Monday, June 4, 2018

Tracking the two-year increase in state aid to school districts

The Kansas Legislative Research Department has posted a new memo comparing state aid to school districts in 2017 with the Legislature’s appropriations for Fiscal Years 2018 (the school year just ending) and 2019 (the school year beginning in August) following the Kansas Supreme Court Gannon decision.

The memo shows total state aid increasing by about $475 million over the two years, which is more than 11 percent. The Legislature also approved foundation aid increases for the next four years expected to add over $500 million, allows the state attorneys to tell the Court state funding is increasing about $1 billion in response to the Gannon school finance order.

Several facts stand out in this report.

Most – but not all – of the additional funding is for “foundation” aid and special education state aid. Over $300 million of the $475 million is for a higher base amount per pupil and higher pupil weightings. Much of that is available for general educational purposes, but a portion must be used for specific programs such as at-risk services, bilingual education and pupil transportation.

The second largest increase is state special education aid ($54.9 million). With this increase, special education state aid is expected to cover 83.2 percent of the “excess cost” of special education services next year. That is $51.9 million short of the 92 percent of excess cost that is supposed to be covered under state law.

Special education costs not covered by state special education aid must be paid by transfers from general education funding.

A growing share of state aid is earmarked for special programs, rather than general operations. Over $44 million, or more than 9 percent, of the increased funding is for special programs and grants. Some of this money is available to every school district, but many programs are targeted to specific districts, or are limited pilot programs or competitive grants.

Increased funding includes a new $10 million pilot program to support mental health intervention teams in Wichita USD 259, Topeka USD 501, Kansas City USD 500, Parsons USD 503, Garden City USD 457 and Abilene USD 435; $5 million for school safety grants; $2.8 million to allow every high school junior or senior to take the ACT test or the Workkeys test at no cost; $520,000 to launch a Teach for America program in Kansas; $300,000 to expand school technology infrastructure; $500,000 for increased mentor teacher funding; $300,000 for a juvenile transitional crisis pilot program in Beloit; and increased funding for parent education, Pre-K grants and career and technical education support.

The balance of the increased funding is for state aid for capital projects (bond and interest aid and capital outlay state aid), local option budget state aid and KPERS contributions.

KPERS funding is … complicated. Accounting for Kansas Public Employees Retirement System contributions has been contentious. The state pays the employer share of pension contributions for school districts and other local education agencies. This money is distributed to school districts then immediately transferred to KPERS. These funds, which support school employee retirement benefits, are clearly a state educational expenditure; however, they simply “pass through” the school budget and do not provide any additional operating money. In addition, the state has deferred millions of dollars in previous payments, leaving a large unfunded liability that must be made up for higher future payments.

In 2017, school district KPERS aid was $253 million, but that was a reduction from the level required to be on track to eliminate the unfunded liability by 2033.  The Legislature committed to repaying that reduction through a process called "layering" payments of $6.4 million per year starting in 2018. The regular USD KPERS payments jumped back to the correct level of $384.9 million in 2018, but the appropriation dropped to $260 million in 2019 when the Legislature delayed another $194 million in payments. (The 2018 Legislature did add $9.8 million for FY 2018 and $32.1 million for FY 2019 to cover higher school district payrolls resulting from increased funding.)

In addition to school district KPERS payments, the Department of Education funding also includes contributions for local education agencies that are not school districts, including special education cooperatives and other interlocals which provide services to school districts, but also including community colleges and technical colleges. These non-USD KPERS contributions also increased by $21 million over the two-year period.

Finally, the Legislature also approved an $82 million direct transfer from the state general fund to KPERS, plus up to $56 million more if actual state general fund revenues this year exceed the April revenue estimates. These funds will help make up for the deferred payments but will not be counted as state aid or as part of school district budgets.

Federal and Children’s Cabinet funding is largely unchanged. The memo also notes federal education aid has increased by about $16 million, almost entirely in school food service assistance. Major education aid programs such special education and the Elementary and Secondary Education Act Title I and other programs have been basically flat from 2017 through 2019.

Funding for education-related programs through the Kansas Children’s Cabinet increased by $2.5 million, mostly in the early childhood block grant. School districts are eligible to apply for these funds. Children’s Cabinet programs are funded by revenues from the state settlement with tobacco companies.

In 2017, the Parent Education Program (Parents as Teachers) was funded by federal Temporary Assistance for Needy Families (TANF) dollars. In 2018 and 2019, it was funded through the Children’s Cabinet.

Almost $1 billion in school district state aid comes from sources other than State General Fund appropriations. Although the SGF is the largest source of funding for school aid, over $720 million is raised by the statewide 20 mill property tax levy for schools, or local tax levies for certain weightings. Capital improvement state aid for bond and interest payments is an automatic transfer from the state general fund of $200 million in 2019. Since the 2012 income tax cuts, the Legislature has shifted $107 million from the state highway fund to fund school district transportation and special education transportation aid. In 2019, those transfers were reduced to $45 million with the balance replaced by state general fund dollars.

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