Friday, July 18, 2014

Five questions for the new performance and efficiency commission

The Kansas K-12 Student Performance and Efficiency Commission holds its first meeting today.  After the first two appointments by House Speaker Ray Merrick - Dave Trabert of the Kansas Policy Institute and former House Speaker Mike O’Neal of the Kansas Chamber of Commerce and Industry - raised some eyebrows due to their long-standing criticism of many aspects of school districts’ operations, other appointments have created a fairly diverse group.

The Commission now includes two other former legislators widely seen as strong supporters of public education (Senate Vice President John Vratil and Assistant Minority Leader Janis Lee); two superintendents (Shawnee Mission’s Jim Henson and Concordia’s Bev Mortimer); two principals (Meg Wilson of Hoisington High School and Ken Thiessen of Wichita East High School), and Sam Williams, former chairman of the Wichita Metro Chamber of Commerce and a retired advertising executive.  The election of a chair from among these members will be a early sign of the commission’s direction.

(In addition to the voting members, the commissioner of education, the director of the budget, the revisor of statutes, the legislative post auditor and the director of the Legislative Research Department are nonvoting, ex-officio members of the commission.)

Here are some questions the Commission will have to confront:

1.  Is the primary goal to reduce spending or to improve results?

Could Kansas spend less on education?  Kansas ranked 27th in the nation in total revenue per pupil in 2012 (the most recent year national data is available). That is about $800 below the national average.  That means 23 states spent less on each K-12 student.  However, past KASB research has found that each of those 23 states either had lower overall performance on national tests, graduation rates and attainment of educational credentials, or had fewer low income students (who have significantly lower achievement in every state) than Kansas.  KASB is updating this research with new funding and achievement data released this summer.

In fact, the data consistently shows the amount of spending per pupil has a moderate to strong positive correlation with higher academic results.  In other words, more money does TEND to equal higher academic performance.  It is not a perfect correlation by any means - some states get a better “bang for the buck” than others.  However, Kansas is already one of the highest achieving states for the money it spends and the type of students it educates. Specifically, Kansas spends below the national average and is very close to the national average in the percent of low income students, but scores above the national average on virtually every achievement measure KASB has tracked.

As the commission considers recommendations, it will be critically important to examine whether such proposals not only lower costs but also improve educational outcomes.  If Kansas wants better results, we need to look at what states with better performance are doing.

2.  Are there easy ways to reduce educational spending?  

The Kansas Division of Legislative Post Audit has been conducting school district efficiency audits for five years.  Unless the LPA has come up with a different message than it has presented in the past, it will explain that almost all of the “easy” steps to cut costs do not save much money. Significant savings only come from making very difficult choices likely to create significant community opposition: closing buildings, cutting teachers and student services, or outsourcing expenditures away from local employees and vendors.

The simple fact is that “administrative” or “backroom” operations are already a very small part of school district budgets.  Most districts are already involved in numerous cooperative programs. However, many districts continue to operate schools or programs that may seem less efficient than some alternatives because their patrons value those programs.  Which leads to the next question.

3.  Who decides the value of “efficient” or “inefficient” operations?

It is important to remember the state, not local school districts, largely determines how much money districts get to spend on operating budgets through the base budget and weightings and limits on the amount of local option budgets.  Local school boards then make decisions on how to use those funds.  It can be a helpful management tool to consider how one district’s expenditures in certain areas compare to others, but those numbers alone will not tell the whole story.

One district may spend more on student support programs like nurses, counselors and social workers because its community lacks those services from other sources.  Another may spend more on certain purchases like fuel, vehicles and insurance because it wants to support local businesses, even if the cost somewhat higher than alternatives.  Another may want to keep open a school with excess capacity or higher operating costs in order to keep an educational presence in a small community or neighborhood, as way to sustain parent and business involvement.

The issue is not whether these choices are right or wrong. The issue is who should make the choice: the local district through its elected school board or the state?  Who will have to live with the consequences?

4.  How is efficiency measured?

Efficiency is usually defined as getting the best outcomes for the lowest cost or inputs.  Total cost is relatively simple to measure; although the details can be more complicated.  However, measuring educational outcomes on a statewide basis is usually limited to state test scores in reading and math and a few other subjects tested sporadically.  KASB has consistently heard from school leaders and patrons that educational expectations are much broader than standardized tests can measure.

The same bill creating the Performance and Efficiency Commission, HB 2506, adopted new educational goals based on the “Rose” capacities identified by the Kansas Supreme Court.  These goals only directly mention written and oral communications skills among subjects currently tested by the state.  But they also include civic and social engagement, physical and mental health, arts and cultural appreciation, and both academic and vocational preparation for postsecondary education and the workplace.  None of these important educational outcomes - included in the new educational standards - are currently factored into calculations of efficiency.  That is a critical issue for the commission to consider.

