Friday, February 2, 2018

Key points on the state transportation aid controversy

After an audit was released in December reporting that Kansas State Department of Education has been making additional transportation aid payments to certain large school districts for decades, controversy has been growing.

Last week, Republican leaders sent a letter to the State Board of Education asking for a full audit of school finance payments and suspension of school finance personnel, including Deputy Commissioner Dale Dennis. The board asked Commissioner Randy Watson to prepare a plan for financial transparency but expressed full confidence in Mr. Dennis.

This week, Senate Majority Leader Jim Denning, R-Overland Park, suggested that under state law, school districts may be required to repay those excess funds, which would likely amount to tens of millions of dollars if extended back to previous years.

As school leaders discuss this issue with board members, legislators, the media and their community, here are some facts to keep in mind.

First, Legislative Post Audit did not call for any funds to be repaid.

The LPA report only recommended that KSDE “Remove the minimum funding level from its funding calculation, beginning with the 2018-19 school year to give adequate notice to the school districts that would be affected,” and recommended the Legislature “Review whether a minimum funding level is appropriate for large, densely populated districts, and amend state law as necessary.” Bills have already been introduced in both the House and Senate to bring state law in line with practice, but no hearings have been held.

Second, the Legislature itself does not always follow the “rule of law.”

It has been suggested that school districts should be required to "pay back" this funding to support "the rule of law." However, the Legislature annually disregards state law in other areas of school funding. For example, state law since 2006 has required the Legislature to provide special education state aid based on 92 percent of the “excess cost” of special services, but actual appropriations have been less than that amount every year since 1992. In fact, last year special education underfunding was almost $70 million – seven times the amount of transportation aid payments in question.
In other words, if the Legislature can exempt itself from following the school finance law, it can ensure school districts will not be penalized for a practice that has been in place for decade and districts used these funds as intended to provide safe transportation for students to and from school as required by state law.

Third, school finance law is not always clear.

It’s not clear that KSDE’s practice, which it says was directed by Legislative leaders decades ago, actually “violates” state law. This gets mathematically murky, but state law directs the department to “construct a curve of best fit,” for student transportation costs, and defines curve of best fit as “the curve on a density-cost graph drawn so the sum of the distances squared from such line to each of the points plotted on the graph is the least possible.” This could allow different interpretations by KSDE and legislative leaders on how to best implement that intent of the law – which is to reimburse districts for mandatory costs of transporting students to and from school.

In fact, the same post audit study that found some districts were receiving more funding also said these additional payments are probably justified because their costs are not covered by the statutory formula. “Among those districts that received less funding than their estimated costs, the shortfall was especially significant for the two large, densely populated districts in our sample (Wichita and Shawnee Mission). Given these results, a funding minimum that benefits large, densely populated districts might be appropriate.” That adjustment is what KSDE said was the intent of legislative leaders.

Removing those minimum payments this year would affect 25 of the largest districts in the state, and reduce funding by almost $10 million, or nearly one-third of their transportation costs.

Fourth, it appears the overall transportation aid formula underfunds district costs.

The Post Audit study also found that while results vary among districts, overall the transportation aid formula does not cover the costs of providing transportation services to students as required by law. Specifically, the auditors said: “Based on our sample, the current funding formula appears to understate the comparative cost of transporting students who live at least 2.5 miles from school.”
In other words, while the attention has been placed on “over payments” to some districts, no attention has been paid to findings that the Legislature’s own auditors say the transportation aid system is not covering mandatory costs for all districts – at a time when the Kansas Supreme Court has found that the entire school finance is unconstitutionally inadequate and is asking the Legislature to produce evidence it is correcting the problem.

It is also important to note that the state does not provide any aid for students who live less than 2.5 miles from school, even though many districts transport these children for safety and attendance reasons.

Fifth, it is clear the actual transportation payments are what the Legislature intended.

Although the minimum transportation payment may not have been specifically authorized in state law, the Legislature certainly intended these amounts to be paid. Legislators focus on the actual dollars their districts receive. Last year, when adopting a new school finance formula that included basically the same transportation system, the House K-12 Education Budget Committee specifically amended the bill to make sure no district lost aid.

Sixth, students would be harmed by penalizing districts.

Requiring school districts to return transportation funding would force them to either reduce transportation services to students living less than 2.5 miles from school (if possible); shift money from other areas of the budget which would reduce instructional and student support programs; cut school districts reserves (if available) or raise local taxes.

Seventh, the courts have not required the Legislature to make payments to schools retroactively.

When the Kansas Supreme Court has previously found the Legislature had been underfunding aspects of the school finance formula, such as local option budget and capital outlay state aid, it was not required to repay districts for past underfunding, only to correct the problem going forward.

Below are three charts from the LPA study:

Here is the impact of the additional minimum payments to large districts over the past five years:

Here are the districts receiving benefit the additional payments this year, and what they would lose without those payments:

Here are the districts studied by LPA showing the overall under funding of transportation costs by the formula:

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