take the ACT test or the Workkeys test at no cost; $520,000 to launch a Teach for America program in Kansas; $300,000 to expand school technology infrastructure; $500,000 for increased mentor teacher funding; $300,000 for a juvenile transitional crisis pilot program in Beloit; and increased funding for parent education, Pre-K grants and career and technical education support.

The balance of the increased funding is for state aid for capital projects (bond and interest aid and capital outlay state aid), local option budget state aid and KPERS contributions.

KPERS funding is … complicated. Accounting for Kansas Public Employees Retirement System contributions has been contentious. The state pays the employer share of pension contributions for school districts and other local education agencies. This money is distributed to school districts then immediately transferred to KPERS. These funds, which support school employee retirement benefits, are clearly a state educational expenditure; however, they simply “pass through” the school budget and do not provide any additional operating money. In addition, the state has deferred millions of dollars in previous payments, leaving a large unfunded liability that must be made up for higher future payments.

In 2017, school district KPERS aid was $253 million, but that was a reduction from the level required to be on track to eliminate the unfunded liability by 2033.  The Legislature committed to repaying that reduction through a process called "layering" payments of $6.4 million per year starting in 2018. The regular USD KPERS payments jumped back to the correct level of $384.9 million in 2018, but the appropriation dropped to $260 million in 2019 when the Legislature delayed another $194 million in payments. (The 2018 Legislature did add $9.8 million for FY 2018 and $32.1 million for FY 2019 to cover higher school district payrolls resulting from increased funding.)

In addition to school district KPERS payments, the Department of Education funding also includes contributions for local education agencies that are not school districts, including special education cooperatives and other interlocals which provide services to school districts, but also including community colleges and technical colleges. These non-USD KPERS contributions also increased by $21 million over the two-year period.

Finally, the Legislature also approved an $82 million direct transfer from the state general fund to KPERS, plus up to $56 million more if actual state general fund revenues this year exceed the April revenue estimates. These funds will help make up for the deferred payments but will not be counted as state aid or as part of school district budgets.

Federal and Children’s Cabinet funding is largely unchanged. The memo also notes federal education aid has increased by about $16 million, almost entirely in school food service assistance. Major education aid programs such special education and the Elementary and Secondary Education Act Title I and other programs have been basically flat from 2017 through 2019.

Funding for education-related programs through the Kansas Children’s Cabinet increased by $2.5 million, mostly in the early childhood block grant. School districts are eligible to apply for these funds. Children’s Cabinet programs are funded by revenues from the state settlement with tobacco companies.

In 2017, the Parent Education Program (Parents as Teachers) was funded by federal Temporary Assistance for Needy Families (TANF) dollars. In 2018 and 2019, it was funded through the Children’s Cabinet.

Almost $1 billion in school district state aid comes from sources other than State General Fund appropriations. Although the SGF is the largest source of funding for school aid, over $720 million is raised by the statewide 20 mill property tax levy for schools, or local tax levies for certain weightings. Capital improvement state aid for bond and interest payments is an automatic transfer from the state general fund of $200 million in 2019. Since the 2012 income tax cuts, the Legislature has shifted $107 million from the state highway fund to fund school district transportation and special education transportation aid. In 2019, those transfers were reduced to $45 million with the balance replaced by state general fund dollars.

Thursday, May 24, 2018

Key Issues for the Kansas Supreme Court in the Gannon school finance case

Based on briefs filed by both parties and oral arguments Tuesday, the Kansas Supreme Court's decision in the last school finance case will focus on these questions.

