Questions on K-12 School Funding

A number of state leaders and organizations are beginning to look seriously at the development of a new school finance system to replace the law abolished by the 2015 Legislature and the two-year block grant system adopted in its place. Here are some basic questions about school funding in Kansas and information to help answer them.

• What is the right balance of state, local and federal revenues and the right balance of sales, income and property taxes?

In Kansas, as in most states, public schools rely on a mix of state, local and federal revenue. Nationally, federal funding provides about 9 percent of school district revenues, with the balance split almost equally between state sources (45.6 percent) and local sources (45.3 percent), according to the U.S. Census Bureau’s Public Education Finances Report.

Kansas is much higher in state funding (56.4 percent) and lower in local funding (36.2 percent), and is also below the national average in federal funding (7.4 percent). The higher share of state funding was a deliberate choice in 1992 when the now-repealed school finance formula was adopted. The goal was to both increase school funding and reduce local property taxes, as well as narrow the range of property tax rates for school districts. At the time, general operating levies ranged from under 10 mills to over 100 mills.

Although Kansas ranks relatively high in the level of funding provided by the state, it remains below average in total dollars per pupil because local and federal revenues are so low. In 2013, Kansas funding from the state ranked 19th at $6,537, but ranked 32nd in local revenues at $4,198, and 45th in federal revenues at $861. Overall, Kansas ranked 27th in total revenues per pupil at $11,596. Kansas per pupil funding has generally been about 5 percent below the national average for the past 20 years.

Both Kansas’ funding rank and the share of funding from state sources will be much more difficult to maintain if the state continues to phase-out the individual income tax, which has been integral to those positions. According to the 2014 edition of Kansas Tax Facts, the state currently receives approximately 40 percent of state general fund revenue and 30 percent of all state revenue from the individual income tax. Most (but not all) state aid to K-12 education comes from the state general fund, which indicates that over 20 percent of current school funding can be attributed to the individual income tax.

Income, sales and property taxes are the only major revenue sources currently available in Kansas, accounting for over 83 percent of total revenue to state and local governments. Most of the rest are taxes on motor fuels, vehicles and unemployment compensation that could not be used for K-12 education.

As a result, eliminating the income tax over time means the state must either rely more heavily on sales and/or property taxes, or reduce either the amount of school spending or the rate of increase compared to other states and past performance in Kansas.

• What is the role of local funding for Kansas school districts, such as the Local Option Budget?

The original proposal for the 1992 school finance formula called for a complete state takeover of school funding in Kansas (except local school building costs) and included a local option budget only as a temporary “hold harmless” feature, or to finance local “extras.”

However, Local Option Budgets grew from less than 4 percent of total district budgets in 1993 to over 17 percent in 2015 for two major reasons. In the late 1990s, the Legislature cut the statewide mill levy from 35 to 20 mills and took it off automobiles, and replaced those funds with state aid. That meant state aid was increasing, but was largely offset by reduced property taxes. As a result, school district general fund budgets per pupil increased less than inflation in nine of the twelve years between 1993 and 2005.

After the Montoy school finance decision in 2005, the Legislature increased K-12 funding significantly, but most of that money was targeted for specific programs, such as special education, at-risk and bilingual services, that were the basis of the lawsuit. These dollars did not go into general funding for all students.

Because most general state aid went to tax cuts or targeted programs, districts had to increasingly use the Local Option Budget to cover the costs of “regular” education programs which increased due to inflation, to keep salaries competitive with the private sector, or to improve programs.

• What is the role of technical schools and community colleges?

Projections show the percentage of Kansas jobs requiring postsecondary education will continue to increase. The Kansas Board of Regents set a goal of increasing the state percentage of adults with a technical credential or an academic degree to 60 percent by 2020. Recent incentives for boosting the number of students earning credentials at technical and community colleges have been successful.

More students in technical and community colleges will increase cost. The only alternative to local funding is either increased state aid, which will have to compete with tax cuts or K-12 funding, or increased tuition, which will place a larger burden on lower income students who may have to rely on these programs for access to any postsecondary education.

• What special funding or weightings should be included in the funding formula?

Transportation, special education, language services have long been funded as separate programs or weightings, because they are required at least in part by state or federal law. The largest weighting used in the previous formula was based on students eligible for free meals, because studies show lower income students consistently start school academically behind their more advantaged peers and frequently fail to catch up without special assistance. The previous formula also provided additional funding for smaller districts on a scale that increased as enrollment decreased.

The cost of each of these programs differs substantially among districts because of different student populations. Without weightings or some other way to target extra resources, children in districts with sparse student populations, or with high concentrations of students with disabilities or requiring English language instruction or low income families, will be disadvantaged. They will have to spend less on “regular” education programs and will be unlikely to help all students successfully prepare for college or careers.

In fact, what some call “failing schools” usually differ only in that they have many more special needs students than what are viewed as successful schools.

• Should a new formula consider changes in the organizational structure of school districts?

These questions raises the issue of school district consolidation, or at least changes in how districts cooperate with each other in certain operations.

According the Digest of Education Statistics, Kansas ranks near the bottom of states in students per district (41st), students per school (40th) and students per school district staff (39th). In other words, Kansas is notable for small districts and small schools (in terms of students), small classes sizes and more teachers and other district employees. Kansas also allows school districts to pick and choose services from multiple service centers and cooperatives, unlike some states which set up regional service providers.

To some, this may sound highly inefficient. But while Kansas is on the low end of the scale for organizational size and staffing per pupil, it is on the high end for student achievement, ranking 5th in the nation on an average of 14 measures of student achievement. (See KASB Research for information on these measures.) At the same time, Kansas spends less than the national average. No other top 10 states spends less than Kansas, and no top ten states has fewer low income, harder-to-educate students. This indicates that Kansas is actually quite efficient, and certainly is doing something “right.”

Consider an alternative perspective. Small districts in Kansas keep schools tied to their communities. Small schools keep students from getting lost in the crowd. Small classes give students more individual attention from teachers. More teachers and other staff mean there are more caring adults in the lives of students, from the teacher to the bus driver, the lunchroom staff, and the coach.

Virtually every school district already participates in various cooperative services, but leaving the decision at the local level means private sector vendors of goods and services compete for school district business based on both price and service.

In fact, these are exactly the arguments used to call for charter schools and private schools in other states: to create smaller, more independent schools in place of larger, less responsive bureaucracies. Perhaps Kansas already has what some reformers say public education needs.

• How should a new formula account for student success?

The most important question to ask about any educational policy is this: based on the evidence, what will help more Kansas students leave school prepared for success as adults? Kansas already ranks very high in measures of student success, yet spends below the U.S. average.To improve results, state policies must first avoid doing harm to what is working well.