Consider recent state legislation and regulations concerning bullying and emergency safety interventions, such as restraining or removing students who pose a threat to themselves or others.  These requirements add significant new costs for staff training and supervision, but are unlikely to improve state reading and math tests.  Therefore, these requirements may be consider “inefficient” because they add costs with improving the only results measured.  However, the Legislature and Kansas State Board of Education clearly value these steps to improve student safety, as do educators, school boards and parents.

5.  How can the state support districts to get better results with available funding?

None of these questions should suggest there is no value to the commission’s work; or that school districts shouldn’t constantly look for ways to get the maximum educational results for the dollars they spend.  One of the reasons the Kansas Association of School Boards exists is to help districts work together to provide more efficient - and effective - ways of operating.  The national performance and spending data described above suggests that Kansas school leaders already take this issue very seriously.  The commission - and the state - need to see local districts as partners looking to achieve the same goals, not obstacles to be overcome.

This means the commission should start with the principle ‘first, do no harm.’ Beware the unintended consequences of new policies.  Remember, Kansas is already a high performing state with below average costs.  What may seem like “inefficiencies” from one perspective (smaller class sizes, schools and districts than most states) could be among the factors contributing to higher achievement.

Second, be consistent.  Ironically, some of the same advocates for consolidating school district operations at a “higher” administrative level also support creating independent charter schools or shifting authority to the building level that would not be required to coordinate anything with local districts.  Likewise, some proposals for additional school budgeting requirements would actually increase district administrative costs with no obvious benefit.  On one hand there are strong advocates for innovation, freedom and flexibility.  On the other hand, here are calls for more controls on how local districts operate.

Third, carrots usually work better than sticks.  KASB has consistently supported incentives for school district consolidation, cooperative and sharing of programs, but also believes the final decision should be made at the local level.  The best approach is not for the state to tell local districts what to do, but to help provide local leaders with the information, training and support to evaluate all options, decide on the best choices for their community; and build support among local patrons.

The commission has an important role for the simple fact that money will always be limited, and educational needs to continue to grow.  The Kansas Constitution requires a system of public schools for “intellectual, educational, vocational and scientific improvement.”  The goal should be finding ways to provide the best educational results for Kansas students. In other words, don’t forget that “Performance” comes before “Efficiency” in the commission’s title.

Tuesday, July 8, 2014

Enrollment projections point to higher costs and achievement challenges

KASB’s annual projection of Kansas school district enrollment for the next five years indicates more students will contribute to school funding costs. Over 90% of Kansas K-12 students continue to attend public schools, and changing demographics mean tougher challenges for student achievement.  Click for the full report from the KASB Research Department and the  KASB media release.  Here are four key points.

Kansas public school enrollment is growing

KASB projects total headcount enrollment will increase by nearly 25,000 students over the next five years, about 1% per year.  That may not sound like a big increase, but it is twice the growth of the last five years.  If all of these students were in one districts, it would be the fourth largest in the state (following Wichita, Olathe and Shawnee Mission).  A total enrollment of over 509,000 would also be the highest statewide public school enrollment since 1972, when the “baby boom” students began to decline.

Growing enrollment adds cost to the school finance system

At the current level of base state aid per pupil ($3,852), 25,000 students will require over $93 million in additional state aid just to keep up with headcount enrollment.  However, these students will also likely add other costs to the system.

Based on current economic statistics, about 10,000, or 40 percent, of these students will be eligible for free lunch, which would result increased at risk weighting.  Some of these students will enroll in career technical education courses, require bilingual or special education services, and transportation, all of which entail higher costs.

In fact, when all weighting adjustments are made, weighted enrollment is currently about 40 percent higher than headcount enrollment.  That means 25,000 additional students would likely result in approximately 35,000 weighted students, which would require about $135 million in five years, or $47 million more than headcount enrollment alone.  This would be the cost of simply keeping the base state aid per pupil at the same level, with no adjustment for inflation or expanded programs..

Public schools consistently enroll over 90% of Kansas students

Over 90% of the Kansas school-aged population has historically enrolled in public schools, which is higher than the national average of 86% to 88%.  Over the past five years, an average of 92.3% of resident live births enroll in Kansas public schools as first graders seven years later.  Also for the past five years, approximately 100% of students enrolled in public schools return for the next grade from first through eighth grade.

In ninth grade, public school enrollment jumps an average of nearly 6% each year; primarily because a number of students who attend nonpublic schools through eighth grade enroll in public high schools for ninth grade.

High school retention falls about 5% in both 10th and 11th grades, and 2% in 12th grade, largely because of students dropping out of school.  Approximately 15% of Kansas students fail to graduate high school by age 24, compared to a national average of about 20%.