  1. How much is enough? The state says actions by the Legislature over the past two sessions will provide $1 billion more in school funding over a six-year period. The plaintiffs want $500 million added to what the Legislature did immediately (for next school year) and up to $2 billion more phased in and adjusted for inflation.
  2. Meaning of the latest cost study. The state says the $2 billion cost of meeting state standards developed by Dr. Lori Taylor and others is based on "moon shot" aspirational goals that should not be required constitutional adequacy. It argues the Legislature used another approach to adequacy, based on previous rulings of constitutional compliance in 2009. The plaintiffs say the new study's goals are based on what Kansas students need to be successful, as defined by the State Board of Education, and the new study confirms what previous state-commissioned studies, a peer review this Spring, and an alternative study commissioned by the plaintiffs found about the cost of meeting state standards. Several justices questioned why the Legislature has repeatedly paid for cost studies it then doesn't want to follow.
  3. What is required to meet the “Rose” standards? The Supreme Court has set the standard for adequacy as enabling "all" students to meet or exceed seven standards of educational competence, from basic skills to preparation for college and career, called the Rose standards after a Kentucky school finance case. A major reason courts found the current finance system unconstitutional is that about 25 percent of students score below "grade level" on Kansas state tests and nearly 15 percent do not graduate on time. The state says approved funding should[LF1] allow 85 percent of students to reach grade level. Plaintiffs say the target should be at least 90 percent of students on grade level and 60 percent of students "college ready" on state tests. Justices asked how high the constitutionally acceptable bar had to be – can schools be expected to reach 100 percent? Put another way, can more money solve all educational issues?
  4. Does money matter? No debate here: both sides agree additional funding will improve education. The state says its billion-dollar increase will significantly improve student success and should satisfy the constitutional requirement. The plaintiffs say it won't go far enough.
  5. The role of the court. Several justices expressed concern that any decision based on substantially new facts – such as the new cost study – would go beyond their scope as an appeals court. They raised the possibility of sending the case back to the three-judge panel to consider new evidence. Neither side expressed much support for a step that would add months or years to the process.
  6. The role of the Kansas State Board of Education in funding. Article 6, section 1 of the Kansas Constitution gives the Legislature the duty to “establish a system of public schools” for educational improvement; and in later sections delegates to the State Board authority for “general supervision” of public schools; to local school boards the duty to “maintain, develop and operate” schools and to the Legislature the duty to “make suitable provision for finance.” The state says this means the Legislature has the primary role, and the State Board is to supervise the system the Legislature “establishes.” The plaintiffs argue the State Board has independent authority to set educational standards for schools and students which the Legislature then must support with adequate funding. When asked if that means the State Board could lower standards (and therefore costs), plaintiffs replied that the Supreme Court should then intervene to the enforce the provision that the public education system must provide educational “improvement.”
  7. Retaining jurisdiction. The school finance bill passed in the 2018 session includes phasing in more than $400 million spread over the next four years. The plaintiffs want more money now AND a phase-in of additional funds. However, the state wants the court to dismiss the case, which means if the Legislature failed to follow through, a new lawsuit would have to be filed. The plaintiffs want the court to retain jurisdiction until any final resolution is fully implemented, which could be more than five years. The Supreme Court allowed a three-year phase-in as part of the Montoy case in the late 2000’s. It dismissed the case before the Legislature fully funded the law, and funding was reduced when state revenues fell during the Great Recession and following state income tax cuts.
  8. What happens to the Local Option Budget? The state claims the new requirement of a 15 percent LOB should count in its favor because it will increase the mandatory commitment of funding for each district. (For example, it would keep local school districts from using additional state aid to offset their LOB and reduce local property taxes.) Plaintiffs argue that a mandatory LOB should be 100 percent equalized by the state, rather than equalized to the 81.2 percentile under current law. The court has approved the 81.2 percent rate for the currently optional LOB. Plaintiffs also want the court to remove any voter protest or election requirements for the LOB and strike a provision that requires districts to use LOB funding for at-risk and bilingual education programs in proportion to amount of at-risk and bilingual weighting they receive.
  9. When will the court decide? That’s up the court. It previously promised a decision by June 30. If the Legislature’s action is found to be insufficient, the state has asked that the system be allowed to operate (schools remain open) during the upcoming school year (while about $200 million will be added) and the Legislature given next session to continue to work toward compliance. Plaintiffs say unless the Legislature approves additional funding for the upcoming school year, more funding committed for the future and changes to the LOB, the court should shut down the school finance system until it does – but want exceptions to allow maintenance of school district buildings and property while schools are closed.

