How the Budget Plan Works

Ever since Governor Brownback signed the income tax bill at the end of last session, KASB and others have warned it would create a significant budget problem over the next few years, and could lead to big cuts in education unless significant changes were made. The Governor vowed to avoid cutting K-12 and other core services. Wednesday, the administration put out its plan.

Here's the basic framework. In November, official revenue estimates projected state tax revenues will drop about $700 million next year, due to the income tax cut and expiration of 0.6% of the state sales tax rate increased passed three years ago as a temporary measure. If the state spends down all of the projected ending balance of $471.7 million, it would still need to find $300 million in spending cuts, revenues or adjustments to pay for required spending increases and avoid a deficit.

The Governor's first step to is identify about $50 million in additional revenues in the current year, boosting the ending balance to $534 million. He then calls for two major tax changes: maintaining the current sales tax rate at 6.3% (adding $262 million), and eliminating the state income tax deduction for mortgage interest ($163 million), for a total of $435 million in additional tax revenue next year. He also proposes over $100 million in other savings, such suspending aid to cities and counties, capping bioscience funding, etc. This totals nearly $600 million in additional available revenue.

Finally, the Governor used over $100 million state highway funds to pay a portion of school district transportation weighting aid, which reduces state general fund spending. The cumulative total of these recommendations offset the $700 million revenue lost, and leaves a healthy $455.7 million ending balance.

For the first time in recent state history, the Governor has proposed a two year budget plan. It depends on repeating most of the revenue and spending policies into FY 2015, which spend means spending must remain almost level over a three-year period. As a result, the budget avoid the deep spending cuts some have feared, but provides almost no increase for rising costs of providing services.

The budget also does not address proposals made by the Governor for further cuts in the state income tax. Some key Republican leaders and constituencies say they will oppose the Governor's tax proposals unless they are tied to more cuts in the income tax. The Governor embraced eventual elimination of the income tax in his State of the State message.

Here are the highlights for K-12 education programs in the Governor's budget.

• $22 million is added to general state aid to keep base aid per pupil at $3,838 in the current year, and maintain the same level next year (FY 2014). The base is projected to increase to $3,852 in FY 15, funded by increased revenue from the 20 mill statewide levy.
• Special education aid is maintained at the same level all three years.
• Supplemental state aid (local option budget aid) is kept at the same level for all three years.
• Transportation for technical education students is increased $100,000 this year and $50,000 next year.
• State funding of $1.5 million is provided this year and next year for school construction on the Fort Riley base.
• State KPERS school contributions are funded at the statutory rate of increase, which requires an increase of $37 million next year, funded from Expanded Lottery Act revenues; and an additional $35 million in FY 2015.
• State Highway Fund revenues are used to pay $96.6 million of school district transportation weighting costs in both FY 14 and 15. SHF revenues are used for $10 million in state special education aid in FY 14 and $43 million in FY 15.
• Funding for parents as teachers programs and the pre-K pilot are funded at current levels from the Children's Initiatives Fund in FY 2013, 14 and 15. CIF revenues from the state tobacco settlement.
• The Governor also recommends spending $7 million in both FY 14 and 15 for a new "Kansas Reads to Succeed" grant program. $6 million each year would be used for grants to non-profit early literacy programs for K-3 students. $1 million each year would provide incentive payments for schools who show significant improvement in fourth grade reading. The program also includes a statewide retention policy for students unable to read at grade level in third grade.
• The budget adds $10.5 million in FY 14 from the State General Fund, with $8.75 million for tuition for secondary students in postsecondary technical education programs, and $1.5 million for high school incentive payments. FY 14 is the second year of these programs, which was created last session by SB 155.

The Governor's budget falls far short of what KASB and the State Board of Education has identified as educational needs.  But it keeps the Governor's commitment to avoid further cuts in K-12 funding and adds dollars to meet obligations like KPERS and state aid for bond payments with shorting other areas.  Most important, it requires tough political votes to increase state revenue.  Virtually every tax change and major funding shift will draw opposition, but without additional revenue, the most likely direction for education funding is down.