The racial composition of Kansas students has changed dramatically, with a major impact on chances for student success.

Two decades ago, the Kansas public school population was 85% white, 8% black and less than 5% Hispanic.  White enrollment declined to 66% of the total enrollment for Kansas this year and is projected to be just 62% in 2019.  Black students enrollment has dropped slightly, and is projected to be less than 7% of the population in 2019.  Hispanic students have increased to nearly 18% of public school enrollment this year, and are projected to reach almost 22% in 2019.

This change alone helps explain the substantial increase in low income students eligible for free or reduced price meals; which rose from about one-third in 2011 to nearly half in 2013.  According to federal census data, Hispanic or Latino per capita income in Kansas is less than half of white income, and lower than any other racial or ethnic group.

The changing faces of Kansas students will make it more difficult for Kansas to improve or even maintain current levels of student achievement.  For example, 95 percent of middle and upper-income Kansas students graduate within four years, compared to just 76 percent of students eligible for free meals.  In both cases, Kansas far exceeds the national average.  (For details, see this report.)  In Kansas public schools, as in other states and private schools nationally and in Kansas, low income students, Hispanics and African Americans continue have lower educational achievement rates, although in most cases the gap has narrowed over the past decade.

The new enrollment projections are a reminder that state and local education and finance policies cannot be static; they must take into account the changing needs of Kansas students.

Sunday, June 1, 2014

What state tax shortfalls may mean for K-12 funding

State general fund receipts for May were $217 million below expectations, on top a of $92 million shortfall in April.  What does that mean for the state budget and education funding?  The state general fund can handle the shortfall in the short term, but the long-term impact will likely further limit K-12 funding.

As illustrated in the chart below from the Kansas Legislative Research Department, the official consensus revenue estimate (CRE) released in mid-April projected the state general fund (SGF) would have $5.96 billion in receipts this fiscal year, which ends June 30.  That was down about $300 million from last year as a result of state income tax cuts.  However, the SGF began the year with a balance of over $700 million.  With expenditures of just under $6 million - also reduced from the previous year - the SGF was still expected to have a healthy FY 2014 ending balance of $695 million, or 11.6%.

The actual receipts for April and May, however, indicate that the June 30 ending balance could be closer to $385 million, or 6.4%.  The real impact would be in Fiscal Year 2015, which was projected to have an ending balance of $391 million.  Assuming receipts this June (the last month of FY 2014) and receipts for all of 2015 are exactly as projected by the April CRE, the FY 2015 ending balance would drop to approximately $80 million or less than 1.3 percent.

Of course, the CRE is just an estimate.  If actual receipts begin to begin to pick up, the ending balance would be higher.  But it means there is little margin for error - if actual revenues continue to drop, the state would face a budget deficit that would require corrective active action, such as reducing funding for state programs.  K-12 education receives over 50% of SGF spending..

The Brownback administration’s spokesmen say the drop in April and May is a one-time event, due to investors taking capital gains in 2012, which reduced their income in 2013 and therefore income tax revenues in 2013-14.  In fact, there is little evidence that the overall Kansas economy is slumping.  On the other hand, despite the tax cuts, the April CRE projected Kansas personal income to grow at a lower rate than the national average in both 2014 and 2015.

The real problem may be in FY 2016.  Note that SGF spending increased from $5.999 billion this year to $6.273 billion in 2015.  Of that $270 million increase, over $200 million was for K-12 education aid, including $109 million for local option budget aid; $25 million for capital outlay aid; $35 million for KPERS payments; $33.5 million for special education; and $7 million for bond and interest aid.

Because SGF revenues were projected to increase just $40 million (due to continuing income tax rate cuts), SGF expenditures were already projected to exceed revenues by $282 million, dropping the ending balance from almost $700 million to under $400 million.  The shortfall in April and May would lower that balance to less than $100 million.

Assuming that shortfall was a one-time occurrence as the administration believes and the revenue forecast for 2015 is accurate, state general fund revenues will have to increase at least $200 million in 2016 to avoid a deficit, a growth rate of 3.4 percent.  However, the Kansas economy will have to grow at an even faster rate to generate that much revenue, because another income tax rate cut will take effect in 2016.  Even that growth rate would leave no ending balance and provide no additional funding for state programs, including a scheduled increase in KPERS contributions; payments of bond issues approved by voters, increased state aid to match local option budgets, and rising special education costs.  This does not include ANY increase in base state aid per pupil for district operating costs, or higher enrollment.

In short, even if the shortfalls of the past two months are temporary, the outlook for state school funding beyond next year is likely to be extremely challenging unless the state economy begins to grow far more rapidly than current projections.