Innovative Districts, KPERS Liability Shift to Districts, State Aid Cuts to Locals

Here is a quick round-up of news this week:

Innovative Districts

The Topeka Capital Journal reports that eight school districts -  McPherson USD 418, Blue Valley USD 229, Concordia USD 333, Hugoton USD 210, Kansas City Kansas USD 500, Seaman USD 345, Santa Fe Trail 434 and Sterling USD 376 - have applied for innovative school district status under a bill passed last Legislative session.

Under the procedures set for the the bill (described here), the first two districts must be approved by a majority consisting of the Governor and chairs of the Senate and House education committees.  If approved, the applications goes to the State Board of Education, which in turn must approve the applications if they meet requirements specified in the bill.  Once the first two districts are approved, they constitute a board of the Coalition of Innovative Districts, which must then approve other district applications, followed by approval of the State Board.  Additional approved districts then become part of the Coalition's board.

Key to the bill is that innovative districts must set out education goals and measurements, and then receive an exemption from most state school laws and regulations.  The innovative status is granted for five years, but can be revoked if districts fail to demonstrate student improvement on various measures for two years in a row.

KASB supported passage of the bill. It was opposed by the Kansas National Education Association because it could allow districts to waive laws regarding employee rights.  The State Board of Education has asked the Kansas Attorney General to interpret whether the law overrides authority of the State Board and local boards as set forth in the Kansas Constitution.

KPERS Liability Shift to School Districts Unresolved

After briefing the Legislative Post Audit Committee Tuesday, the executive director of the Kansas Public Employees Retirement System says there is still no final decision on whether local units of government must show billions of dollars in unfunded pension costs on their balance sheets, but warned it is a strong possibility this change will be made.

The pending change was prompted by new national accounting standards, but final guidance from the Governmental Accounting Standards Board has not been released and the Kansas Department of Administration has not made a final decision, says KPERS Chief Alan Conroy.  He noted that the KPERS liability is not currently reported by either the state or local employers.

KPERS has released the following issues brief on the new GASB guidelines, including “special situations for schools” on page 2.  The primary impact of such a change would be showing increased liability on the balance sheets of local governments, including school districts, when seeking to issue additional debt through bonds.  There could also be some additional costs for calculating the liability of individual districts.  However, the new rules will only apply to local governments that follow Generally Accepted Accounting Principles, and KPERS estimates that only about 300 of 1,500 local governments currently do so.

The reporting change will not, by itself, change who is responsible for making employer contributions.  Currently, the state makes an appropriation to cover the employer contributions for school districts.  These funds are transferred to school districts and then immediately transferred to KPERS.  As a result, school districts shows this payment in their budgets as both a revenue and expenditure.  Other local units of government (cities, counties, etc.,) are responsible for making these payments for their employees without state aid, increasing from $82 million, or 2.3 percent of total school district budgets, in 2000, to $366 million and 6.2 percent of budgets this year.

Because of the significant unfunded liability in the KPERS state and school employee groups, the state has been increasing its contributions in recent years.  KPERS contributions have been the fastest growing part of school district budgets over the past decade.

State Aid Cuts Affecting School Districts

The Kansas Center for Economic Growth has released a new report on the impact of state funding cuts on local services.  Here is a link the report.

According to the Center's report, local governments have seen significant decreases in state government aid that affect neighborhood community health programs, schools, safety initiatives and libraries.   In particular, it notes that school districts have reduced staff and state funding for professional development has been eliminated.

According to KASB analysis of Kansas State Department of Education data, total school district full-time equivalent (FTE) employees increased from about 65,155 in 2002 to 70,409 in 2009 as state funding and local option budget authority increased, dropped to 67,860 in 2012 due to state budget cuts, and rebounded to 68,569 last year.

Total school employees actually increased about 1 percent between 2011-12 and 2012-13 after the Legislature funded an increase in base state aid per pupil and some districts increased their LOB.  However, the total number of school employees is still down 2.6 percent from 2009, even after the 1 percent increase last year.  The total number of employees is still about 5.2 percent above 2002.

For a closer look at changes in school employees over the past decade, see this blog posting, including a detailed chart showing each category of employee at the end.