Friday, May 18, 2018

Grading the Legislature on Education

The 2018 Kansas Legislative Session has ended and the campaign for the 2019 session officially begins June 1 when candidates must file if they plan to run in Democratic or Republican primaries. It's a good time to take stock of what happened to the state's biggest responsibility: public education.

Under orders from the Kansas Supreme Court to correct constitutional issues of adequacy and equity, the Legislature has added $400 million in state funding spread over two years (the school year just ending and next year) and committed to an additional $400 million spread over the following four years.

To pay for that increase and fund other state programs, the Legislature also repealed most of the 2012 income tax cuts last session and did not pass another income tax cut this year.

Some legislators argued the additional education funding will not be enough to satisfy the courts and support the state’s educational needs. Others argued it was far too much. Here are some facts.

The $400 million will have increased school funding nearly 10 percent since 2017, the largest increase in almost 10 years. However, when adjusted for inflation, school district general fund, special education and local option budget funding will still be lower than it was a decade ago.

School districts increased teacher salaries an average of $1,200 or about 2.2 percent this year and a similar amount is likely next year. That was the largest increase since 2009. However, it will still leave teacher pay far behind inflation since 2010. According to the National Center for Education Statistics, average Kansas teacher salaries have declined by $4,200 since 2010 when adjusted for inflation.

In 2017, Kansas teacher salaries trailed Iowa by almost $7,500, Nebraska by $4,300, and Missouri by $300, exceeding only Colorado and Oklahoma among our neighboring states. The new funding will help Kansas schools be more competitive, but certainly not close the gap.

Increased funding allowed school districts to add nearly 900 jobs last year, mostly teachers, classroom aides and special education paraprofessionals. However, that is less than half of the total school positions cut since 2009, while enrollment has increased by 25,000 students.

The increased funding equals about $800 per pupil over a two-year period. It is expected to help Kansas make up some lost ground compared to other states. Kansas per pupil funding from all sources was $311 lower than the national average in 2009 but dropped to almost $1,200 lower in 2015, falling from 24th in the United States to 31st. National statistics from other states are not yet available for 2016 and 2017, but because general state aid was frozen under block grant system, Kansas likely fell further behind.

The Legislature also commissioned the first new independent education cost study since 2005. That study made three critical findings. First, higher funding IS strongly correlated with higher student outcome (test scores, graduation rates). Second, Kansas school districts are highly efficient – among the best in the country. Third, 2017 school funding was between $1.7 billion and $2.0 billion short of what it would cost to meet the state's highly ambitious educational goals, which would exceed every other state if achieved.

The new study was validated by an independent peer review, which also found it consistent with a previous study done by the Legislature’s Post Audit agency and cited as evidence in the school finance court case.

These studies are not the only evidence that additional funding will support higher educational outcomes. The states that do better than Kansas on national measures provide more total revenue than Kansas. Until 2009, Kansas K-12 funding consistently exceeded inflation and educational levels have consistently improved: high school completion, college participation and postsecondary attainment is at an all-time high.

Finally, the 2017-18 Legislature increased funding in targeted programs that have proven effective in raising student outcomes, including preschool, mental health services, the Jobs for America’s Graduates program that helps at-risk students complete high school and providing free testing programs for college and career readiness.

Restoring tax revenues and a strengthening Kansas economy also allowed the Legislature to reverse previous cuts to higher education, reduce transfers from highway funding and make up missed payments in the underfunded school retirement system.

While no one wants to pay more taxes than necessary, it should be noted that the state income tax rates are still lower than before 2012. Based on new state revenue and economic projections, total state general spending will remain lower compared to total state personal than any year since 1988. In fact, since the Legislature partially restored tax rates last year, state personal income is growing faster than any time since BEFORE the 2012 tax cuts took effect, and the state’s credit rating has been upgraded.

In other words, over the last two years the Kansas Legislature was able to reinvest in schools and other important programs, found more evidence that school funding increases educational outcomes and kept taxes and spending lower than Kansans previously supported. Now, the court and the voters will give their grades on that record.